Tax question: Company paying school fees
Options
reader
Registered Posts: 1,037 Beyond epic contributor 🧙♂️
I've just read part of the latest edition of the AAT magazine and Michael Steed (I can't seem to escape this guy, I've seen him at AAT branch meetings, ATT CPD events, Youtube..............) writes the following:
".....if the school were to contract directly with the company, with no recourse to the director for non-payment, this is a benefit that is not subject to class 1 NICs (where both the employer and the employee pay), but this is instead subject to class 1A NICs, where only the employer pays, so there's a [tax] saving for the director personally." Page 9, Accounting Technician, January/February 2013
So imagine we have a one man band ltd company and that ltd company pays for the director's children's school fees (and P11D duly completed for the cost) can someone explain how this would result in a tax saving (compared to taking the equivalent dividends, for example) given that:
1) The company would have to pay class 1A NIC @ 13.8% on the cost of the school fees.
2) The cost of the school fees would have to be declared on the director's personal tax return probably resulting in him paying income tax on this @ 20% (at least).
3) And I'm assuming the cost of the school fees would not be an allowable deduction against the company's corporation tax.
".....if the school were to contract directly with the company, with no recourse to the director for non-payment, this is a benefit that is not subject to class 1 NICs (where both the employer and the employee pay), but this is instead subject to class 1A NICs, where only the employer pays, so there's a [tax] saving for the director personally." Page 9, Accounting Technician, January/February 2013
So imagine we have a one man band ltd company and that ltd company pays for the director's children's school fees (and P11D duly completed for the cost) can someone explain how this would result in a tax saving (compared to taking the equivalent dividends, for example) given that:
1) The company would have to pay class 1A NIC @ 13.8% on the cost of the school fees.
2) The cost of the school fees would have to be declared on the director's personal tax return probably resulting in him paying income tax on this @ 20% (at least).
3) And I'm assuming the cost of the school fees would not be an allowable deduction against the company's corporation tax.
0
Comments
-
That's not what he is saying.
He is saying that if the contract can be between company and school, rather than director and school (which in itself is highly unlikely in my opinion) then rather than being taxed via the payroll as settling the pecuniary liability of the director, it will be taxed as a benefit in kind. Hence only employers NIC rather than both employees NIC and employers NIC.
This is for your salaried director, not your one-man-band director/shareholder.
In answer to your third point it is an allowable deduction for the company just as any other form of salary/benefit.0 -
deanshepherd wrote: »That's not what he is saying.
He is saying that if the contract can be between company and school, rather than director and school (which in itself is highly unlikely in my opinion) then rather than being taxed via the payroll as settling the pecuniary liability of the director, it will be taxed as a benefit in kind. Hence only employers NIC rather than both employees NIC and employers NIC.
This is for your salaried director, not your one-man-band director/shareholder.
In answer to your third point it is an allowable deduction for the company just as any other form of salary/benefit.
That makes sense- thanks0 -
I do wages for a Religous charity. The minister's salary is reduced to take account of private education for his kids. Thecharity is billed directly by the school. It goes on his P11D, so he saves paying the Employee NI.0
-
I do wages for a Religous charity. The minister's salary is reduced to take account of private education for his kids. Thecharity is billed directly by the school. It goes on his P11D, so he saves paying the Employee NI.
Just out of interest, does the charity pay corporation tax or has the charity been given exemption from corporation tax by HMRC.
Thanks0 -
No tax is paid as it's a not-for-profit charity - and is not incorporated.0
-
deanshepherd wrote: »This is for your salaried director, not your one-man-band director/shareholder.
Do you mean it's not allowable for a one-man band director/shareholder or that there are better alternatives for them?0 -
Company paying school fees
Please can someone help out there about company paying school fees?
A client approaches me recently asking if he's company could pay his kids school fees?
He is a sole trader and had kids in private school.
Your advice in this matter will be much appreciated.
Thank you.0 -
A sole trader does not have a company.
This thread relates to limited companies, which is an entirely different matter.
In short: no, sorry.0
Categories
- All Categories
- 1.2K Books to buy and sell
- 2.3K General discussion
- 18.9K For AAT students
- 266 NEW! Qualifications 2022
- 147 General Qualifications 2022 discussion
- 9 AAT Level 2 Certificate in Accounting
- 42 AAT Level 3 Diploma in Accounting
- 65 AAT Level 4 Diploma in Professional Accounting
- 8.9K For accounting professionals
- 23 coronavirus (Covid-19)
- 274 VAT
- 92 Software
- 274 Tax
- 138 Bookkeeping
- 7.3K General accounting discussion
- 194 AAT member discussion
- 3.8K For everyone
- 38 AAT news and announcements
- 352 Feedback for AAT
- 2.8K Chat and off-topic discussion
- 590 Job postings
- 17 Who can benefit from AAT?
- 36 Where can AAT take me?
- 44 Getting started with AAT
- 26 Finding an AAT training provider
- 48 Distance learning and other ways to study AAT
- 25 Apprenticeships
- 65 AAT membership