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PAYE Issues

30 August 2013

I know it is a complex area, but could you write a follow-up article explaining when a church cleaner can correctly be considered to be self-employed; so enabling the church to avoid PAYE and other employment issues (16 August)?

Since April this year, there has been an HMRC requirement to report all payments to their RTI system (via their website or a compatible software package) - whether or not any NI or income tax needs to be deducted - before, or at the same time as they are paid. This is a nightmare for small organisations.

THE first response had me double-checking Her Majesty's Revenue and Customs (HMRC) website, which is fairly detailed and clear. They have an "employment status indicator" that can be used online for you to double-check. But here is a brief summary.

If yours is the only work the cleaner does, he or she is probably an employee. Employment status is based on the nature of the terms of any agreement or contract between the church and the cleaner. An employee has employment rights - even if you have never signed a contract - for things such as holiday and sick pay, hours, and rights with regard to dismissal.

A self-employed person is "running their own business": they have the risks of running a business, and may make profits or losses.

The cleaner is an employee if most of the following questions (and a few others) have positive answers: "Do they do the work themselves?"; "Can you tell the worker what to do and how to do it?"; "Can you move them from task to task?"; "Do they have set hours of work?"; "Are they paid a regular wage or salary?"

The cleaner is self-employed if he or she can: "Hire someone else to do the work"; "Decide when and how to do the work"; "Make a loss as well as a profit"; "Agree a fixed price, regardless of how long the job takes"; "Provide their own equipment for the work", and a few more.

The self-employed person will be registered with HMRC to arrange his or her own income tax, National Insurance, and VAT. To avoid your having to register as the employer, the cleaner would need to register as a self-employed person with a set-up for his or her own payments. There is no possibility of a private, verbal arrangement between the church and the cleaner which exempts the church or cleaner from registering; they are either employed or self-employed legally on the HMRC system.

There are still sections of the website that I have not trawled through, which will fill many a quiet moment in the next few weeks.

The second respondent points out that you can do it all online, if you know what to do and how to do it. Maybe the diocesan finance department could teach individual churches how to register and pay online. Or, as in some dioceses, it could take on the arrangement for smaller churches with few resources.

At many HMRC offices, you can drop in for advice; and, I suspect, were I the treasurer at a church with a cleaner, I would drop in and talk to them and get it all from the horse's mouth.

What is not an option is to "pretend" that the cleaner is self-employed as you pay his or her weekly wage. You have no excuse for not knowing their status with HMRC; it is like a speed restriction that applies whether you are aware of it or not.

Questions and comments to maggiedurran@virginmedia.com

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