Employer Liability Insurance

[silentbull]

Hi

I am highly in confused state.

I have a limited company where myself and my wife are directors with 50% share holding.

I am the only working person who is doing IT contracting and want to know whether it is mandatory to have Employer Liability insurance. Please note that I don't have any other employees apart from me and my wife who are directors.

These are my questions

1. If mandatory should it cover both myself and my wife or just me.

2. If it needs cover for my wife also, I had it only for me in last year. Does it mean I will be trouble or attract any fine for not having it for my wife in previous year? Although it costs an extra 40 quid for my wife, i am more worried about not having it in the past.

The link below says the following , please confirm my understanding

Firstly, if you are a husband and wife team, or your sons/daughters assist then you generally do not need EL cover. If you’re in doubt, then usually a good way round it is to insure them jointly with you – that way all the cover applies to them as well as you. The exception to this is if you are a Limited Company with 2 or more working directors then you MUST by law have this cover even if you are a husband and wife team under the Employers Liability (Compulsory Insurance) Act 1969. There is an exception to this legal requirement which is a Limited Company with only ONE working person who is a director and owns fifty per cent or more of the issued share capital, i.e. there are no other persons whatsoever doing any work in the company.


Regards
Sam

[northernladuk]

Is she an employee of your company or just a shareholder?

If you are not sure you need to learn the difference sharpish.

[TheDandy]

According to the OP she is a shareholder. Therefore is she just holding office as a director or does she have a contract with the company that makes her an employee.

[silentbull]

According to the OP she is a shareholder. Therefore is she just holding office as a director or does she have a contract with the company that makes her an employee.

Hi All

She is just a director who gets dividend and basic salary which does not attract TAX or NI contribution.

[stek]

Hi All

She is just a director who gets dividend and basic salary which does not attract TAX or NI contribution.

Does she do any actual work?

[silentbull]

Does she do any actual work?

yes, looks after the company accounts. If she does not do anything, is it ok to pay her minimum salary and dividend

[TheCyclingProgrammer]

I think you probably do need it. I never used to have it but when my wife became company secretary and started doing some work for the company I took out a policy. I asked QDOS about this and in their view it was compulsory at that point.

Its so cheap - and normally sold as a bundle with public liability anyway - that its probably better to just get it and not worry about it rather than risk being wrong unless you can find anything that definitively says you don't need it.

[Old Greg]

yes, looks after the company accounts. If she does not do anything, is it ok to pay her minimum salary and dividend

What does your accountant say?

With respect, you have quite a bit to learn still. If you have an accountant, ask them these questions and take their advice. If you do not have an accountant, you must get one as a matter of urgency. Read the guides on the right of this page. SJD accountancy have a good guide as well. You need to register to download but they don't spam you.

[kal]

EL costs about 50 quid if bought together with the usual PI/PL insurances, is it really worth wasting your time debating over it, just get it as part of the insurance package and be done with it.

[TheCyclingProgrammer]

yes, looks after the company accounts. If she does not do anything, is it ok to pay her minimum salary and dividend

If she's a shareholder she's entitled to dividends.

You can pay her whatever salary you like, but if she doesn't do any work, then any salary you pay her will not meet the "wholly and exclusively for business purposes" test (what's the purpose if she doesn't do any work?) and therefore will not be an allowable expense for YourCo when calculating it's corporation tax liability (in other words, any salary will come out of YourCo's post-tax profit which is fine if thats how you want to spend YourCo's profit but it seems a bit pointless).

Additionally, even if she does do work for the company, the general advice is that any remuneration should be broadly in line with the amount of work she does. An excessive salary might still raise questions and HMRC could still challenge it and say its not "wholly and exclusively" for business purposes.

Bear in mind that as she is a company director, then its probably reasonable that she receives a basic salary for that responsibility alone but how much is reasonable is a matter of opinion and you should speak to your accountant. Some would be quite comfortable paying the full personal allowance for a director with some additional admin/bookkeeping duties. Some might not.