Churches, employment and Real-Time Information for PAYE: update

This updates the information in the 2013 post on Real-Time Information and filing for employees’ PAYE which came into operation on 6 April of that year: the earlier post has been taken down. We’re afraid it’s just as boring as its predecessor…

PAYE and Real-Time Information: the background

PAYE began in 1944 and has changed very little in broad outline since its introduction over seventy years ago. At that time, work patterns were fairly static, jobs were often for life, and part-time, flexible working and multiple employments were much more the exception than they are now – which meant that the in-year estimation of tax liability based on a tax code was usually a fairly reasonable prediction of actual annual liability. As employment patterns became more complex, the system began to show increasing signs of strain.

In the autumn of 2010, HMRC ran its end-of-year reconciliation process for the first time using the new National Insurance and PAYE Service (NPS), reconciling taxpayer accounts for the years 2008/09 and 2009/10. By the end of the process, around 5.6 million taxpayers had received repayments and 1.1 million had been sent notices of underpayment – all of which was heavily criticised in the media at the time. HMRC made repayments of around £1.9 billion and had to recover some £1.1 billion in underpayments  – and, in the process, wrote off about £160 million in back tax. In effect, the PAYE system had been operating in arrears: the difference between the two figures represented a temporary loan of £0.8 billion to employers and employees.

The immediate driver for the change to RTI, however, was probably the impending introduction of the Universal Credit benefit system in 2013. Quite apart from the more general goal of collecting tax more quickly, the Government’s reasoning was that one could not operate a Universal Credit system unless payments under PAYE were kept strictly up to date.

Readers who have stayed with the story thus far may be beginning to wonder what the relevance of all this to “law and religion” – to which the answer is that it may look very marginal but it is emphatically not. Church congregations are sometimes employers and are sometimes responsible for PAYE; and those that are employers have had to grapple with the new system – hence this post.

HMRC’s intention was to make PAYE reporting in real time as easy as possible for employers while deterring employers from deliberate non-compliance. In April 2012, HMRC  consulted on how best to support employers in understanding and complying with the requirement to send PAYE information in real time and on the appropriate design of late-filing and late payment penalties. It also confirmed that RTI penalties would be issued automatically and, as with other penalties, would be subject to appeal. The consultation ended on 6 September 2012.

Under the previous arrangements, employers were required to make annual returns to HMRC of PAYE information for the previous tax year by 19 May and were liable to late-filing and late-payment penalties if they failed to file and pay on time. Under RTI, most employers and pension providers have been required routinely to report PAYE information in real time from 6 April 2013. The general guidance for employers is here.

In order to give employers more time to adapt to “on-or-before” reporting, HMRC announced in March 2013 a temporary relaxation or “easement” for small employers (those with 49 or fewer employees) who pay staff more often than monthly to report once a month. This was introduced from April 2013 for a six-month period to 5 October 2013 but was subsequently extended for a further six months. This was replaced with a narrower easement in April 2014, which enabled existing micro employers only (those with 9 or fewer employees) to report on or before the last payment day of the tax month until April 2016, with the clear intention that ALL employers should adapt to “on or before” reporting by April 2016.

PAYE, RTI and church congregations

Some years ago HMRC agreed with the Churches Main Committee (the predecessor of the Churches’ Legislation Advisory Service (CLAS)) that a “local religious centre” (LRC) – for example, a parish church – could merely report actual payments made if it did not operate a PAYE scheme.

As from 6 April 2013, however, that arrangement ceased to apply. The current HMRC guidance is as follows:

“The rules on when to register as an employer and report PAYE information in real time are applicable to all employers. Consequently, an LRC will need to register as an employer and report PAYE in real time if any of the following apply:

  • The LRC is paying an employee at or above the PAYE threshold
  • The LRC is paying an employee at or above the National Insurance Lower Earnings Limit
  • The employee already has another job
  • The employee is receiving a state, company or occupational pension

The LRC is providing the employee with employee benefits.

An LRC guide to PAYE [which downloads as a Word Document] has been produced and can be printed locally if you receive an enquiry from an LRC. Examples of such payments may include:

  • Payments to casuals
  • Fees.

