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hello
i was wondering how do nic works when
say a company commenced trading on 1 october 2012 to the 31 march 13
and a director is paid a salary of $23000….
how will you account for the nic????
class 1 employer7488 = annual value
do you apportion the 7488 x 6/12 ???????????
plz help!!
thank you
up up I have the same question as it’s not very clear. Nothing mentioned in opentutition notes nor in BPP book but in 1 question in BPP practice book there is a case where NIC are apportioned.
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yes it is time-appotioned by 6/12—-(20,000 – 7488)*(6/12)*13.8%
In real life NIC’s are calculated according to your “earnings period” which will be on either a weekly or monthly basis – ie paid weekly or paid monthly, with directors being assessed on an annual basis. There are weekly and monthly limits that are used as well as the annual limits provided in the F6 exam. In the F6 exam as only the annual limits are provided it is acceptable for candidates to time apportion both the employer and employee limits, so yes for a 6 month period you would compare the salary paid in that period with 6/12 of the annual 7488 limit and apply the same apportionment to both the lower and upper limits for the employee contributions. We do not however time apportion the Class 4 limits where a trader has only traded for part of a tax year!
question wireless ltd June 2008
wireless commenced trading on the 1 october 2012 and prepares accounts to the 31 march 2013
directors remuneration of $23000 paid to the managing director of wireless ltd together with the employer’s class 1 nic!
the remuneration is in respect of the period ended 31 march 2013 but was not paid until 5 april 2013
no accrual was made for this remuneration in the accounts
i cannot understand why the nic for class 1 is not time apportioned. the director worked from the 1 october- 31 march. how come the 7488 is not apportioned in the marking scheme???
Although as I stated previously directors are assessed to NIC’s based on an annual earnings period, when a director is appointed during the tax year the relevant limits should be pro-rated (time apportioned) from the date appointed to the end of the tax year. If the full annual limit has been used in your answer to this question I would respectfully suggest that it is wrong!
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