PAYEing The Reception Committee
Over the years I have come across as many misconceptions concerning paying reception staff as I have people who do not get all six numbers on the lottery. In this article I will set out my views of this area together with examples of how the Inland Revenue sometimes apply the law.
Basic Principles If you pay someone for providing you with services, they are either self-employed or an employee. If that person only works for you it is very difficult (but not impossible) to get the Revenue to accept that they are self-employed. If they are self-employed, they assume full responsibility for their tax and National Insurance liabilities.
However, even if they wish to assume these liabilities, it does not necessarily mean that they are considered self-employed by the Inland Revenue. If you are in any doubt, ask them to provide you with details of their Tax District and Unique Taxpayers Reference (a new term for self-assessment - the UTR is always ten digits).
Generally, the Revenue no longer accept the "casual labour" argument, even for occasional cover staff. So if you have a receptionist who is not self employed, what is the position.
Let us assume they have no other income and you are their only or main employer. As the National Insurance threshold for 2009/10 is £110 per week, payments below this level do not attract any National Insurance costs for you, nor are any tax deductions required.
A Story. One of my Chiropodial clients was the subject of a Revenue enquiry which was amicably resolved in all areas save one - receptionists wages. My client had, for three years, had three receptionists all of whom had no other income and had each earned £60 a week or less.
The Revenue insisted that as the full PAYE system had not been applied, the equivalent of basic rate deductions based on the last three years wages - nearly £2,500 had to be paid in settlement.
The Moral If you are in the above situation, write to your local tax office asking that a PAYE scheme be opened. Explain the situation and it is possible that they will advise you that a scheme is not required, as there will be nothing to pay. Insist that they confirm this in writing - if they will not, demand that they open the scheme, get your staff to complete forms P46 (one each) and submit these to the Revenue. You will then be protected from a Revenue attack - the total cost to you being a small amount of time.
A number of people still suggest that they should pay receptionist cash and treat this as their own drawings. This raises the following: -
1. Cost
You would be paying out of "after tax" money; therefore to a basic rate taxpayer, reception wages of £40 really cost £55, and to a high rate taxpayer, the true cost is over £68.
2. Contributions Agency
A little while ago I was giving a presentation to the McTimoney chiropractors and this subject was brought up. A young lady in the front row stood up and advised that, prior to re-training, she had been an investigator with the Contributions Agency. It is C A policy that where they find a situation where the correct system is not being applied, they will prosecute both parties as “collusive employer/employee”. This can carry a custodial sentence.
If you do end up having to register receptionists as employees, I strongly advise talking with your accountant about how to apply the PAYE system. The Revenue are tightening up on this area and I believe now is the time to protect your own positions. You will be required to submit returns at the end of each year, with draconian penalties for errors, omissions or non-submission.
In theory, where you have a multi-disciplinary clinic, it is possible for the receptionist to be self-employed, raising invoices to each of the practitioners. This needs to be done correctly to prevent the Revenue challenging the situation – again, talk to an accountant with relevant experience before attempting to set this up.