Employed or Self-Employed – Make Sure You Know! (Resource contributed by Community Matters) Read the following (real-life) scenario and then discuss the question at the end: The management committee of the small but busy XYZ Community Centre received a bill from HMRC for £16,000 for PAYE and National Insurance contributions backed dated for 6 years. The committee were horrified. Over the years the committee had paid every bingo caller, doorman and other casual worker cash in hand. No individual payment had been very large, just £10 or £20 here and there. It all went through the books, so they believed they had done nothing wrong. Any tax issues were, they felt, for the recipient and HMRC to deal with as they believed no one earned enough for the centre to qualify to pay tax and National Insurance (NI). They did not see these people as employees, instead they saw them simply as volunteers who were “given a drink”. The PAYE audit team did a spot check visit and held a different view. They believed the recipients of the “drinks” were part time workers and tax and NI were due unless it could be proved otherwise; the way to do this is through a P46 for each worker. The P46 is the form to be sent to the tax office for every worker who does not produce a P45 at the start of their employment with the organisation. The P45 is a statement of earnings and deductions given by an employer when employment with them ceases. Upon receipt of the P46, HMRC will issue a tax code which tells the employer how much tax, if any, to deduct. Tax on the part time worker’s income is the responsibility of the organisation to collect and if it is not it becomes the responsibility of the trustees to pay it from their own funds at emergency rate. This is what happened to the XYZ Community Centre. £16,000 is a lot of money. It became such a large sum because the audit team took all sorts of other payments into account as well, such as the expenses of voluntary workers - legitimate in every way except how they were accounted for, or indeed whether they were accounted for properly at all! Without precise records and receipts for every item of expenditure then they can, perhaps quite inaccurately, be considered as payment of wage to part time workers. Thus a very large bill can be the result. What do you need to do to prevent a situation like this happening in your organisation? You will need to think about: § Information you need from a new worker § Budget – to include on-costs if the workers will actually be staff (such as National Insurance, tax etc) § Payment procedures § Expenses policies for staff and for volunteers § Expense claim forms § Records to be kept § Clarity between volunteer and staff roles § Delegation of authority for ensuring the payment processes are carried out accurately and are properly monitored
Code of Good Governance for Smaller Organisations: Useful Resources
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Advice you might need to take
Code of Good Governance for Smaller Organisations: Useful Resources
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