Is a director self employed despite no salary?

Ginger_Winner

Hi - I don't think this will be too difficult for anyone in the know, but it's managed to confuse me...

I have a Limited company of which I am the sole director. I receive dividends but do not take a salary and I am not registered for PAYE. I received dividends of £18,400 last year.

I also have two rental properties. Net profit from these was £10,500.

There are two area's that I am am confused about...

1. On my self assessment, am I correct to class myself as 'employed' rather than 'self employed' even through I don't take a salary. If I do classify myself as employed are there any issues with not having a PAYE reference and a zero salary?

2. There are expenses incurred in my work (travel, hotels, subsistence). Can I account for these as administrative expenses in my Limited Company accounts or do I need to pay these expenses to myself and produce a P11D. If this is the case are there issues that would arise from receiving expense payments from a company despite not receiving a salary?


Any advice would be greatly appreciated...

anselld

The guide states ....
1 Employment
You should fill in the ‘Employment’ page if you:
• were employed in full-time, part-time or
casual employment
• received income as a company director
• held an office, such as chairperson, secretary or
treasurer and received income for that work
• worked for 1 person through another company
or partnership, for example, agency work
• were resident in the UK and received an income
from any foreign employment
You will need a separate ‘Employment’ page for each job, directorship or office.

...

I would read that as you do not take an income as a Director you do not need to complete Employment pages.

Ginger_Winner

Many thanks anselld - that is clear.

Can anyone advice me with the other question regarding the accounting of expenses?

chrismac1

There is a separate box on the tax return for "I was a director of a limited company and took no salary." You are not self-employed, simply and employee taking zero pay.

You strictly should apply to HMRC for a dispensation from P11ds, and strictly all expenses on company business should ideally be in the company name. In practice, P11ds are bunkum and being phased out of the UK tax system, and long overdue this change was though it has not happened yet.

So I would treat these as expenses in the company accounts, ideally backing them up with an expenses claim form. Note this is practical advice from an accountant who has around 60 limited company director clients spread around 35 companies, and I never do a P11d for any of them. Where there is a P11d issue - for example I do personal tax work which the company pays for - this is charged to the director's account so not treated as a company expense.

Strictly this should be a P11d issue but result in no tax arising, a complete and utter waste of time so I don't bother with it. Also, the mere act of filing a P11d exposes you to a new risk of being asked lots of stupid questions by HMRC about what you filed. This plagues accountants who strictly abide by the silly P11d rules.

chrismac1

Sorry it is not a box on the tax return, Taxcalc includes it and then uses it to amend box 19 as follows:

"As a director of X Limited I received no income, benefits or payments and therefore have not completed employment pages for this."

System

My understanding is that even though you are taking nil income you have to join the PAYE scheme if you want to submit a P11D as the PAYE number is the reference that ties it all together.

Ginger_Winner

Thanks chrismac1, that makes sense. Thanks for spelling it out so clearly.

Ginger_Winner

blondebubbles - the expenses are paid for by the company although the transactions are usually made on my credit card.

System

Personal credit card or company credit card?

Ginger_Winner

personal credit card...

System

I think that might need a P11D. If paid directly by the company then that would have been no problem