Frequently Asked Questions

[Accountancy & other tax issues]  [Club Management]  [Constitutional]  [Computerisation]

PAYROLL ISSUES

51. PAYE and National Insurance
52. Taxation of Club Checks
53. Stakeholders Pension
54. National Minimum Wage
55. Working Time Directive Regulations
56. Statutory Sick Pay
57. Statutory Maternity Pay
58. Form – Maternity Leave

PAYE AND NATIONAL INSURANCE

By law a club must operate PAYE on the pay of its employees.  The club may also have to account for National Insurance Contributions (NIC) and in some cases will have to pay Statutory Sick Pay (SSP) and Statutory Maternity Pay (SMP).

New Employee

When a person is first engaged by a club he should produce parts 2 and 3 of the form P45 which he received from his former employer.  Part 3 of the P45 should be sent to the local Tax Office, part 2 is kept by the club and used to complete the employees deduction working sheet, P11.

If an employee does not produce a P45 a P46 must be completed and the employee asked to sign certificate A or B.  If the employee is unable to sign either certificate, tax at the basic rate must be deducted by the club.  Where either certificate A or B is signed and the employee’s pay is over the PAYE threshold the P46 should be sent to the local tax office straight away.  Where the P46 is signed and the total weekly pay is below the PAYE threshold the P46 should be kept by the club for three years.

Key Dates

The PAYE system works to set dates:-

1.    5th April – End of the Income Tax Year.

2.    19th April – Last date for sending payments for the year ending 5th April.  Interest is chargeable for payments after this date.

3.    19th May – Deadline for sending end of year returns P14 and P35.

4.    6th July – Deadline for sending details of expenses and benefits (usually for the steward) on form P11D.

5.    19th Monthly-Payment date for PAYE and NIC deducted in the previous month.

6.    19th July, October, January and April – Payment date for PAYE and NIC where the quarterly payment option is exercised.

Statutory Sick Pay (SSP)

As an employer, a club is obliged to pay a minimum level of sick pay to most employees, aged between 16 and 65, who have been sick for four or more days in a row.

SSP paid over by the club to the employee may be recovered by deducting the SSP from the monthly or quarterly payments sent to the Inland Revenue.

Employers can recover any SSP paid in a tax month were it exceeds 13% of their total of employers and employees Class 1 NIC for that particular tax month.  The amount of SSP which can be reclaimed is the excess of SSP paid over and above 13% of the total NIC liability.

Statutory Maternity Pay (SMP)

The rules for SMP are complex and employers are advised to study the SMP booklet N1257 available from the Department of Social Security.

Casual and Part Time Workers

Casual and part time workers are subject to the PAYE and NIC regulations and a P46 should be completed for all such workers.  It is often worthwhile for a club to maintain a book of the names and addresses of all employees including part time and casual workers.

Committee Honoraria

Honoraria paid by a club to its officers are taxable.  In addition the Inland Revenue is currently enquiring into checks and other benefits given to committee members in return for duties performed.  Checks distributed in this manner are taxable on the officer.

Quarterly Payment Option for Small Employer

A small employer may apply to the Inland Revenue to make PAYE and NIC payments to the Inland Revenue on a quarterly as opposed to a monthly basis.

Final Word of Warning

TAXATION OF CLUB CHECKS

INCOME TAX

Free Drinks for Members

No Income Tax is due on free drinks to members for attending the Annual General Meeting, Annual Dinner etc.

Drinks to Committee Members – “Duty Drinks”

In May 1995 the CIU obtained legal Counsel’s advice on the taxation of free drinks to committee members at club meetings.  Counsel concluded that a club is not liable to pay tax to the Inland Revenue in respect of free drinks provided to committee members.  While this opinion is effective in certain circumstances the Counsel’s opinion is not binding and did not deal with the non cash voucher legislation under which many of the Inland Revenue assessments have been raised.

A non cash voucher is defined as “any voucher, stamp or similar document or token capable of being exchanged for money goods or services”.  During 1996 the Revenue was assessing clubs on the face value of each check.  The face value being the retail price of the drink for which the check may be exchanged.  However, such assessments on the selling price were incorrect and after appeal have subsequently been reduced.  The voucher legislation states that the measure of the taxable benefit is the expense incurred by the club in providing the benefit.  The cost to the club in beer and other purchases in providing a £1 check is considerably less than £1.  For purposes of this legislation cost includes VAT.

A club should always prohibit the sale by committeemen of their checks to other members or visitors.  This is because the sale would increase the taxable benefit from the cost to the club to its face value.

Procedures to Reduce Liabilities

It is only free drinks given for duties, eg committee, doormen etc that is under attack.  If however, beer and other drinks are provided to committeemen without them having to provide anything to bar staff, the voucher legislation will not apply.  A major problem with such a scheme is ensuring the maintenance of bar controls.  Any scheme where no vouchers are provided to obtain free beer is potentially open to abuse and financial loss to the club may result if the scheme is not carefully monitored.

For there to be no income tax liability no voucher or anything which can be construed as a voucher is passed over the bar in exchange for the drink.  The following procedures are suggested:-

1.    A record be maintained by the secretary in a “Free Drinks Book – There should be no reference at all to checks, vouchers etc and none should
       be given out for duties.

