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We have recently commenced acting for a funeral director and have prepared the first accounts. Cash payments of £10 or £15 are paid regularly to pall-bearers. The company does not deduct any tax or National Insurance contributions although an end of year statement is sent to each individual to confirm the amount that has been paid to him. Included within the statement is a note to confirm that the company has made the payments gross and that it is the responsibility of individuals to declare the amounts on their own tax returns.

Our initial thought was that this is incorrect as tax should be withheld from the payments and the amounts should be shown on the annual pay-as-you-earn return form P35. However the company considers that the payments are more of a freelance nature.

The company's thinking behind this is that the individuals used as...