Does a Director have to register for payroll scheme?

LondinaLondina Experienced MentorPosts: 814MAAT, AAT Licensed Accountant
On HMRC website it says:
"You don’t need to register for PAYE if none of your employees are paid £112 or more a week"

what about a sole director of a LTD? if he only earns £112, does he have to set up a payroll scheme and submit RTI etc..? or can he just pay himself and considered as salary, not dividend?

Info on .gov are confusing as usual and can't find a straight forward answer!

thanks
KernowAccountant

Comments

  • rwbrwb New Member Posts: 32Registered
    If pay is below the Lower Earnings Limit (LEL) then no need for a PAYE scheme in the circumstances as indicated. So yes, less than £112/week can be paid as salary without setting up a PAYE scheme.

    Whether that's a good idea or not is another question though...
    MarieNoelle
  • MarieNoelleMarieNoelle Trusted Regular Hampshire/Surrey borderPosts: 1,462Moderator, MAAT, AAT Licensed Accountant
    edited September 2016
    If it is his only employment income at that level of earnings he may lose out on NI contributions for pension purposes (assuming he has not reached state pension age).
    If he has other employment income outside his company then the company will have to set up a payroll scheme to withhold the correct tax.
    rwbBeccaLouJ9
  • LondinaLondina Experienced Mentor Posts: 814MAAT, AAT Licensed Accountant
    thanks everybody!
    rwb said:

    If pay is below the Lower Earnings Limit (LEL) then no need for a PAYE scheme in the circumstances as indicated. So yes, less than £112/week can be paid as salary without setting up a PAYE scheme

    so if this is the only employment and no need to set up a PAYE scheme, the payments can just be posted as salaries in the accounts and HMRC will be ok with it? It seems strange....maybe they can argue that it's money taken out from the business and should go into Director's loan?...

    mrme89
  • LondinaLondina Experienced Mentor Posts: 814MAAT, AAT Licensed Accountant
    mrme89 said:

    It would be strange to pay a director with no other income just £112 per week.

    If procedures are followed, I’m not sure why you think HMRC could argue that it wasn’t salary?

    because as you said, maybe it's just strange and no payroll scheme is set up for this?

    but if it's normal procedure and this is allowed, that's good! :-)

  • LondinaLondina Experienced Mentor Posts: 814MAAT, AAT Licensed Accountant
    for those who are interested and want to find more, there is actually a webinar tomorrow organised by HMRC called "Company directors - payroll and you":
    "This webinar is aimed at new company directors and more experienced directors who want to refresh their knowledge. It covers the Income Tax and National Insurance that directors pay, the payroll information that has to be submitted and how to report expenses and benefits to HMRC"
    MarieNoelle
  • LondinaLondina Experienced Mentor Posts: 814MAAT, AAT Licensed Accountant
    I'm not sure and anyway, this could be useful to refresh your knowledge, as not everyone is an expert on payroll and director responsibilities, the AAT doesn't cover that in details
  • BeccaLouJ9BeccaLouJ9 Experienced Mentor DevonPosts: 1,022FMAAT


    If he has other employment income outside his company then the company will have to set up a payroll scheme to withhold the correct tax.

    @Londina you kind of skipped over this point that @MarieNoelle made, I would make sure you look into this bit before going forward with what ever your plan is.

    B
  • LondinaLondina Experienced Mentor Posts: 814MAAT, AAT Licensed Accountant
    edited September 2016
    @BeccaLouJ9 I thought I did, the £112 would be the only income, no other employment. At the webinar I managed to get confirmation from HMRC and no payroll need to be set up.

    About NIC contributions & pension, that's another issue...if in future state pension needs to take in consideration
    BeccaLouJ9
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