Honorarium NOT wages

embob74

Hi all

I've recently taken on the role of clerk within the community and it is mainly voluntary but does come with an honorarium of £300 per annum.
I have been informed that every other area employs their clerk and pays them wages however the funds are not available to do this for me.
I have suggested that I be employed albeit for less hours than I would actually work but I am being made to feel like I am asking for the moon!
How would I be liable by receiving the honorarium should HMRC ever investigate and decide I should have been employed all along?
I am currently self-employed with earnings approx £5k per year so not paying any tax but paying Class 2 NIC's

Valli

It's earned income so it will be taxable. My understanding is that, as it's an honorarium your 'employer' is not conferring employee rights on you; and THAT's the difference. I also believe it should be paid as a lump sump; NI and tax won't be paid by your 'employer'. Because, technically, you're not actually employed. You won't pay tax if it doesn't take your earnings over your tax allowance though.

But, as you're self employed you DO need to declare it as part of your total income.

LINK

embob74

Thank you for your quick response.

I was just worried about the honorarium as I was given some info recently from HMRC :
http://www.hmrc.gov.uk/manuals/esmmanual/esm4260.htm
which states:
The Clerk is an office holder and emoluments received, whether described as an honorarium, a salary, a payment towards expenses or a combination of these, are chargeable as employment income and there is liability for Class 1 NICs.
I'm happy to receive the honorarium but not if it means in later years I could be liable for not being classed as employed. Not too worried about tax liability as I shouldn't have one but the NIC's is worrying. Could I be asked to pay back payments for any years I received an honorarium and should have been employed?

Valli

You need to separate this idea of honorarium and 'should have been employed'

The REASON charities/voluntary bodies etc pay hororaria is so they THEY don't have a duty as employers. So they pay the honorarium and that is it; they don't have to give you a 'payslip' which shows your tax allowance and NI number; they don't have to pay employer's contribution etc - it just makes it simpler FOR THEM. Which, if they are a charity/voluntary body is what they want. You should be given some form of statement saying what you were paid and when, and that it is an honorary payment.

You, however, then have an income which is taxable and on which NI contributions may be paid.

You cannot be 'liable' for not being employed; declare it as what it is, an honorary payment. You have only just taken on this role so there is no 'back payment' liability.

As long as you declare your income and retain paperwork you should be fine.

My understanding is you will be classed as self employed - but this is the bit I am haziest on. If you do contact HMRC do tell them it's an honorarium not a salary. Keep copies of all letters; make notes when you phone; date, time, to whom you spoke and content of call;)

Pennywise

It may not be taxable or NIable at all. Is the money solely for your "time" or do you also have to provide your own materials, equipment, etc and do you do any work at home.

Most HMRC officials can be persuaded that a modest honorarium is set solely to cover your costs so that you aren't out of pocket for doing the work, rather than giving you a "reward" for your time.

ceeforcat

Not too worried about tax liability as I shouldn't have one but the NIC's is worrying. Could I be asked to pay back payments for any years I received an honorarium and should have been employed?

If the payment is £300 per year there will be no liability for NIC.

Valli

ceeforcat wrote: »

Not too worried about tax liability as I shouldn't have one but the NIC's is worrying. Could I be asked to pay back payments for any years I received an honorarium and should have been employed?

If the payment is £300 per year there will be no liability for NIC.

Given that as the OP has other income and is registered as self-employed then NI may well be payable on her total income, of which this honorarium would be part.

ceeforcat

Valli wrote: »

Given that as the OP has other income and is registered as self-employed then NI may well be payable on her total income, of which this honorarium would be part.

The op states that her self employed earnings are £5000 per annum approx and, as such, will not pay Class IV on this amount nor on an additional £300 per annum.

embob74

Pennywise wrote: »

It may not be taxable or NIable at all. Is the money solely for your "time" or do you also have to provide your own materials, equipment, etc and do you do any work at home.
Most HMRC officials can be persuaded that a modest honorarium is set solely to cover your costs so that you aren't out of pocket for doing the work, rather than giving you a "reward" for your time.

I work from home using my own laptop and printer. Expenses are payable for printing, posting letters, filing equipment etc.

Valli

ceeforcat wrote: »

The op states that her self employed earnings are £5000 per annum approx and, as such, will not pay Class IV on this amount nor on an additional £300 per annum.

she says she pays class 2 NICs; looks like she's earning a little more than the £5K approx stated in her first post;)

jimmo

Sorry, but you’re making a mountain out of a molehill.

With self-employed profits of £5000 and an honorarium of £300 there is no way that you are going to become liable to Tax or Nat Ins. You don’t even need to pay Class 2 so I assume that you are doing so for a reason that is personal to you.

For what it is worth, if you are something like a Parish Clerk you are most certainly an Office Holder, the Office being the clerkship.

An office holder is not an employee in terms of general law but is treated as an employee for tax purposes.

If any tax or Nat Ins was due on your honorarium your payer would be obliged to make the appropriate deductions under PAYE and if HMRC were to come sniffing, they would have to chase your payer, not you.

In your case, it just won’t happen.

If, for some reason, you make annual Self Assessment Tax Returns you should continue to declare your self employment profits on the self employment pages but also complete an employment page for your honorarium.