Much of the chat in beaters’ rooms recently has been about forthcoming changes in tax and how they might affect the traditional brown envelope. HMRC is implementing a Real Time Information system from April, which will require an employer to report every time an employee is paid. The taxman appears intent on doing away with the agreement under which shoot casual workers are currently paid. Change is often unwelcome but take heart, because the news here is mainly good for casuals, though less so for shoots.
A few shoots, typically the larger commercial ones doing four or more days a week, operate a normal tax system. The casual is paid, say, £30, which the shoot grosses up for tax to £37.50 and pays the £7.50 to the taxman. At the end of the season the casual gets a P45 showing the gross sum paid and tax
deducted. The casual also gets a notice of coding for the following year. The system is familiar to anyone who has been in ordinary employment. These shoots will not be much affected by the regime, except that the folk who run their payroll will need to update their method of working.
Most shoots operate a more relaxed regime. Under an agreement struck in 1985, shoots can pay casuals without deducting tax, subject to two conditions. First, payment has to be in cash at the end of the day. Second, the employment has to be for one day only with no agreement for further employment. The fact that there is no formal agreement does not prevent the casual from being employed later in the week or the season.
Shoots operate this in various ways. There may be a signing-up sheet or the keeper may just keep a note of who was paid on the day. Either is currently acceptable provided there is a record that can be produced on request to HMRC. It’s a pragmatic arrangement which reflects the facts of life on a typical shoot and is in some ways similar to the manner in which farmers pay harvest casuals. It is this that will change from April this year.
Full payroll system
In future, shoots will have to operate a full payroll system and inform HMRC every time a casual is paid. Tax will have to be deducted in most cases and in a few cases National Insurance (NI) contributions may be payable. The administrative upheaval will be considerable and Victoria Nicoll, tax specialist at accountants Price Bailey, sees no loophole for shoots.
Increased shoot costs
I can see a riot in the beaters’ room if the keeper comes along and says: “Sorry, chaps, I know you were paid £30 last season but we’ve got to deduct 20 per cent tax, so you’re only getting £24 now.” Shoots will have to bite the bullet and pay the tax themselves. This will delight the Chancellor, who will get £7.50 instead of £6. It will increase shoot costs, especially if NI also has to be paid. In our example, NI would be payable if a casual worked more than two days in a week. One keeper told me that the actual cost of employing a casual, allowing for pay, tax, NI and lunch, is around £44.
Shoot casuals are pretty honest, nevertheless all casuals will have to produce their NI number, name and address in the future. Older casuals will have to obtain a certificate from HMRC to say that they are exempt from NI.
Shoot casuals come from differing financial circumstances. Where I am based, the weekday beating teams are at least 75 per cent bus pass holders. Those living on the state pension and perhaps some building society income may not be paying tax at all, since the threshold from age 65 is £10,500, roughly double the level of the state pension. They will benefit from the changes as they will be able to reclaim tax paid on their behalf. You may not see the money before it goes to HMRC, but when refunds are due they go to the beater not the shoot. The downside is you will have to do a tax return to claim the refund. Beaters are usually employees, but may be able to offset some costs against income.
The more prosperous will be neither better nor worse off. The basic rate tax paid on their behalf is what would have been due anyway if earnings are above the threshold. If you’re a higher rate taxpayer then HMRC will want a little more.
Loaders and pickers-up are in a different situation. Loaders usually work for the Gun, not the shoot. Remuneration comes in the form of a tip or gratuity. In the eyes of HMRC, this counts as a payment and should be declared for tax, as keepers do with their tips. Loaders are self-employed, which means they can offset certain costs, including the mileage to and from the shoot, against their taxable earnings.
Pickers-up are also self-employed, which means they can offset all legitimate costs against their income. These include travel at 45p per mile, dog food, vet bills, kennels, dummies, whistles and the like. These are year-round costs because “a dog is for life, not just for the shooting season”.
It is virtually impossible for a typical picker-up to make a taxable profit. My annual costs are about three times what I get paid by shoots, despite the fact that I do more than 50 days a year. Tax paid by the shoot on a picker-up’s behalf can be reclaimed from HMRC.
One West Country picker-up told me two years ago that his tax refund was £800. It may become necessary for pickers-up to invoice the shoot to demonstrate self-employment and to complete a self-employment tax return.
Not all bad news
The contents of the brown envelope are useful, but most shoot casuals go for the fun not the money. Rural welfare for the elderly, I call it. A more diligent approach to tax may focus people’s minds on what they are being paid. The National Minimum Wage, if you are 21 or over, is £6.19, so £30 would buy a little under five hours’ work, which is not enough for most shoot days. However, when the £30 is grossed up for tax it buys another hour. So if a shoot day lasts six hours, a beater would need to be paid at least £30 (£37.50 gross), a fiver more than many are paid. To allow for the added costs incurred in owning dogs, shoots would need to pay a picker-up about £40. Some shoots match those figures but a good many don’t. The days of the £25 pay packet are probably gone.
The statutory right to be paid in cash disappeared in 1986 and the requirement to pay casuals in cash is now an anomaly. Cash is nice in the hand but it is labour intensive. Someone has to get it from the bank, it has to be counted at every stage, and it can be nicked (as it was from one shoot I was on). Shoots may consider paying casuals by bank transfer once the obligation to pay cash disappears.
So the news is not all bad. Shoots will have to rethink their pay arrangements and will be penalised for non-compliance. Loaders, pickers-up and beaters working a dog need to start keeping receipts and recording all costs incurred from 6 April, so as to be able to offset them against tax paid on their behalf.