2.    A duplicate of the “Free Drinks Book” as far as it refers to “duty” free drinks should be kept behind the bar.

3.    Each time a committee member, doorman etc receives a drink a record should be made in the “Free Drinks Book” – by the bar staff marking it
 with a tick or other symbol confirming the transaction.

4.    The two books should be reconciled each week.

5.    The steward should be given a separate stock-sheet allowance for “Free Drinks” this should be separately identified by the stock taker on his
 report to each reconciliation with the secretary’s record.

6.    Free drinks given other than for duties eg, prize winners, AGM’s etc can still be controlled by the voucher/check system.

7.    Often the only committee drinks given by the clubs are for attendance at committee meetings.  No liability arises if the drinks are brought to
 the committee or collected by committee members at the start and end of the meeting without the exchange of checks.

       It cannot be confirmed absolutely that this method will not be attacked in due course.  It does appear to be effective at present.

Other Procedures

The liability to pay income tax on checks is that of the person receiving the check and not a liability of the club.  Clubs normally only settle income tax liabilities on checks because they have not followed correct procedures, or they do not wish their members and committee to be inconvenienced.

A club may continue to issue duty checks and minimise liability by ensuring PAYE procedures are correctly followed by obtaining signed P46’s from committeemen.  No income tax is due if a committeeman has unused personal tax allowances to absorb any potential tax liability.  In addition the club should provide a supplement to the end of year P35 Return, giving details by individuals of the cost of duty checks provided during the year.  The income tax liability, if any, will then fall on the individual.

Provided each recipient earnings from the club is less than the lower national insurance threshold no national insurance is due on duty checks.

VALUE ADDED TAX

Free Drinks for Members when attending the Annual General Meeting, Annual Dinner etc. 

Free drinks provided to subscribing members in circumstances such as these, do not constitute business entertainment because, in effect, they are paid for from subscriptions.  This means that no (further) tax is due when these drinks are provided free, but tax is – of course –  due on any money paid if the drinks are given at a reduced price.  VAT incurred on such supplies may be reclaimed.

Drinks to Committee Member – “Duty Drinks”

Tax is due on the normal selling price of the drinks – entitlement to input is not restricted.

STAKEHOLDER PENSIONS

There is no doubt that the next year is going to be interesting for businesses that have 5 or more employees, in light of the government’s intentions regarding the new Stakeholder pension legislation.

Already, there has been a great deal of publicity – although the rules aren’t entirely fixed yet – and there will be more to come in following months leading up to April 2001 when the legislation is due to come into force.

The reason for the publicity is that there will be fines of up to £50000 levied on any employer who doesn’t comply with the legislation.  However, this is no reason to panic and to act in haste.  The legislation isn’t due to be finalised and in place until April 2001 and doesn’t have to be complied with until October 2001.

This is a brief outline of our understanding of the rules for Stakeholder to date, and at the time of print.

Employers with five or more employees have to offer access to stakeholder pensions unless they offer an occupational or qualifying group personal pension scheme to all ‘relevant employees’.  If not, they have to…

·        Identify a suitable Stakeholder provider;

·        Designate a Stakeholder scheme;

·        Provide employees with sufficient information to enable them to contact the designated scheme;

·        Offer the employees the option of having contributions deducted directly from payroll

·        Allow the designated provider access to employees.

It will be the responsibility of the employer to ensure that the scheme remains Stakeholder compliant and that the scheme remains on the approved list.  The one concession regarding the employer’s responsibility is that they will not be held responsible for the performance of the scheme

So there will be collection of the premiums through payroll  - on top of PAYE, national insurance contributions, working families tax credit etc.  It might be a suitable time to consider whether or not your accountant offers a payroll facility and weight up the costs of delegating the responsibility to a professional rather than risking a fine, paying the cost of additional training and adapting any software currently in use.  This would certainly be the time to discuss this issue well in advance of the October 2001 deadline.

What is Stakeholder?  It is a new type of pension plan on a low cost and flexible basis, offering the traditional features of a personal pension.

There are basic rules that every Stakeholder pension will have to meet… the minimum contribution will be £20; there is no minimum frequency for contributions.  This means that one person can pay one premium of £20.  Transfers from one Stakeholder plan to another can be made at no cost.  There is no initial cost to invest, meaning that 100% of the premium is invested in the pension fund.  There are no penalties if premiums are discontinued, the retirement date is changed or if contribution levels are changed.  There is only one charge on the pension fund every year and this cannot be higher than 1%.  Individual advice is not included in this cost.

The one advantage of this single charging structure is that it is going to make the choice of scheme easier, potentially.

It is estimated that Stakeholder pensions will be available to an estimated 13 million people!  It is interesting that an individual does not have to be earning income to contribute to a Stakeholder pension scheme.  If an individual is in an employer scheme and earning less than £30000 per year, they may also be able to contribute to a Stakeholder pension scheme.  This is called concurrency and may be good for tax planning for the right individuals.

There is no link between earnings and the amount that can be contributed to pension as long as the contributions remain below £3600 per year, and all contributions will be made net of tax whether the individual is employed, self employed or a non-worker.  For contributions above £3600 in any one year, there is a requirement to show earned income and the restrictions on premiums are the same s current Inland Revenue limits for personal pensions.

The only age restriction on Stakeholder pensions is the current upper age limit of 75.