Real Time Information (RTI)

noodles

I went on the AAT payroll session the other day and thought I would pass on the information regarding the views for paying one man band salaries of £624 pmth.
As we do not want to run a monthly payroll as to keep the costs down for the client, it is best considered to give a payroll to the directors in mth 1 for the years pay and then journal to dir loan. Each month he then calls on that amount.
If you do it the other way of calling on £624 from directors loan and posting it through the payroll in month 12 it would be wrong. With RTI it has to be processed the day the employee takes the salary or draws on the directors loan.

Anyway, thought I would share that little bit of information

Monsoon

The problem with declaring it all in month 1, is that you'd get a tax bill, which would then reverse as the year went on.

We just declare everything monthly - my understanding of your post is that this is fine?

Edited to add... A director's salary is declared on the day he either pays himself OR it is credited to his DLA. The DLA credit counts as a payment - it doesn't have to affect the bank.

noodles

yes monthly is ok but we try not to do them monthly as it would cost them more. We are trying to think of ways to keep a once a year payroll for them. We have around 30 of these so although the extra income would be nice it would take a lot of time. Still some time away ......

marinaweg

We always pay our directors monthly, but for some of them do it 3 monthly runs at a time in advance to save on costs, wouls I not be able to do this anymore?

noodles

you can make the payments to the directors as of when you want. The point to remember is that if they take a salary either by bank or directors loan you have to report it using RTI. The reason for my post was that there are lots of directors who only receive a yearly payslip and therefore pay a yearly fee. If we have to report their £624 pm from directors loan each month it would mean a monthly payroll run and a monthly fee. The way around this is to do one payroll run in mth1 and cr DL, each month they just draw on these funds.
The other way of course is to run it monthly and charge accordingly...........

Donna Curling

just a little query on this - wouldnt the system believe the director will be paid same amount every month and therefore the NI etc. would be worked out accordingly? Sorry a little confused.

Newbie

Worth a read
http://www.accountingweb.co.uk/article/pa-case-could-trigger-rti-dividends-attack/529282

payrollpro

According to my contacts at HMRC the act of moving funds from the company to the director and hence into the DLA/DCA makes the sum assessable for income tax. If it is expenses then fine, if it is dividends etc, it is fine but if it is pay then it must be assessed and reported under RTI.

I agree that we, as agents, have a problem in finding the most cost effective way of doing things. I actually agree with Monsoon and would say that it is better to continue with monthly processing, submit the FPS like good citizens and charge the client accordingly. If they can afford to make a single transfer then they need to make it in March to avoid the very problem Monsoon refers to. They can then draw on the total throughout the next year before replenishing the DLA 12 months later.

Some of our clients will move to quarterly payroll and hence four FPS returns.

My point is that currently many of us have one system for all our owner managed Ltd's but from next year this one size fits all won't work and we have the prospect of managing a different system for each one, or at least them selecting one of four options.

noodles

(If they can afford to make a single transfer then they need to make it in March to avoid the very problem Monsoon refers to. They can then draw on the total throughout the next year before replenishing the DLA 12 months later.)

When you say if they can aford to make the payment, I think I may be missing something as I was under the impression that you make a book entry only, they are not actually paying themselves via the bank, just recording it as owed to them.
Quarterly returns may be an idea but many of my directors would not be able to pay for a monthly payroll run. Interesting times ahead ............. what are the 4 options you mention as a choice for your one man bands?

Monsoon

I think the annual payment in Month 12 (March) is only feasible if you don't have a potential overdrawn DLA situation in the preceding 11 months. The current director's annual salary is £7590 or thereabouts. If they are an 'average £30k' profit company with the director drawing down willy-nilly from the bank, then one March payment is not going to work. One April payment will mean a tax issue that then causes as much work to reverse as running a monthly payroll.

We run all our payrolls monthly on 12Pay. It takes about 2 minutes per director - surely this isn't too much work, even over multiple directors?