Previous HM Revenue & Customs’ (HMRC) guidance (EIM67320) on the tax treatment of payments made by Parish Councils to their Clerks indicated that it was acceptable for tax purposes for these payments to be made outside of a PAYE Scheme. This guidance was based on the premise that payments to Clerks fell below the PAYE tax threshold. HMRC is now aware that many Clerks earn in excess of the PAYE and National Insurance contributions thresholds. HMRC has therefore decided to issue new guidance on the tax treatment of parish clerks (see below). Guidance EIM67320 has been removed and should no longer be followed.
A Parish Clerk is an Office holder. All office holders are subject to PAYE. This means that Parish Clerks:
- can never be considered self employed for tax or NIC purposes.
- must not be paid “gross”; and.
- must be taxed under PAYE.
In some councils the Parish Clerk will also be the Responsible Financial Officer (RFO) however in other councils this may be a different person. If it is, then the RFO is also an office holder and is therefore also liable to PAYE on their earnings.
All Parish Councils must operate PAYE for both tax and NIC purposes on income they pay their Clerks (and RFOs). Checks will be made by HMRC to ascertain whether councils are operating PAYE on clerks (and RFOs) as required. These checks will be undertaken in the tax year commencing 6 April 2011.
APS Global can provide payroll services for parish councils. Please contact us for more information.