AAT Comment: What bookkeepers should know about director’s national insurance contributions
AAT_Team
Administrator Posts: 503 🤖 Admin 🤖
Director’s NICs can be problematic for many payrollers as the methods used are different from those of other employees and can often seem problematic.
Here the aim is to demystify the process and ensure that the correct amounts are paid to HMRC.
Director’s national insurance contributions (NICs) are, unlike employees, calculated cumulatively using the ‘annual earnings’ method. This is because, historically, payment amounts and frequency of payments made to directors could be made in such a way that NICs could be avoided. This manipulation can no longer be done, but the method is still used to calculate the deductions.
Unfortunately, many employers do not apply the method correctly, and, knowing this, HMRC inspectors often focus on this area during a compliance review.
Here the aim is to demystify the process and ensure that the correct amounts are paid to HMRC.
Director’s national insurance contributions (NICs) are, unlike employees, calculated cumulatively using the ‘annual earnings’ method. This is because, historically, payment amounts and frequency of payments made to directors could be made in such a way that NICs could be avoided. This manipulation can no longer be done, but the method is still used to calculate the deductions.
Unfortunately, many employers do not apply the method correctly, and, knowing this, HMRC inspectors often focus on this area during a compliance review.
Full article.
0
Categories
- All Categories
- 1.2K Books to buy and sell
- 2.3K General discussion
- 12.5K For AAT students
- 325 NEW! Qualifications 2022
- 160 General Qualifications 2022 discussion
- 11 AAT Level 2 Certificate in Accounting
- 56 AAT Level 3 Diploma in Accounting
- 95 AAT Level 4 Diploma in Professional Accounting
- 8.9K For accounting professionals
- 23 coronavirus (Covid-19)
- 273 VAT
- 92 Software
- 275 Tax
- 138 Bookkeeping
- 7.2K General accounting discussion
- 202 AAT member discussion
- 3.8K For everyone
- 38 AAT news and announcements
- 345 Feedback for AAT
- 2.8K Chat and off-topic discussion
- 583 Job postings
- 16 Who can benefit from AAT?
- 36 Where can AAT take me?
- 42 Getting started with AAT
- 26 Finding an AAT training provider
- 48 Distance learning and other ways to study AAT
- 25 Apprenticeships
- 66 AAT membership