A: Yes, 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.

Key Points...

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.
• Parish Councils must register as an employer with HMRC and operate PAYE on the income the Clerk earns. This is the same position as for any office or employment; there is no other acceptable tax treatment applicable to Parish Clerks. 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.
• Responsible Financial Officer. In many councils, the clerk will undertake the duties of the Responsible Financial Officer (RFO). However, in some councils, the RFO is a separate appointment. As an office holder, the RFO will be subject to the same tax and NIC rules as the clerk, so Councils should operate PAYE for tax and NIC purposes.