Protecting Your Club Against HMR&C Inspection

1. Protecting Your Club Against HMR&C Inspection Name Role

2. Background • HMR&C announced in 2011 would be investigating “instructors and tutors” • This has resulted in a number of inspections of sports clubs: • Aspect • Normally a telephone call • Looks into specific “aspects” of the club’s activities • Dependent on outcome can lead to full investigation. • Full • Visit to club – normally Executive and Head Coach • Review financial records for current and previous year.

3. Inspections - Main Issues Arising • Poor bookkeeping records • No receipts • No formal accounts • No historic records • Current year plus 6 • Claiming incorrect expenses • Honorarium Payments • Failing Self-employment guidelines

4. Good Bookkeeping • Keep detailed list of all items of income and • Expenditure • Date, Value, Reason and Who • Keep receipts for all expenditure • Organised filing system and cross reference to expenditure list. • Retain copies of all contracts • Ensure all computer files are backed up

5. Paying Expenses for Volunteers • Wholly and Exclusively for Club Activities • Exclude any personal use • Ensure expense relates to valid club activities • Must be supported by receipts and only cover actual costs incurred by the volunteer. • Do not pay Honorariums (payments not directly linked to volunteers costs on behalf of club are subject to tax) • Mileage allowance is allowed up to 45p per mile • SASA and East District rate currently 35p per mile • Do not pay for mobile phone costs unless phone is used exclusively for club business *Do not distribute list of duties for volunteers as this could constitute a “job description”. Retain them at committee level

6. Self-Employment GuidelinesThe Basics • Ensure all individuals receiving payments in addition to expenses are registered self-employed with HMR&C • Keep copy of certificate with accounting records • Create a formal contract between club and individuals • Define duties • Payment rates (training, competitions etc) • Not standard fee per month • Expenses to be covered by club (hotels and travel for competitions) • Ensure individual submits invoices for services

7. Self-Employment Guidelines Avoid Implied Employment • 3 ways to pass guidelines – only need to fulfil one of them to pass • Financial Risk • Individual provides all equipment to carry out work • Individual pays reasonable fee for facilities they use • Individual submits invoice for hours worked • Individual is responsible to put right any work deemed unsatisfactory • Control of Work • Individual decides on when, where and how they carry out their work. • Substitution • Club allows and requires the individual to provide a substitute if he/she cannot fulfil their duties • Ensure substitution actually happens occasionally • Club must pay contracted individual for this work and he/she pays the substitute. Test you meet guidelines by visiting HMR&C’s Employment Status Indicator software at www.hmrc.gov.uk/calcs/esi

8. Self-Employment Guidelines Consequences of Failure to Meet Guidelines • Club not individual responsible for meeting guidelines • Individual deemed to be an employee • Club responsible for PAYE and NI for individual • Payment to individual will be deemed to have been net of PAYE and NI. • For every £100 paid club could be liable for c. £30. Could be more if individual has another employment • HMR&C can go back for as long as individual has been involved with club up to 20 years • HMR&C will make assessment of past income of individual based on current situation • Interest on past assessment will be charged • Penalties could be levied • Criminal charges brought if deemed deliberate abuse of rules • Club (members collectively) could face charges under employment legislation for not meeting minimum wage levels.

9. Next Steps Do: • Ensure accounting records are robust • If not start now, credit given for willingness to improveEnsureonly valid expenses supported by receipts given to volunteers • Ensure all individuals paid sums in excess of expenses are registered self-employed and have formal contract with club • Ensure individuals submit invoices for services provided • Ensure 1 of the 3 ways to pass self-employment guidelines are met to avoid “implied” employment (visit www.hmrc.gov.uk/calcs/esi) Don’t: • Assume HMR&C will never investigate your club • Pay honorariums • Contact HMR&C to seek advice on the topic as this will raise concerns with them and is likely to increase the possibility of an investigation.

10. Responses to an “aspect” investigation by HMR&C • All our paid individuals are registered self-employed with HMR&C • We have written contracts in place with each of the individuals • We fulfil the requirement of the Employment Status Indicator by virtue that the individuals have written into the contracts that they must provide a substitute individual who is suitably qualified to fulfil their duties in the result of their absence and this has indeed been the case on a number of occasions. The degree of knowledge shown in that response will give the HMR&C a degree of confidence that you as a club know the rules, and are applying them properly and greatly reduce the chance of a full investigation