Ltd co director-no profit, no pay, class 3 to protect, or is it worth it?

imeldabye

Hello all, can I get your take on this? A Ltd company set up November 2012. Sole director was previously employed (architect) and paid sufficient tax/NI to take him over the LEL in 2012-13. Now in this tax year 13-14 and he is having problems securing commissions and whilst the company has £5k in the bank (which he personally put in at the beginning- i.e. Director's Loan) the company is not making any profit so cannot afford to pay him the minimum monthly salary for salary/div split. If work was in the pipeline, ie projects on the go and monies set to come in over the coming months I would run the minimum salary and credit the DLA, and once the monies come in, debit that, pay him that way. However, this is not the case, it doesn't feel correct to do that if there is no profit being generated. What do you think? If no, then in terms of Pension/NI contributions should we look at some temporary Class 3 voluntary contributions, or given the expense should we just assume that he will make up for this blip in years to come and "write off" a year or so of contributions?
Thanks, I've been mulling this over for ages and can't come up with an answer. There probably isn't a definitive answer but I'd be grateful for your opinions.

JodieR

Firstly, the company doesn't need to be making profit to pay salaries. there must be profit to take dividends but no company can tell their staff 'sorry, we didn't make a profit this month therefore none of you are being paid'/

Secondly, it usually isn't a problem for someone to have a gap in their NI contributions. The number of qualifying years required to get your full state pension is lower than it used to be, so it's rare that it would be necessary to make Class 3 contributions for a couple of years gap.

imeldabye

That is HUGELY helpful thank you! What would you recommend he do? run payroll as normal or take a NI break?

JodieR

in most cases run the payroll so that it'll build up losses in the company which can be offset against future profits.

groundy

Agree with JodieR, I have a client that has run his business part time whilst building his own house. He has accumulated losses of £30k to carry forward thanks to paying a directors minimum wage.