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Employing the self-employed – time to stop burying your head in the sand

Do you run a small business charity or non-profit organisation?

If you have employees then by now you should be filing on-line payroll returns every time you pay your employees. From 6 April 2013 employers started reporting PAYE information to HM Revenue & Customs (HMRC) in real time. You may see this referred to as Real Time Information – or RTI. This means that employers (or their accountant or bookkeeper) have to:

  • send details to HMRC every time they pay an employee, at the time they pay them
  • use payroll software to send this information electronically as part of their routine payroll process

But we don’t have any employees!

Really? Are you sure?

Think very carefully about all of the people you make payments to. Are you really sure that they are self-employed?

Now that I have planted a seed a doubt in your mind take a look at the Employment Status Indicator on the HMRC website.

By answering a number of questions you can check whether that “helper” you make a payment to would be classed as an employee. Can you satisfy yourself that every person you pay would be classed as self-employed?

So that’s all clear then!

Well, unfortunately not quite so clear and a recent example has come to light in the instance of church organists. A phone call to the general HMRC helpline yielded the answer that an organist might be employed or self-employed depending on circumstances. Further probing however yielded a very different answer.

Following an Employment Tribunal decision, wherein an Organist was declared to be an employee, it has been the Law since 2007/8 that he/she should have been put on a payroll and been subject to the usual tax rules. Two further Tribunals have decided in similar manner, that an organist is an employee.

An HMRC Employment Status Officer has advised that Church of England Organists:

  • Are engaged under Canon Law (which is correct);
  • Play what the Incumbent authorises (according to that Law);
  • Cannot substitute anyone else without the Incumbent’s express permission;
  • Any substitute would be under his (the Organist’s) control (another employee) otherwise the Organist could not determine the substitution;
  • Must play the required music on set days and at set times determined by the Incumbent;
  • Does not provide his own “tools”, i.e. the organ;
  • Have full employment rights under EU Law.

This is a very specific example that illustrates the need to check employment status carefully.

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