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Where Taxpayers and Advisers Meet

Voluntary National Insurance and Ltd Company Deductions

tax2015
Posts:10
Joined:Wed Jan 28, 2015 8:49 pm
Voluntary National Insurance and Ltd Company Deductions

Postby tax2015 » Sat Jun 27, 2015 9:51 am

Hi,

If you are a Ltd Company Director and only you are involved in the whole company, and if you legally pay yourself monthly dividends and no PAYE at all, can you add voluntary national insurance contributions in your end of year accounts as an outgoing company deduction.

E.g.

Company total profit 10k
NI voluntary contribution 3k
Equals - Accounts - 7k to pay corporation tax on

Can you do this?

King_Maker
Posts:6538
Joined:Wed Aug 06, 2008 3:22 pm

Re: Voluntary National Insurance and Ltd Company Deductions

Postby King_Maker » Sat Jun 27, 2015 10:08 am

Do you any other earned income?

bd6759
Posts:3634
Joined:Sat Feb 01, 2014 3:26 pm

Re: Voluntary National Insurance and Ltd Company Deductions

Postby bd6759 » Sat Jun 27, 2015 10:56 am

Yes, because the NIC is payment of wages to you. It is a cost of employing you, therefore a legit deduction. You, of course, will be taxable on that amount.

tax2015
Posts:10
Joined:Wed Jan 28, 2015 8:49 pm

Re: Voluntary National Insurance and Ltd Company Deductions

Postby tax2015 » Sat Jun 27, 2015 11:23 am

Hi, thank you for your fast replies!

To clarify, the example I gave is based on 1 Ltd Company Director being the only person in the company doing everything (no staff). The director is also not using PAYE and is not receiving any employee pay. The only revenue he receives each month is a legally declared dividend amount from the end of month profitable balance.

RE the example total profit I originally stated of 10k - this amount is the total figure earned by the Ltd company from all contracts that have paid for that 1 tax year.

Therefore with the above known, there should be no 'grey' areas of ambiguity to provide the answer to my question. :twisted:

Recap:
- Company Profit = 10k
- In End of Year Accounts Company states they will pay a 'voluntary' National Insurance contribution for NI gaps 'because' there are no PAYE employees in the company. The NI 'gap' amount (for example only) is set at 3k

I believe this NI 3k outgoing cost to the Ltd company can be declared in the annual accounts as a deduction hence this 3k deduction would prove to be in your favour as taxes would only be focusing on the remaining 7k profits.

:) I hope that clarifies this, not sure how I can make it any clearer?

I think you are agreeing this NI 3k deduction is legal and can be added in your outgoings field in the HMRC account form.

Is that correct?

Thank you in advance... 8-)

tax2015
Posts:10
Joined:Wed Jan 28, 2015 8:49 pm

Re: Voluntary National Insurance and Ltd Company Deductions

Postby tax2015 » Sat Jun 27, 2015 11:32 am

One additional point I wanted to add (doesn't seem to be an 'edit' button for my original posts)...

Am I right in saying that because the company has no employees (the Company Director is taking Dividends only and no PAYE), that the Ltd company does not have to officially pay any NI contributions over and above the Voluntary Contributions the Company Directors is going to pay himself.

E.g. HMRC state a Ltd Company hads to pay in addition to PAYE employees NI (note, of which, in my example, there are no employees in this said company) - I think the amount is 13.8% - but am I right in saying this would not have to be paid? ...Because there are no employees, the voluntary contribution is a choice by the director and the reason the Ltd company deducts the amount of 3k (see my first post for why 3k) in its end of year accounts is more a case 'housekeeping' because he is not employed elsewhere and there is no other choice but to pay NI contributions (because he does not pay as an employee).

Hope that made sense.

If this is easier to understand use this: Basically the only NI the Ltd Company would record is the outgoing NI 3k payment in its accounts - no other NI is to be thought about.....

Is that correct? :roll:

bd6759
Posts:3634
Joined:Sat Feb 01, 2014 3:26 pm

Re: Voluntary National Insurance and Ltd Company Deductions

Postby bd6759 » Sat Jun 27, 2015 3:16 pm

A company cannot pay voluntary contributions: it doesn't need them. Only persons can make these contributions, so the £3000 is an amount paid on behalf the director/employee. This is part of the reward the company is giving to the director/employee, so it is a cost of that employment, and therefore an allowable deduction.

However, you should speak with an accountant because this is a ridiculous way of dealing with your situation. Why pay voluntary contributions when you can be automatically credited with contributions without actually paying any. Paying a dividend without using up as much of your personal allowance as possible is naive.

King_Maker
Posts:6538
Joined:Wed Aug 06, 2008 3:22 pm

Re: Voluntary National Insurance and Ltd Company Deductions

Postby King_Maker » Sat Jun 27, 2015 5:17 pm

Is there a reason why you are not taking the usual route of a small salary and appropriate dividends? This assumes you have no other income.

This could reduce your CT bill at no tax cost to yourself and provide for the State Pension.

A director is subject to PAYE & NI.

Your accountant is the best placed person to assist on this elementary option.

tax2015
Posts:10
Joined:Wed Jan 28, 2015 8:49 pm

Re: Voluntary National Insurance and Ltd Company Deductions

Postby tax2015 » Sun Jun 28, 2015 9:53 am

Thank you everyone for your replies.

Feedback
Posts:345
Joined:Thu Feb 23, 2012 10:26 am

Re: Voluntary National Insurance and Ltd Company Deductions

Postby Feedback » Mon Jul 20, 2015 7:31 pm

as long as your employment earnings are above the lower earnings limit (£5824 for 2015/16) and below the primary threshold (£8,060 2015/16) then you will be credited with a full qualifying year for NI purposes without having to pay any tax or NI. The rest of your income you take as divs.


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