HMRC
GETTING IT RIGHT ON TAX AND EXPENSES
I was a parish councillor for some years but did not stand in the May 2019 elections and so am no longer a member of our parish council. However, I do perform the role of clerk. I am well aware that for 12 months I cannot be paid for this work, nor would I ever want to be. The clerical side of the role is not giving me any issues, but there are some aspects to the legal side where I need more education. I have seen a notice from HMRC stating that any expenses incurred by a clerk must be treated as chargeable income – and yet I cannot be a paid employee. The council is willing to pay for some education for me that will help us be certain we are performing everything as we should. Is there any way this can happen?
Ian Thompson, Clerk, Darrington Parish Council, Pontefract, West Yorkshire
Paul Clayden writes: Although not paid, Mr Thompson is an employee of the council and the council must apply HMRC’s rules so far as they apply. I have looked at the relevant parts of HMRC’s employment manual and confirm that, in principle, expenses are chargeable to income tax. However, the manual also says that expenses incurred wholly, exclusively and necessarily in the performance of the office of clerk can be set off against income, e.g. postage and other office expenses, travel costs and the like. Payment for training I would classify as a benefit which is potentially taxable and which could not be set off against employment or other income. It should be declared to HMRC in the tax return for the relevant year.
Clerks & Councils Direct, September 2019
OFFSIDE FLAG ON RECLAIMING VAT
I read with interest Paul Clayden’s article on “danger zones” and reclaiming VAT and the letters on the topic in the July issue. My council has “contributed” towards the cost of street furniture, which was paid for and installed by the district council. According to the district council officer, if the district council invoiced for part-payment then it would be a business activity and therefore subject to VAT; however, if the parish council made a contribution then this would be a goodwill gesture and not a business activity, and therefore not subject to VAT. With this in mind, my council recently had verti-draining work done on a recreation ground which it owns, and the local football club made a contribution towards the work as it had additional work done on the actual pitch. The agreement has always been that the council pays for work on the recreation ground in maintaining it as such, and if the football club wishes any additional work to be done then it would pay for this itself. This was the first time we had all the work done paid for by the council, as this was seen as being prudent with public money, bringing an efficiency of scale and at the same time assisting a local community group. However, from your article and the subsequent letters, should this not have been done in this way?
Name and address supplied
Paul Clayden writes: On the facts as stated by the clerk, this seems to me to be a case where the council cannot claim the VAT back from the bill for the extra work done for the football club. The situation is akin to that described in paragraph 10.1 of VAT notice 749 relating to community projects. In any event, the council should check with HMRC.
Clerks & Councils Direct, September 2019
HACKING THROUGH THE PAYE JUNGLE
With regards to the query about clerks and PAYE (Letters, November), I got caught up in this nonsense some six years ago, after many years of having my modest annual honorarium (currently £600 per annum) taxed via my NHS pension.
Despite intervention from my local MP I had to register for PAYE, and after ploughing through the masses of online gobbledegook and declaring that I was the only employee, managed to create the right kind of records, including getting a code number for my parish council income. I receive this income twice a year, in two £300 tranches, and I have to make an online return to this effect.
However, the irony – and stupidity – of this whole affair is that HMRC is happy for me to continue to pay the tax through my NHS pension, with the code number relating to the parish council income being adjusted so that it is tax-free. It does, at least, mean that I’m not responsible for forwarding any tax due to HMRC.
Jack Smith, Clerk, Lindal and Marton Parish Council, Cumbria
Clerks & Councils Direct, January 2019
MUST CLERKS BE PAID VIA PAYE?
I was appointed clerk to a small community council in Wales last year. I am the only person employed by the council, which is paying me £60 a month plus expenses for postage, paper and printer ink for the work that I do (though these expenses will probably be less than £100 per annum). The previous clerk did the work on a voluntary basis for over 28 years.
I contacted HM Revenue and Customs in order for them to adjust my tax code in view of the additional income. They told me that I had to register my community council as an employer and to operate a payroll and submit details every month of the payments made to me.
I am 69 years of age and am claiming the state pension, and pay tax on my total pension income at a standard rate. HMRC seems to be suggesting an unnecessarily bureaucratic and complex arrangement to deal with a very simple situation.
I have consulted the HMRC website and found the following advice: “You don’t need to register for PAYE if none of your employees are paid £116 or more a week, get expenses and benefits, have another job or get a pension. However, you must keep payroll records.”
In these circumstances, is it still necessary for our community council to register for PAYE, or is there a simpler method of ensuring that I pay the correct tax and that the council conforms with all necessary legislation?
Name and address supplied
Paul Clayden writes: In most circumstances, a council must operate a PAYE system for the clerk’s pay; this has been the case since 2011. In light of the quoted HMRC advice, however, I agree that in this instance the council does not need to set up a PAYE system. However, I would recommend that, if possible, the clerk gets written confirmation that this is the case. Further guidance should be available from One Voice Wales or from the Society of Local Council Clerks.
Clerks & Councils Direct, November 2018
RECOVERING VAT ON GOODS
PAUL Clayden’s article in the July issue of Clerks & Councils Direct states that parish councils may purchase goods, reclaim the VAT and donate them to village halls – but this is not the case, as my parish has discovered.
Cllr Reg Thompson, Chairman, Syderstone Parish Council, Norfolk
Paul Clayden writes: I said in my article that a council may be able to recover VAT on goods it buys and then donates to a village hall; I did not say that such a recovery would always be possible. I also advised that advice should be taken before making purchases. I recommend the HMRC VAT publication Local authorities and similar bodies (Notice 749, April 2002), which gives detailed guidance. It can be viewed on the HMRC website. My Legal Matters article in this issue (page 10) deals with various aspects of VAT relating to councils in greater detail.
