P35 and P14 for dividends only director

[karoloydi]

Hi,
my company has 1 director and 1 employee.
The director only receives dividends. Will I have to include the director in the P35 and P14? Or only the employee?

[David Griffiths]

The simple answer is that you only include the employee. People who earn less than the Lower Earnings Limit for NI don't get included on any return.

However, the posting raises several questions.

Are you asking about the year ended 5 April 2009? If so, you are late with the form, and will get a penalty.

Secondly, why is the director not taking anything? Even if there are other employments, it's usually efficient to take a salary between the Lower Earnings Limit for NI and the Primary Threshold.

[karoloydi]

The simple answer is that you only include the employee. People who earn less than the Lower Earnings Limit for NI don't get included on any return.

However, the posting raises several questions.

Are you asking about the year ended 5 April 2009? If so, you are late with the form, and will get a penalty.

Secondly, why is the director not taking anything? Even if there are other employments, it's usually efficient to take a salary between the Lower Earnings Limit for NI and the Primary Threshold.

I am gonna submit my forms 1 month late and pay the £100 fine. I am hesitant to make any payments that will require from me to submit a P11, because I am afraid that the fines are going to be even higher.
My salary for last year was £25000 from my other employment. Do you suggest I pay myself salary as a director for year ended 2009?

How about year ending 2010. My salary will be about £32000. How much do you suggest I pay myself?

[David Griffiths]

Either you did pay yourself a salary for 2008-09 or you didn't. It's not a point to make suggestions about.

For 2009-10, you could pay a salary of £5,400 and deduct basic rate tax. It might be the best option but there might be a cash flow disadvantage in terms of the PAYE, offset by the extraction of profits at basic rate, whereas future extraction might be at higher rate. This is the kind of judgement call that we sit down and discuss with clients so they have the information to make an informed choice. Don't you have an accountant to discuss things like this?

[karoloydi]

Either you did pay yourself a salary for 2008-09 or you didn't. It's not a point to make suggestions about.

For 2009-10, you could pay a salary of £5,400 and deduct basic rate tax. It might be the best option but there might be a cash flow disadvantage in terms of the PAYE, offset by the extraction of profits at basic rate, whereas future extraction might be at higher rate. This is the kind of judgement call that we sit down and discuss with clients so they have the information to make an informed choice. Don't you have an accountant to discuss things like this?

Thanks for your advice David. Yeah, I ll start looking for an accountant in a months time.

[MJames]

Either you did pay yourself a salary for 2008-09 or you didn't. It's not a point to make suggestions about.


I would actually suggest that there is some scope for adjustment here. Presumably money has been taken out of the business but neither dividend vouchers nor payslips have been prepared.

So, while the amount of money that's been taken cannot now be altered, whether it's a dividend or a salary is a matter of administration which hasn't been completed yet, so this can be changed.

I quite agree with the rest of your comment though. The £5,400 salary avoids any N.I. and, although it will attract personal tax of 20%, will save corporation tax of 21%.

Just as a side point, P35 late filing penalties for 5 April 2009 are limited to the amount of PAYE or NI due to HMRC at 19 May 2009. Thus, if your business did not owe any PAYE or NI (or CIS from subcontractors) then the penalty will be £nil.

[Williams lester]

So, while the amount of money that's been taken cannot now be altered, whether it's a dividend or a salary is a matter of administration which hasn't been completed yet, so this can be changed.



Well it can't be a dividend unless board meetings were held and dividends declared, this can't be done retrospectively.

[MJames]

Well it can't be a dividend unless board meetings were held and dividends declared, this can't be done retrospectively.

Maybe not according to the letter of the law, no. But as this is a small OMB with only one director it's still purely an administrative issue which, in practice, is carried out retrospectively in a majority of OMBs.