With beaters? barbecues and clay shoots in full swing, you can bet that some of the discussion going on will revolve around what the taxman is planning to do about beaters? pay. When I last wrote on the topic (Time to talk tax, 13 February), it looked as if beaters might have to have tax deducted from their pay as part of the Real Time Information (RTI) system being introduced by HMRC. HMRC has now clarified the situation in respect of casual beaters ? and there?s both good and bad news.
The good news is that the present system, whereby casual beaters are paid in cash without the deduction of tax, is to continue. This deal goes back to an agreement struck nearly 30 years ago between HMRC and the CLA. For it to apply, the employment must be for one day or less; the beater must be paid at the end of the day; and there must be no contract for further employment. The fact that there is no contract for further employment does not prevent the beater working for the same shoot on subsequent occasions during the season.
This arrangement will be familiar to most shoots and their beaters. A small number of shoots ? mainly the large commercial ones ? book their beaters well in advance and, as a consequence, have to treat them as ordinary employees (I have already received a Notice of Coding for one such shoot for the current tax year). That will not change under the RTI system.
What has changed is the information that shoots must keep about their beaters, and the way in which payments have to be recorded. Most shoots have an address for their casuals, but one that I work for keeps only my name and telephone number. In future, all shoots employing casuals will need to keep full names, dates of birth, National Insurance numbers and addresses ? they?ll probably ask for a P46 to get this information. Details of payment will need to be made by RTI on the day of payment, though in some circumstances, seven days of grace are permitted.
This represents a major change. Under the old scheme, payments were not taxfree; it was just that tax was not deducted at source ? the beater was responsible for reporting the income and paying the tax. I suspect that a few may have overlooked this formality, reckoning that the chance of HMRC discovering such an oversight was small. In future, it will be easy for HMRC to check whether tax has been paid ? whether they will actively do so or not remains to be seen, but with the Chancellor desperately short of money, I?m not holding my breath.
How things might work
Let?s look at a few scenarios to see how things might work in practice. For the older beater whose sole source of income is the state pension, it?s unlikely there will be any tax liability on his beating money. He can earn about £4,000 before tax becomes payable ? and he?d have to do a lot of beating to get that much. Married women without another job, whether retired or not, will be in much the same situation.
For those who are already near or over the basic rate tax threshold, some tax will be due. To comply with the law, they will need to fill in a tax return, either online or in paper form. On the plus side, there are certain expenses that those affected can legitimately claim, such as the cost of protective clothing. There will be an ?Oh my God? moment for the better off, who may find themselves being taxed at 40 per cent on their beating money.
People on benefits will have to look carefully at their circumstances. Some benefits could be invalidated if you are fit to work. However, if you are unemployed, you can still do a few days? work without losing your Jobseeker?s Allowance.
The biggest change
In summary, the biggest change for beaters is in the information shoots will have to keep about them. It may have been possible in the past to overlook the need to report beating money for tax purposes, but it will be more difficult in future. The best solution, from the beaters? point of view, will be for shoots to gross up the pay and deduct the necessary tax, thus avoiding putting the beater in the position of potentially breaking the law. The downside to this is a 25 per cent increase in the cost of casuals.
Beaters will almost always be classed as employees for tax purposes, but there are two categories of shoot casual who will normally count as self-employed: loaders and pickers-up. The distinction is important because the self-employed are able to claim important expenses that the employed are not.
Loaders are usually taken on by the Gun and are remunerated with a generous tip. Tips count as income, as keepers will well know, and must be declared. On the plus side, they can claim for items such as protective clothing, loading paraphernalia and the like. Significantly, because they are self-employed, they can claim the cost of travel from home to the shoots they attend.
Pickers-up are self-employed because they meet the key criteria of supplying the tools of the trade ? dogs and, in some cases, vehicles. They can claim all the costs of running their dogs, bearing in mind that a dog has to be kept for the 300 days it does not work as well as the 65 it does. Vets? bills, food, travel, kennels, training aids and so on are all legitimate costs that can be claimed. To avoid being mixed in with the employees, for tax purposes, pickers-up should invoice the shoot at agreed intervals for the work they do.
A simple solution is to hand over a receipted invoice on the day rather than signing the pay list.
In order to claim expenses, pickers-up will have to keep receipts and fill in a self-employed tax return. A few minutes spent putting this data into a spreadsheet will reveal there is almost always no taxable profit, and there may even be a loss, which can be offset against other taxable earnings. This may involve some paperwork, but it will be financially worthwhile.