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Parish clerks will no longer be considered by HMRC to be self-employed and must be subject to PAYE. Guidance in Employment Income Manual EIM67320 had stated it was acceptable practice to treat payments received from the parish council as self-employed income
The Revenue says its view was based on the premise that payments to clerks fell below the PAYE tax threshold – but the department is now aware that many individuals’ earnings are above the thresholds of PAYE and National Insurance (NI) contributions.
New guidance has been issued on the tax treatment of parish clerks. It states that as a parish clerk is an office holder, income arising from the position is subject to PAYE, meaning a clerk
• can never be considered self-employed for tax or NI purposes
• must not be paid gross; and
• must be taxed under PAYE.
Parish councils must register as an employer with the taxman and operate PAYE on the income earned by clerks. The new guidance adds that ‘any previous agreements with HMRC or the former Inland Revenue under which the clerk was paid gross or was treated as self-employed are void, as are any “inherited arrangements” under which a clerk’s income is not subjected to PAYE’.
To ensure a correct tax code is issued, HMRC must be advised – usually via form P46 – if a clerk has other income.
The department says it will carry out checks to ascertain whether councils are operating PAYE on clerks. They will be undertaken in the tax year starting 6 April 2011.
The guidance in EIM67320 has been removed and should no longer be followed.
Our local council pays an annual sum of £1500 to the clerk who is retired and on a civil service pension. The parish council pay the tax on this income (around £400 ) which I think should be deducted from that income and to be claimed back from hmrc by the clerk should the total income not reach the taxable threshold allowed to that person.