Director new employment NIC

by **Kitty Kat** on Tue Aug 16, 2011 5:03 pm

NIC is NOT my thing, so appolgies if this is stupid...

A director who is not on the Table Method earns £10,000 (thus paying a bit of NIC after they exceeded the threshold) then leaves their employment. They start a new employment as a director and effectively get that allowance again (i.e. they aren't paying NIC yet and they have earned £5,000 at the new place).

This doesn't sit right with me, they will underpay NIC over the year. But a P45 doesn't have NIC cumulative figures on it, so how can the new place take account of NIC paid?

by **pawncob** on Wed Aug 17, 2011 11:40 am

I thought the rules required an average over a year, thus equalising contributions.

by **Kitty Kat** on Wed Aug 17, 2011 3:12 pm

pawncob wrote:I thought the rules required an average over a year, thus equalising contributions.

Which would be fine if they held the post for 12m, but they moved in month 5. To my eye it would be like me earning £10,000, moving jobs, and not giving in a P45. I would then get my PA again. Ok, so in theory HMRC should catch on, but my new employer wouldn't know about my underpayment.

In this case we could manually sort this I imagine by adding the two lots of figures together. I suppose my query was really, if we didn't act for both companies, how would we know at the year end given all we would have is gross pay and tax from the P45? We would have no way of knowing how much NIC had been took by job 1.

by **Tax Champion** on Wed Aug 17, 2011 3:50 pm

Provided the employments are not "connected" for NI purposes, there is no problem - the director has paid his correct NI on his director's earnings (averaged) and starts again at the new job. As you say, NI does not appear on the P45, so separate employments are not linked, and there is effectively a new PA (nil rate band) at the new employment.
It is theoretically possible to have say five employments (one each day), earning £100 per day/week from each one, total annual earnings £25,000, and no contributions due - although if the employments are connected the earnings do have to be aggregated for NI

by **Kitty Kat** on Fri Aug 19, 2011 9:12 am

Tax Champion wrote:Provided the employments are not "connected" for NI purposes, there is no problem - the director has paid his correct NI on his director's earnings (averaged) and starts again at the new job. As you say, NI does not appear on the P45, so separate employments are not linked, and there is effectively a new PA (nil rate band) at the new employment.
It is theoretically possible to have say five employments (one each day), earning £100 per day/week from each one, total annual earnings £25,000, and no contributions due - although if the employments are connected the earnings do have to be aggregated for NI

Without me even looking at the definition of 'connected' for NICs I am sure they will be connected, the directors have just all moved to another company, owning all the shares in both companies between them.

It's been suggested (by our software provider) that we put cumulative totals in for the new directorship, but then at the year end we will declare to HMRC that £x has been paid and £y NIC collected, but will only pay over part of y as the rest has already been paid over by the first directorship.