Clerk claiming to be self employed

Question

Good afternoon,

I have recently joined my local parish council.  To cut a long story short, our present clerk took on the role for our parish council in 2019.  She is clerk to a total of 9 PCs in our county. We have enquired why we are not making payments to HMRC for her salary and she claims she is self employed and always has been, for all of her parish councils. Our previous clerk was employed.

I understand that the law states that clerks can only be considered employees and can never be self employed.
Where do we stand on this as an employer?  Do we need to inform HMRC and what are the implications regarding tax and NI?

Answer 1

You are quite correct and must operate PAYE for the clerk, including notification of a joiner. Ideally that is done by an external service of some kind. Please also see my answer at https://towncouncillor.com/3491/can-a-parish-council-clerk-be-self-employed?show=3491#q3491

Answer 2

You might also want to examine the cumulative working hours of the stated 9 parish councils.
You might find that the total contracted hours across all employment exceeds the total hours available for work in a day / week / month.
I know of a clerk that was claiming, across several councils, more hours than were actually available to work.
I think it’s called fraud in certain circles.
Clerks cannot be SE according to HMRC - but it is my personal belief that HMRC have been misguided by NALC.
The issue originates from the 3 parts / job titles associated with clerk.
Clerk - admin assistant

RFO - an office holder

Proper officer - an office holder.
If the RFO and PO functions are separated out of the JD, there would be no reason why a clerk shouldn’t be SE.

Comments

As far as I understand there is nothing stopping the clerk operating as a self employed sole trader legally. Of course the system of invoicing and checking whether the invoices presented are correct is an extra burden on the council. Contractual specification as to extent of duties and definition of what is required would need to be closely monitored and enforced. The confidential nature of the information handled and data protection within the contract would need much more specification and adherence. The question of liability insurance would need thorough investigation and confirmation by the council. The point made about cumulative hours exceeding total available is of course a HMRC problem along with VAT registration etc.
So what on the face of it might look a simple solution to a council maybe opening up a can of extra supervision work for the council. Also if widely adopted could lead to commercialisation by large companies seeing a service opportunity to councils with the resulting loss of control to councils.

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See EIM 67300 issued by HMRC on 14 May 2014 and updated on 17 June 2022.  This contains definitive guidance on the employment status of the clerk to a council.  The 'killer' sentence contained therein is quote "A Parish Clerk can never be considered self-employed for tax or NIC purposes".

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May I also respectfully disagree that "The point made about cumulative hours exceeding total available is of course a HMRC problem".  My understanding, now a bit rusty, is that the employer(s) have a duty to ensure an employee's hours do not cumulatively exceed the Working Time Directive - which I seem to remember is 48 hours per week (although Im happy to be corrected on the detail).

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I think I said in a separate thread that I am aware of a council where they allowed their clerk to remain self employed but when it was reported to HMRC by a "well meaning parishioner", it caused huge issues culminated in a huge fine by HMRC, police involvement (allegations of fraud against the clerk) and a public interest report by the external auditors at the time.  It was a few years ago but the town has not forgotten.
Would also add that the comment "HMRC misguided by NALC" demonstrates total lack of connection with the real world

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This will be fun!

As it stands - a clerk cannot be SE.
That’s just the way it is. (As is illustrated in HMRC guidance above and previously referenced HMRC BIM)

Why it is that way is because HMRC consider a company officer (in this case a proper officer or responsible financial officer - both ordinarily, but not mandatory, as being parts of a clerks role) exclude the PO & RFO from clerk duties and they are no longer an office holder and there is no barrier to being SE.
Now who do you think HMRC consulted when considering what a clerks role entails?

Maybe the Football Association? No?

Maybe the Automobile Association? No?

Maybe the Federation of Small Business? No?

(I could go on all day, but back in the “real world” who thinks they actually consulted the National Association of Local Councils?)

Everybody EXCEPT DBW apparently );0)

And what does everybody think NALC told HMRC?

They told them that the clerks role ordinarily (possibly / probably always) includes PO & RFO and why would HMRC disbelieve them?

But as we know, the clerk role doesn’t HAVE to include PO & RFO and if it didn’t then there would be no reason why the basic admin functions of clerk could NOT be delivered by a SE person.
In fact, just imagine how much easier and cheaper it would be for the TAXPAYER if they didn’t have all of the liabilities of employee management.
I’d also wager the disproportionate amount of complaints and threats of Ind Trib would fall off a cliff if incompetence was met with non renewal of contract rather than the protectionist cocoon of civil service T&Cs.
How’s that for “real world” DBW  ):0)

And the other point about claiming more hours than are available to work across 9 (9!) councils!!  That has “issues” written all over it and screams inefficient / ineffective / potentially inappropriate employment terms and possible fraudulent (at the very least irresponsible until proven otherwise) practice. Every one of those 9 councils bears a degree of responsibility for checking  / affirming that there is nothing amiss here.
As it stands - your clerk CANNOT BE SE. No ifs, no buts, they cannot.
If they really are employed across 9 councils you really need to have a proper good look at that situation - not least of which the degree of business continuity risk having 1 individual spread across such a swath of local government.

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Hmmm... we appear to be confusing someone employed who states they are self employed and an employer who condones such a statement to avoid payee and NI payment deductions due to regularity of employment with a fully registered self employed person who is totally responsible for declaration of income which is fully recorded and available for tax and possibly VAT payments. Essentially a small company supplying a person for the job.
I see no reason why the position cannot be held by such a person as can't see where it states that a clerk must be a directly employed person of the council. Why not engaged as a fully qualified clerk running their own business. I can understand NALC's objection to such a situation being acceptable as it totally undermines their "controlling influence" on clerks. The question is of course when your local CNALC office offers you the services( at an inflated price) for a stand in clerk how can they justify that if they say no to self employed clerks when clearly those they supply are in fact "self employed " and invoice to the council and not on the local office payroll? Strange that?

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No confusion on my part.
Entirely separate issues.
The clerk cannot be SE according to current rules.
It is my belief that HMRC have been misdirected in their assessment of the job role (either by NALC or SLCC - who else are they gonna ask?) and that has resulted in HMRC rules which are overly restrictive.
It is my belief that clerk should be a SE role so long as they are not an office holder.
SE clerk would remove overly protective employment ‘rights’ which result in clerks being all but un-firable regardless of incompetence.
And the second point of the post, whilst (unless stipulated in employment contract) there is no restriction upon a clerk working for more than 1 council, 9 is excessive and could give rise to statutory employment breaches not to mention whether they are actually able / capable of properly servicing the employment demands of all 9.
It’s not just 1 ‘problem’ as ever, it appears to have several facets.

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Sorry, meant to add an agreement about the apparent anomaly of CALC providing temp clerk on invoice rather than payroll.
Yes, ‘odd’ to say the least.

Answer 3

It’s doesn’t matter what the Clerk thinks what matters is what HMRC think so unless you’ve fully explained the position to HMRC and they have confirmed in writing the Clerk can be treated as self employed you and all the other Councils could be in real trouble

Having worked for HMRC for many years ( but now retired) I pity the member of staff who has to deal with this
However there is some consolation in that HMRC are now in such a mess that it could take years to resolve