Clerks & Councils Direct, September 2014
VALUE ADDED TAX – helping local communities
Written by Paul Clayden, Chief Executive, Local Councils Advisory Service
As appeared in Clerks & Councils Direct, September 2014
© CommuniCorp
TRUST IN A PROFESSIONAL
I AGREE entirely with the comments made by Ian Hook (May 2014) about the disproportionate amount of work PAYE is placing on clerks to small parish councils. However, I don’t believe anyone has to pay HMRC by internet banking, it’s simply that HMRC would prefer it. You can understand that as it will save them millions.
Either way I have a different solution for Ian. Pass the whole PAYE task over to a small accountancy firm like the one we use. For around £30 per year they will take care of everything for a small parish council, and I thoroughly recommend them. They provide peace of mind that the job is being done properly and on time. Moreover, compared with a possible penalty notice of £100, their fee seems really good value for money too.
Phillip Brooks, Clerk, Keswick and Intwood Parish Council, Norfolk
Clerks & Councils Direct July 2014
HMRC’S GROWING BURDEN ON CLERKS
FURTHER to recent correspondence regarding HMRC’s RTI, I fully agree with the comments expressing irritation with the extra unnecessary work that it entails (Letters, January 2014). As with the Thrussington clerk, I am paid irregularly, therefore requiring nine nil returns with accompanying postage!
In addition, I fell foul of the annual return. I thought that I had completed the return ahead of time in March last year but apparently did not ‘release’ the data. When I received my £100 penalty notice (out of proportion relative to the £400 tax actually paid correctly on time), I went back into the system and all of the data previously entered was there. My protestations to HMRC were rejected and as at this moment I am still appealing through the tribunal system.
As Janet Heath said in her letter, it was so much easier and more efficient to declare the income in my personal return, but HMRC appear deaf to such pleas.
Now comes a briefing note from NALC advising that electronic payments to HMRC are mandatory “irrespective of inconvenience” and “even if this triggers a bank charge”.
What is being done to resist this almost unbelievable imposition on small parish councils? HMRC seems hell-bent on making more unnecessary work for already over-worked clerks.
Ian Hook, Clerk, Mursley Parish Council, Buckinghamshire
Clerks & Councils Direct May 2014
HANGING ON THE TELEPHONE
WE can all sympathise with L. Michael Woodman on his frustrating telephone experience (“Taxing times”, January 2014). You get the impression that companies and organisations would rather not speak to you at all. Are they so frightened of complaints?
However, in the case of HMRC, I wonder if Mr Woodman and his parish council have considered a way in which he would not have to contact them in that way at all. There will be “payroll providers” in Warwickshire, one of which would be pleased to take on his PAYE work, I’m sure.
There is a cost involved, of course, and maybe we are lucky in East Yorkshire in having more than one with very reasonable charges, but it would save him contemplating retirement over it!
Phillip Crossland, Clerk, Rudston Parish Council, East Yorkshire
Clerks & Councils Direct March 2014
WHO WILL TAKE TAXMAN TO TASK?
WITH regard to the letter from the Clerk of Hampton Lucy Parish Council in Warwickshire (“Taxing times”, January 2014), I agree entirely with his comments.
Paying the clerk (me) used to be a doddle until Real Time Information (RTI) was introduced last April. My experiences are exactly the same as his. I am paid twice a year but, despite my best efforts, have not found a way to record the “periods of inactivity”, other than monthly, to avoid penalties!
Before the introduction of RTI, I was able to speak to someone at HMRC and tell him I was only paid bi-annually (and, as a pensioner, no NICs were paid by me or my council anyway), and that was satisfactory.
Is there anybody or any institution who could take up the cudgels with HMRC on behalf of clerks of small parishes, to streamline the information that has to be recorded or to add another “box” to allow for our different pattern of payments? If there is, I feel sure that many clerks of small parishes would be eternally grateful!
Janet Heath, Clerk, Thrussington Parish Council, Leicestershire
Clerks & Councils Direct March 2014
TAXING TIMES
I FOUND my council's PAYE affairs so straightforward before Real Time Information (RTI) was introduced in April 2013, and since then I have spent an inordinate amount of time contacting HMRC.
The problem started when the council was threatened with a penalty for not having notified HMRC that I hadn’t been paid (I am the sole employee and I make the payment twice a year in September and March). Knowing that a “period of inactivity” – tax speak for not being paid – could incur a penalty, I contacted them in May last year, via the PAYE Basic Tools software, and received a notice saying, “Invalid, you have nothing to declare”. I had marked the software that I was paid bi-annually, so naturally I was not satisfied.
I phoned HMRC to speak to someone, but for the first five minutes I was directed to a host of websites that would give me answers to all sorts of questions, but not mine! Eventually, I was told to await an adviser and then a buzzing noise began, before oft-repeated sounds of what I can only describe as the frantic cries of a choking duck.
At last I was connected to an adviser who confirmed that, yes, I must inform the Revenue every month that I'm not paid, and I will receive an acknowledgement from Gateway. “So what happens when I’m paid and the Revenue receives the tax due?,” I asked. “Oh, we don’t acknowledge that,” was the answer.
I've had enough, I'm retiring!
L. Michael Woodman, Clerk, Hampton Lucy Parish Council, Warwickshire
Clerks & Councils Direct January 2014