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Tax changes require instant reports

15 March 2013

THE "most significant change to the income-tax system in 70 years" will require churches to notify Her Majesty's Revenue and Customs (HMRC) the moment they make a payment to an organist, cleaner, or other staff.

At the moment, employers tell HMRC whom and what they have paid at the end of each tax year; but in the coming tax year, under the new Real Time Information (RTI) system, employers will need to make an online notification to HMRC "on or before" the date on which they make regular payments to staff; or within seven days of the payment, if it is a casual or ad-hoc arrangement.

The new requirements, which take effect on 6 April, will affect all Pay As You Earn transactions, regardless of whether the amount is above the threshold for income tax and National Insurance.

The new arrangements will not apply to payments made to self-employed contractors, but HMRC warned that churches must ensure that organists and other suppliers really are self-employed, and that they keep adequate records.

"Anybody paying somebody else needs to ensure that they have identified the correct employment status," an HMRC spokesman said. A self-employed person "should bill or invoice the church for their services". It was not sufficient for the church to obtain a receipt for a cash payment, and then to assume that the person being paid was self-employed, he said.

HMRC said that it had written to all registered employers last month, and in October and November last year, to inform them of the change; but last weekend's Money Box programme on Radio 4 reported a survey that suggested that half of all employers were not aware of the change.

HMRC's chief executive, Lin Homer, defended the changes. She told the programme: "Everything about the workplace is changing, including the speed with which people change jobs, and the number of people, like a church organist, who have part-time employment. Unless we have a system that keeps up to date with that as those things happen, the year-end reconciliations were always behind the curve."

She said that the changes were designed to make the tax system more accurate, and to reduce administration. "If you employ someone, you already have the responsibility for recording what you are paying, and making sure you are making the deductions. What you are going to have to do in the future is share that information with us."

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