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Confusion rife on RTI and churches

03 May 2013

SHUTTERSTOCK

Status blurred: organists are one of the groups that are affected

Status blurred: organists are one of the groups that are affected

CHANGES to the Pay As You Earn (PAYE) tax system, requiring employers to make immediate notification to HMRC of payments to employees ( News, 15 March), have highlighted confusion about the status of some church workers.

Generally, if people are paid for services - including cleaning, bell-ringing, organ-playing, or singing in a choir - they are either employees or self-employed.

The self-employed provide invoices, and are responsible for their own National Insurance and tax payments. In contrast, employees have tax deducted at source; and, under the new Real Time Information (RTI) system, employers are required to notify HMRC each time a payment is made.

The new system does not change anybody's status; but it has led many to question whether the correct statuses were being applied.

A number of dioceses have organised briefings to help churches understand the new system. This had resulted in the diocese of Chester's having a public spat with the journal The Ringing World about the status of bell-ringers.

"No one with any knowledge of employment law thinks the Chester diocesan office is right, but all attempts at persuasion have been unsuccessful," Steve Coleman wrote in The Ringing World. "The office takes the view that HMRC have told them that bell-ringers are employees and that's that."

But the Diocesan Secretary for Chester, George Colville, has rebutted the claim in a letter on the journal's website. "Talking about tax inevitably leads to questions about employment status. . . Parishes, bell-ringers, and others have been attempting to get us to state categorically that bell-ringers are not employees. We are not in a position to do this, and in response we have referred to HMRC advice."

Local Religious Centres (LRCs) that make only very small ad hoc payments to a limited number of workers below set levels may not have to comply with RTI reporting requirements. The LRC arrangement was agreed with the HMRC and the Churches Legislation Advisory Service (CLAS) before RTI came into being.

HMRC has been unable to confirm that LRC arrangements still stand, more than two weeks after first being asked by the Church Times. In response to questions, their web page giving details of the arrangement has been "removed temporarily pending updated guidance".

The secretary of CLAS, Frank Cranmer, said that it had been in continued discussions with HMRC about LRCs. The arrangement continued, and CLAS was awaiting updated guidance.

THE main change is that, from their first pay day on or after 6 April, every time an employer makes a payment to an employee, they must report details of the earnings and deductions to HM Revenue and Customs (HMRC).

This applies to all employers required to operate a PAYE scheme. Guidance on when and how to register as an employer has not changed and can be found at: www.hmrc.gov.uk/payerti/getting-started/register.htm.

Employers who are required to operate PAYE schemes must report earnings and deductions for all employees, including those who are part-time, who earn less than the lower-earnings limit, and casual workers, even if those amounts are below £109 a week.

Many churches already operate PAYE schemes and use payroll software. They should check with their software provider to ensure that the software they use is RTI-compliant. There are details of various software products at www.hmrc.gov.uk/efiling/paye/paye_software_forms.htm, including HMRC's free Basic PAYE Tools. This is suitable for employers with nine or fewer employees.

Until 5 October this year, employers with fewer than 50 employees, who find it difficult to report every payment to employees at the time of payment, may send information to HMRC by the date of their regular payroll run - but no later than the end of the tax month in which the payments are made. (A tax month always ends on the 5th of a calendar month.) This is a temporary relaxation to give some extra time to small businesses that pay weekly, fortnightly or more frequently, but who only run their payroll (or use an agent to run their payroll) at the end of the month.

This extra time will enable these businesses to adapt their processes, or change their arrangements with their payroll service supplier so that they can comply with the new legislation. Employers who choose to take advantage of this relaxation will still need to report their PAYE in real time by the last pay day in the month, or the end of the tax month (i.e. the 5th) at the latest.

There is further detailed guidance about reporting PAYE in real time at www.hmrc.gov.uk/rti.

HMRC has a helpful tool on its website, the Employment Status Indicator, which will help a church determine whether a worker is self-employed or an employee.

The tool is anonymous; so no personal details about the worker or the church are needed. Visit www.hmrc.gov.uk/calcs/esi.htm.

HMRC's employer helpline (08457 143143) is open from 8 a.m. to 8 p.m., Monday to Friday, and from 8 a.m. to 4 p.m. on Saturday.

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