CEO of a Registered Charity-1-2 days P/Wk can this be a contract position or does it have to be PAYE

krissy08

Hello ,
Thank you as always.. I am seeking to understand the legal position in the UK.
The position;
CEO of a Registered Charity-1-2 days P/Wk

can this be a contract position for a contractor working outside IR35 or does it have to be PAYE full time employee please?. 

Jillanddy

Being the CEO of a charity would not pass the three key tasks of employment for IR35, so it is an employee status. It would be extremely risky for a charity to try to engage someone off payroll in this way. Plus, if they receive any public monies, there are additional issues around attempting to use self-employed contracts as replacements for employment contracts.

Sandtree

krissy08 said:

Hello ,
Thank you as always.. I am seeking to understand the legal position in the UK.
The position;
CEO of a Registered Charity-1-2 days P/Wk

can this be a contract position for a contractor working outside IR35 or does it have to be PAYE full time employee please?. 

A CEO won't be outside of IR35, it does leave the option of an inside IR35 engagement via an umbrella etc as an alternative as a PAYE of the charity

Undervalued

Given that it is only one or two days a week is there any reason the CEO could not set up a limited company, which in turn provides executive services to this charity (and any other clients it may have)?

It that any different to a solicitor acting as company secretary to a limited company or a company limited by guarantee? Or subcontracting the bookkeeping to a firm rather than employing a bookkeeper.

It is surely the trustees that have the legal responsibility for the running of the charity. In many situations they would employee a CEO but nothing says (as far as I know) that they can instead sub contract what my normally be a CEO's duties to one or more contractors.

Marcon

krissy08 said:

Hello ,
Thank you as always.. I am seeking to understand the legal position in the UK.
The position;
CEO of a Registered Charity-1-2 days P/Wk

can this be a contract position for a contractor working outside IR35 or does it have to be PAYE full time employee please?. 

Certainly doesn't need to be full time. Be aware of the potential for reputational damage if it emerges this is the way a charity has engaged the CEO's services. 

krissy08

Hello Undervalued- those were my thoughts exactly. If they provide services for a number of companies of which the charity is just one?
I can't see how they would reasonably expect a permanent employee position CEO for a small charity that only requires 1-2 days a week
They do require some sort of consultancy expertise from the CEO and there is a board of trustees involved.
I guess I am asking would it be against any current law for the company to engage the services of a limited company personnel to act as their CEO for 1-2 days per week.

If the CEO came on board and deferred all their salary to their pension-would that avoid tax on it? The candidate does not want to incur additional taxes from taking this position and we are looking at options

Grumpy_chap

The individual could salary sacrifice all their salary apart from NMW to pension and that will reduce the individual's tax liabilities.

The individual could also make donations to charity of their salary via gift aid and minimise their tax liabilities.  

However, I don't see that the role of CEO could be an outside IR35 assessment. The individual will be an Office Holder and therefore inside IR35.  Has the charity used the CEST tool?

krissy08

Not yet-Will get on to that now. Thank you all

Jillanddy

krissy08 said:

Hello Undervalued- those were my thoughts exactly. If they provide services for a number of companies of which the charity is just one?
I can't see how they would reasonably expect a permanent employee position CEO for a small charity that only requires 1-2 days a week There are many charities who successfully do exactly that, so it is actually commonplace rather than unusual.
They do require some sort of consultancy expertise from the CEO and there is a board of trustees involved.
I guess I am asking would it be against any current law for the company to engage the services of a limited company personnel to act as their CEO for 1-2 days per week.

If the CEO came on board and deferred all their salary to their pension-would that avoid tax on it? The candidate does not want to incur additional taxes from taking this position and we are looking at options

I do not think you should be asking for advice here if you are a trustee - you should be talking to the Charity Commission. This kind of arrangement is now very definitely not permitted in the public sector - it used to be but it did so much reputational damage and the loophole was closed. Consultants must be very definitely exactly that now, consultants not employee avoiding tax. We do not allow it for organisations that we fund either, for the same reason. 

But there are wider considerations for trustees, including personal risk. It is not just about what this person wants. If you are just trustees, you are jointly and severally liable for anything that goes wrong with this - including HMRC coming along at a later stage and deciding that you can't do this, and your organisation / you being landed with bills that you have to pay. Also remember that no matter what someone wants now, things can change. For example, when you and your "employee" fall out, they take you to an employment tribunal and claim that they are really an employee (which they would have a very good chance of winning that argument)....

To be honest I think you are over complicating things so that someone can avoid paying tax! It isn't a good idea, and it certainly isn't a good look for a charity.

Undervalued

krissy08 said:

Hello Undervalued- those were my thoughts exactly. If they provide services for a number of companies of which the charity is just one?
I can't see how they would reasonably expect a permanent employee position CEO for a small charity that only requires 1-2 days a week
They do require some sort of consultancy expertise from the CEO and there is a board of trustees involved.
I guess I am asking would it be against any current law for the company to engage the services of a limited company personnel to act as their CEO for 1-2 days per week.

If the CEO came on board and deferred all their salary to their pension-would that avoid tax on it? The candidate does not want to incur additional taxes from taking this position and we are looking at options

I think (60:40 I wouldn't put it stronger than that) that there could be ways of doing this but you would need to seek proper professional advice from a solicitor who specialises in this area. Whether that would be economic I don't know.

Even if it is lawful and you set something up that doesn't mean that the regulations won't get tightened again in the future. I have seen that happen in a related field.

The stock / safe / HR answer is that everybody needs to be on PAYE. Certainly easy and safe from the "employer's" point of view but there are still lawful ways around this in some situations, although far fewer than there used to be.

krissy08

Pease note that I am not a Trustee. Neither is the Candidate.