RTI for Directors - many practical points to consider NOW

As you may be aware from the financial press and recent postings from us, there have been many changes regarding the submission of payroll forms and returns.  This new process is known as RTI or Real Time Information. 


In the past, if money has been taken out of a company by directors, unless this was specifically earmarked as salary, this could eventually be treated in a variety of ways in the accounts.  The methods of taking money out, and the rules surrounding the tax and NIC due are unchanged, but now it is vital that whenever money is withdrawn a decision is made NOW as to whether this is “earnings” or something different i.e. a loan to the director, a dividend, a reimbursement of expenses etc.


If the new rules aren’t adhered to, this might result in sizeable penalties becoming owed by the company.


As a Company director, we would usually submit the payroll amounts for you at the tax year end, and disclose these in the accounts, but the new system requires changes to this.  




In summary, there are 3 basic ways this can now be done, if you would like us to help you deal with the issue:


·         A year in advance, at the beginning of the tax year – the problem with this is that if you have a change in circumstances i.e. a tax code change, you will need to submit another full payment submission with the changes.

·     Quarterly – the company will pay the directors quarterly and we will process a full payment submission on a quarterly basis.  This way, if there are any changes in circumstances it will be easier to amend as it can be done at the end of the quarter concerned. 

·     A year in arrears, at the end of the tax year – the problem with this is that the directors will not be able to draw any salary until March 2014 and then pay themselves £7,600 in one month.




The decision needs to be made NOW for the forthcoming year, so please don’t delay in dealing with this.


We also have to look at any other employees that may appear in the accounts at the year end i.e. directors’ spouses.  If they receive a salary from the company, even if this is not above the LEL (Lower Earnings Limit) (currently £109 per month or £5,668 p.a.) then a full payment submission must be completed for them, if there are any employees/directors being paid who are above the LEL.  If this is the case, you can use the same payment methods as above for the spouses or other employees.


Important point!  An RTI return needs to be submitted for any salaries that get provided in the accounts at year end.  If we don’t ensure that the payroll amounts have been processed through RTI, the company cannot have these included in the year end accounts, and as such, they will not be a tax deductible expense.


If you wish us to assist you with this, Kerry Baldwin in our payroll department will be able to submit the necessary forms on the company’s behalf, but firstly we need to agree the best course of action in your circumstances. 


If there is any change in your circumstances throughout the year it is vital we are informed immediately as this may effect the RTI payments to be processed.  If we are not advised at the actual time, this could result in potential penalties and tax liabilities. You will be required to sign an agreement with our payroll department and provide them with the necessary details to run the payroll. 


We believe the second option will probably be best in most cases, but we shall be grateful if you will consider these points and advise us if you agree, and let us know if you would like us to assist. 



Alternatively the payroll can be run through the HMRC website if you prefer to deal with this yourself. These are new rules, with very harsh penalties, so we recommend you take advice over each relevant director. 


If you are unsure then please take advice quickly - the alternative will be expensive. If you would like to speak to our payroll specialist Kerry Baldwin - contact her now kb@sovereignbs.com


For more details of our payroll service click here


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