LRCs no longer need to provide information to the PAYE Employer Office to determine whether any further action is necessary if they pay someone more than £100 per tax year but less than the National Insurance Lower Earnings Limit. Instead, they will need to establish whether they are required to report PAYE information in real time in accordance with the rules above for registering as an employer.

If they are required to register as an employer then they will need to report all payments made to their employees irrespective of the amount they pay.”


In principle, RTI should not have imposed any great extra burdens on employers who were already operating PAYE: its most immediate effect was that those who paid their staff weekly found that they had to file weekly instead of monthly. The problem for employers, one suspects, was that some of the very small ones with lowly-paid part-time staff should have been operating PAYE systems but may have instead been paying their employees gross and leaving them to account for the income on their annual self-assessment returns (assuming, that is, that they completed one – which not every employee does).

RTI is now well-established; however, there may still be a number of small charities that are failing to comply. Church treasurers and others responsible for payments need to consider carefully whether people such as cleaners, organists and vergers are “employees” and whether or not the organisation should be operating PAYE.

If in doubt

If you pay someone a sum at or above the National Insurance Contributions and PAYE thresholds and you are in doubt as to whether or not that person is an employee (given that they may claim to be self-employed), contact the Employer Helpline on 0300 200 3200 and ask HMRC for further advice – because you must seek confirmation as to whether or not PAYE applies. You will need your employer reference number when you call.

NB: this post is provided for information only and does not constitute professional advice. If in doubt, consult an accountant or a payroll specialist.

Cite this article as: Frank Cranmer, "Churches, employment and Real-Time Information for PAYE: update" in Law & Religion UK, 25 October 2017,

One thought on “Churches, employment and Real-Time Information for PAYE: update

  1. The concept of the basic forty hours a week is largely out of date. I myself work part time (PAYE) and under contract (not PAYE) but taxable. Other work would be considered freelance and I enjoy this flexibility greatly. It does mean I get ‘paid less’ per hour notionally under PAYE but this more than compensates for more profitable work when it occurs, elsewhere. It’s not just the Church that needs to consider that it is an ‘employer’ in the same way that the BBC is a similar ‘employee’ of well-paid people (that often have million pound salaries) under ‘private contract’ licensing deals that are used to avoid PAYE and NI tax that most of cannot avoid. HMRC are inclined to think of them as ’employees’ – if they only have one employer. I only employ that metaphor in that the BBC won an important employment tribunal case stating that it was (for employment purposes) like a Church. It won the legal argument, thus proving (for some) that it was indeed ‘like a Church’. So it’s a fair comparison to make for PAYE contributions.

    Some of those working on Church projects should not have to pay tax (as their earnings are already below taxable income as individuals) and that should apply to anyone offering their own time as volunteers (being paid expenses), which also applies to people who have free time for a Society or Charity. I think we all would agree on that. But we don’t want to discourage volunteers by taxing them on what little expenses they receive.

    It is really about the UK diminishing tax and NI contributions from a (UK) workforce that may not be paying any enough tax at all in this country. The entire tax system is creaking under a mixture of daft EU legislation (pushing up costs) and overprotective (UK) employment legislation (pushing up NI and personal taxes). In fact, I have just been reading that on the TAXPAYERS ALLIANCE on that very issue in a number of ways that need addressing, fairly. All will be ignored, I suspect.

    There are those (me included) who would like to see a totally new tax system (so we know the cost of things such running a country). Most think its ‘Magic trees’ including those who pay less than they should in the Public Services (which includes the antics and avoiders at the BBC).

    Yet somehow I doubt it will be part of a great UK Budget strategy to reduce the tax burden on us all. PAYE is already expensive enough and with the high cost of the NHS we need to consider if our own NI contributions (not fit for purpose) should be fundamentally reviewed on an individual basis – more akin to Life Assurance, (In my opinion) that you could also choose your hospital provider is the way forward. That would be worth paying more for. More tax does not equal a better tax spend and, historically, countries such as Venezuela can be devastated if ignored due to left-wing ideologies…

    As for the Church, if the BBC thinks it is like Church, then perhaps the Church needs to think how less like the BBC it should be.

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