NI for a Director working as Employee?

[ramone]

Thanks for reading my post.

I'm a Director of a firm, but essentially working as a PAYE employee (my firm is a trading division of a UK limited company). For simplicity up to now I've essentially just been treated (for tax purposes) as a normal employee.

I get a basic monthly salary (which I pay PAYE income tax on, plus the company bears my employers NI contribution on this salary as a cost in the same manner as my salary).

However, if we make an annual profit (which I am thus entitled to 45% of) of say £100,000 - my share (£45,000) becomes £39,893 (before PAYE tax) as I'm made to bear the full employers NI contribution at 12.8%.

Do the other Directors (not PAYE) actually pay 12.8% on their share? If I was paid properly as a Director would this help? Do you think its fair that the company bears some of my employers NI but not all of it?

Is this complete madness? Fortunately for my firm I'm better at doing my job than understanding Accounting procedures!

In addition what are the major tax disadvantages for me as I'm simply just paying PAYE?

Thanks for your help in advance.

[King_Maker]

Are you actually a member of the Board of Directors?

Or is the title of "Director" merely for status purposes etc?

[ramone]

I'm a registered Director of the non-trading company, but not the parent company - we operate as a 'Trading Division' of them.

So to answer your question, probably more status than substance, but I do own 45% of the shares of the (non-trading) company and more importantly, am entitled to 45% of the profit!

Thanks

[King_Maker]

I am not sure I understand how a non-trading company can operate as a "Trading Division".

Are you actually a subsiduary? Does the parent company own the other 55% of the shares? What about the other directors?

I assume a dividend route is not possible?

[ramone]

Neither am I quite frankly, but that's what it says at the bottom of our headed paper.

We don't trade via the NT company at all - we're are essentially just a division (with seperate P&L etc.) and yes the parent owns the other 55% of the shares.

The other Directors (3 who own parent company) have no involvement at all, other than one who oversees financial situation. We're in profit consistently so they don't really care.

Situation was something to do with (their) corporate tax burden when we set up - hence why we are not a seperate ltd company. Dividends thus not possible? Sorry to sound stupid, but why is that preferable anyway?

Thanks

[King_Maker]

There is no NI on dividends (at the moment).