Director Questions

da_rule

I have a couple of questions about Directors and hoping someone can help.

1) Can a director be paid via PAYE? I know that a director has to complete a self assessment but is there any reason why a director could not be paid via PAYE and then submit a self assessment using the details from the P60? I suppose an issue would be that the company would have to pay the employers National Insurance contribution, unless there is a way around this? If you cannot use PAYE do you basically just transfer the money into the directors bank account (in line with what is agreed in the service contract in terms of how much and how often etc)?

2) Can director be a job title? So if I was the sole director of a company could I employ other people and give them the title of director (e.g. I.T. Director) but in reality they are just senior managers, they would not appear on the list of directors at Company House etc

Thanks for your help.

trailingspouse

1) Yes, you can pay yourself via PAYE. Whether this is the best way for you to access the company's earnings is another question. Very many directors of small limited companies pay themselves a basic wage (to avoid tax/NI) and take the rest in dividends. An accountant can advise if this is the right method for you.

2) Not sure why you would want to call someone a director if they weren't a director. Why not either make them a director, or call them something else?

Aquamania

da_rule wrote: »

I have a couple of questions about Directors and hoping someone can help.

1) Can a director be paid via PAYE? I know that a director has to complete a self assessment but is there any reason why a director could not be paid via PAYE and then submit a self assessment using the details from the P60? I suppose an issue would be that the company would have to pay the employers National Insurance contribution, unless there is a way around this? If you cannot use PAYE do you basically just transfer the money into the directors bank account (in line with what is agreed in the service contract in terms of how much and how often etc)?

2) Can director be a job title? So if I was the sole director of a company could I employ other people and give them the title of director (e.g. I.T. Director) but in reality they are just senior managers, they would not appear on the list of directors at Company House etc

Thanks for your help.

1) Yes. If the director is paid a salary it must, like all employees, be paid under PAYE regulations

2) Yes.

Suarez

trailingspouse wrote: »

1) Very many directors of small limited companies pay themselves a basic wage (to avoid tax/NI) and take the rest in dividends. An accountant can advise if this is the right method for you.

Being a director doesn't entitle you to take dividends from a company.

CKhalvashi

Suarez wrote: »

Being a director doesn't entitle you to take dividends from a company.

I was just going to mention that; only a shareholder can take dividends.

On terms of job titles, my title is simply 'Director', and the fleet manager is also a director on the official documents (as well as a shareholder.)

Others have 'director' on their job title, but aren't directors of the company, just a department.

CK

da_rule

Suarez wrote: »

Being a director doesn't entitle you to take dividends from a company.

That brings me to a point I was going to make.

If I am a director of a company and registered as such at Company's House but don't have any shareholding, then any salary I receive (including bonuses/expenses etc) must be paid through PAYE? If so, what is the point in submitting a self assessment, surely HMRC have all of the details from the PAYE data.

Aquamania

da_rule wrote: »

That brings me to a point I was going to make.

If I am a director of a company and registered as such at Company's House but don't have any shareholding, then any salary I receive (including bonuses/expenses etc) must be paid through PAYE? If so, what is the point in submitting a self assessment, surely HMRC have all of the details from the PAYE data.

Nearly all company directors must complete a self assessement (the notable exceptions are where the company is dormant or it is a not-for-profit company from which the director is not renumerated at all)

The self assessment includes the director's income from all sources and it is very rare for a director to be in a position as you describe.

Directors may receive benefits that have not been taxed at source.

Directors may have more than one job (i.e. at another company) ... the other may or may not be a directorship.

Also as the primary role of the director is to run the business for and on behalf of the shareholders, most directors do have a shareholding in that business as otherwise it could easily be argued they have no incentive to act in the best interests of the company's shareholders.

...and of course in most small companies, the directors and shareholders are the same people. If you invest in a small business, you probably want to run it ... and if you run a small business, you will almost certainly want to share in the profits.

It is still possible to complete a self assessment for anyone in the rare position you describe. Actually any employee who is asked by HMRC to complete a self assessment must do so ... and HMRC do make such requests from time to time.

Edit: Also, whilst probably not directly related, directors NI contributions are worked out differently to any other employee. As I said, not directly related, but the money all goes to HMRC, so I wouldn't mind betting the self assessment could be crossed checked against NI contributions to ensure they are being paid correctly.

Pennywise

da_rule wrote: »

That brings me to a point I was going to make.

If I am a director of a company and registered as such at Company's House but don't have any shareholding, then any salary I receive (including bonuses/expenses etc) must be paid through PAYE? If so, what is the point in submitting a self assessment, surely HMRC have all of the details from the PAYE data.

Tax and common sense don't mix! You'll go mad trying to fathom out logic behind HMRC and tax. If HMRC decide they want a director to complete a SA return, then that's what they want - don't waste the grey cells trying to understand them. By the way, there is no LAW requiring directors to complete an SA return, so unless they write to tell you to complete one or you met other criteria to complete one, you don't have to do it voluntarily.

Pennywise

da_rule wrote: »

That brings me to a point I was going to make.

If I am a director of a company and registered as such at Company's House but don't have any shareholding, then any salary I receive (including bonuses/expenses etc) must be paid through PAYE? If so, what is the point in submitting a self assessment, surely HMRC have all of the details from the PAYE data.

Tax and common sense don't mix! You'll go mad trying to fathom out logic behind HMRC and tax. If HMRC decide they want a director to complete a SA return, then that's what they want - don't waste the grey cells trying to understand them. By the way, there is no LAW requiring directors to complete an SA return, so unless they write to tell you to complete one or you met other criteria to complete one, you don't have to do it voluntarily. (Another error on the HMRC website says that directors must complete a SA return - there is no LAW stating that! but HMRC can instruct any person to do so).