Employment Allowance for (very) small company

silvercar

I have my own company, I am the only director and only employee. I earn an amount below the secondary threshold for employers and so the company pays no NI or income tax on my earnings.

If I make the company secretary a director, the company will then have 2 directors and would be eligible to claim employment allowance to help with NI costs, currently as there is only 1 director it is not eligible.

Is it really as simple as that?

Bookworm105

in the context you ask about
2 employees/directors, both of whom earn above secondary threshold

Dazed_and_C0nfused

silvercar said:

I have my own company, I am the only director and only employee. I earn an amount below the secondary threshold for employers and so the company pays no NI or income tax on my earnings.

If I make the company secretary a director, the company will then have 2 directors and would be eligible to claim employment allowance to help with NI costs, currently as there is only 1 director it is not eligible.

Is it really as simple as that?

Based on what you have posted I don't see why you think would become eligible 🤔

Maybe you have omitted some relevant information.  Or you're simply not eligible?

silvercar

I read this "You also cannot claim if your company has just one director and that director is the only employee liable for secondary Class 1 National Insurance" it doesn't say anything else.

on here - https://www.gov.uk/claim-employment-allowance/eligibility

so I thought that I only need to increase the number of directors, it doesn't say " both of whom earn above secondary threshold"

Dazed_and_C0nfused

silvercar said:

I read this "You also cannot claim if your company has just one director and that director is the only employee liable for secondary Class 1 National Insurance" it doesn't say anything else.

on here - https://www.gov.uk/claim-employment-allowance/eligibility

so I thought that I only need to increase the number of directors, it doesn't say " both of whom earn above secondary threshold"

Have a look at the examples in point 14 here.

https://www.gov.uk/government/publications/employment-allowance-more-detailed-guidance/eligibility-for-employment-allowance-further-employer-guidance#limited-companies-with-one-employee-the-director-paid-above-the-secondary-threshold

silvercar

Dazed_and_C0nfused said:

silvercar said:

I read this "You also cannot claim if your company has just one director and that director is the only employee liable for secondary Class 1 National Insurance" it doesn't say anything else.

on here - https://www.gov.uk/claim-employment-allowance/eligibility

so I thought that I only need to increase the number of directors, it doesn't say " both of whom earn above secondary threshold"

Have a look at the examples in point 14 here.

https://www.gov.uk/government/publications/employment-allowance-more-detailed-guidance/eligibility-for-employment-allowance-further-employer-guidance#limited-companies-with-one-employee-the-director-paid-above-the-secondary-threshold

Thank you. Odd that the link I pointed to, also a gov webpage, doesn't make it clear.

Bookworm105

silvercar said:

Dazed_and_C0nfused said:

silvercar said:

I read this "You also cannot claim if your company has just one director and that director is the only employee liable for secondary Class 1 National Insurance" it doesn't say anything else.

on here - https://www.gov.uk/claim-employment-allowance/eligibility

so I thought that I only need to increase the number of directors, it doesn't say " both of whom earn above secondary threshold"

Have a look at the examples in point 14 here.

https://www.gov.uk/government/publications/employment-allowance-more-detailed-guidance/eligibility-for-employment-allowance-further-employer-guidance#limited-companies-with-one-employee-the-director-paid-above-the-secondary-threshold

Thank you. Odd that the link I pointed to, also a gov webpage, doesn't make it clear.

.Gov website content is written for those barely able to cope with words of 2 syllables. Details are therefore skimped over as they might otherwise provide answers 

when in doubt always refer to the manual, not .Gov (that said, the manual is not infallible as it can be nothing more than HMRC's interpretation of legislation, so may be open to debate on some matters!)

what you want is here in the final 2 bullet point paras:

NIM06545 - Employment Allowance: Who can’t claim the Employment Allowance? Single director limited companies - HMRC internal manual - GOV.UK

Jeremy535897

On the positive side, as the secondary threshold will fall to £5,000, it isn't going to cost so much to get the company secretary over it. I can't see HMRC arguing £5,001 paid to an office holder is not deductible for corporation tax purposes, so long as they do the stuff company secretaries are supposed to do.

silvercar

Jeremy535897 said:

On the positive side, as the secondary threshold will fall to £5,000, it isn't going to cost so much to get the company secretary over it. I can't see HMRC arguing £5,001 paid to an office holder is not deductible for corporation tax purposes, so long as they do the stuff company secretaries are supposed to do.

Good point, though the company secretary has a full time job elsewhere and is already an additional rate tax payer, so would lose 45% in personal income tax.

Grumpy_chap

silvercar said:

I read this "You also cannot claim if your company has just one director and that director is the only employee liable for secondary Class 1 National Insurance" it doesn't say anything else.

I think that is meant to read differently.

The company cannot claim if the Ltd Co has just one Director AND that Director is the only Employee.

The company can have one Director AND two Employees and then claim.

There was a thread recently where this was mentioned and, IIRC, it was explained like this:

Ltd Co.
Director earns £12.5k.  Employer's NI therefore on £7.5K (£12.5k - £5k) at 15% = £1,125 NI.
Also employ Administrator part time at £100 per month, cost £1,200 but the company then can claim so recovers the £1,125 Eers NI making the Administrator virtually free of charge.

Other salary levels for the Administrator can also be beneficial.  £125 per week would be sufficient to ensure the Administrator also qualifies for their NI stamp (they won't need to in the OP's case as the individual in consideration for the role has employment elsewhere).

Once employed, the Ltd Co can also make Employer Pension Contributions for the Administrator.

The Administrator needs to actually do something and cannot be simply employed to avoid taxation.

DullGreyGuy

silvercar said:

I have my own company, I am the only director and only employee. I earn an amount below the secondary threshold for employers and so the company pays no NI or income tax on my earnings.

If I make the company secretary a director, the company will then have 2 directors and would be eligible to claim employment allowance to help with NI costs, currently as there is only 1 director it is not eligible.

Is it really as simple as that?

Totally lost... you say you are currently the only person that works for the company and you are below employers NI

Then you talk about a second person that works for the company? And ask if making them a director would improve the NI situation? What NI situation as you previously said you didnt pay any?

If you have a CoSec thats not a director then making them a director won't change the NI position but will mean you can get rid of the pension scheme, if you want and neither of you currently use it. Had to promote the Mrs to a director when auto-enrolment came in