Income tax paid on behalf of directors

Our team of experts tell you how to report these payments to HMRC

Our experts at DSR Tax Claims know how hard it is to find good, quality information about HMRC’s tax regulations that is easy to understand, and that’s why we have created these handy guides to tell you everything you need to know. Our aim is to make life easier for our clients and that is why we want to share our expertise with you. You can also call our friendly team on 0330 122 9972 – we’re the tax experts you can trust.

What happens if you pay income tax on behalf of your company directors?

If you are an employer who pays income tax on behalf of the directors in your company, there are certain things you need to do to make sure that everything is above board with HMRC. This means that there will be certain reporting requirements on your behalf as well as possible National Insurance obligations.

This includes instances where you pay your company directors without deducting any PAYE tax and HMRC later recovers that unpaid tax from you – HMRC will consider this as having provided a benefit to those company directors.

Are there any exemptions?

In most instances you will be expected to report these payments to HMRC, unless the director is considered not to have a ‘material interest’ in the company and one of the following conditions apply:

  • Your company is a not-for-profit organisation or a charity
  • Your director is considered to be a full-time working director.

When HMRC talk about having a material interest in the company, they mean that the director owns or controls more than 5% of its ordinary share capital (whether on their own or with associates).

How do you report to and pay HMRC?

If the income tax you pay on your director’s behalf doesn’t come under one of the above exemptions, you will need to report this to HMRC on your P11D. You then need to add the value of the benefit to the director’s other earnings when you deduct and pay Class 1 National Insurance through payroll – you wouldn’t deduct PAYE tax though.

How do you work out the value?

To work out the value, you use the amount of tax that HMRC recovered from you on behalf of the company director. If the director paid any amount back to you (‘made good’ as HMRC term it) then you would deduct that from the value.

How can DSR Tax Claims help?

We aim to make life as simple as possible for our clients and that includes giving you the information you need to make your taxes (and your life) simpler and less stressful.  Our team of experts at DSR Tax Claims are always on hand to help our clients and our excellent standing with HMRC means that we can make sure you don’t fall foul of their regulations, while claiming your maximum tax relief. We can even take care of all that paperwork and deal with HMRC on your behalf too. Call our friendly team on 0330 122 9972 – we’re the tax experts you can trust.

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