Tax Question....If a director pays himself £7,068 on 6 April 11, and then nothing for the rest of the year, does he have to pay tax/NIC in May?

Question:

If a director with tax code 747L pays himself £7,068 on 06/04/11, and then nothing for the rest of the year, does he have to pay tax/NIC's in May?

Answer:

Techically yes....

There should be an up-front PAYE bill for the tax (no NIC's as it is calculated on a cumulative basis for directors) followed by monthly/quarterly refunds by the company to the director on his net pay. At the end of the tax year he would have to offset it against any other tax he owes when he does his self assessment return or claim a rebate. Alternatively the company could ask for a PAYE rebate as they would have overpaid for the year but this is likely to take a while and may well be queried, attracting unwanted attention.

HMRC used to do annual PAYE schemes in such cases where they wouldn't hassle you with pink reminders every month but I'm not sure if they still do them. Even if they do, could you avoid a surcharge for a late PAYE payment under the new regime? Probably if you appealed, but I wouldn't count on it, as I believe the annual schemes were meant for year end salaries, not up-front payments or monthly/quarterly ones.

Hard to see how HMRC would ever find out about it anyway as there is no need (yet) to disclose when someone is paid. Obviously that would change if RTI comes in next year as planned. Even if the client had a PAYE visit, it would probably not get picked up as they tend to focus on payroll, bank statements, credit card bills and expense claims. If it just goes through loan account to clear a debit balance they would probably never know.