Campaign to give a tax break for domestic PAYE employers.

Before I go any further I need to acknowledge that this is not an issue facing the majority of the population. However if addressed, I believe it could bring benefits to the wider society.

Listed Buildings need labour intensive care.

This concerns the issue of private individuals becoming employers to help them in private affairs and in particular maintaining privately owned Listed Buildings.

Currently the owner of the Listed building or garden earns income on which they pay Income Tax at various rates. If they choose to employ someone to help maintain the building or garden (domestic staff) they then have to pay those employees out of net income (that is left after tax has been paid), and then undertake the same Pay As You Earn administration (collecting the income tax from that employee and paying the employers share of the National Insurance) as would any other employer.

Here’s the issue: any employer running a business is able to set their employment costs against their income to reduce their tax, so why can’t owners of Listed Buildings or for that matter employers of domestic staff (nannies etc), whose employees are paid through the PAYE scheme get some sort of tax relief on their income for doing so.

It would be easy to administer because HMRC has records of both the employers and employees tax affairs. It should only work where employees are paid through PAYE. There are loads of benefits:

  1. This would encourage employment by making it more affordable for private individuals to employ staff in domestic, childcare, gardening, and property maintenance jobs.
  2. It would encourage employers to pay staff currently paid cash in hand into the PAYE system and probably increase tax revenues.
  3. It would be easy to administer as HMRC has all the records it needs to cross check claims by private employers.
  4. By encouraging individuals to employ domestic staff it would free up their time and encourage them to spend in the local economy.
  5. Owners of our heritage would be able to employ sufficient help to make it possible and desirable to open their properties/gardens on an occasional basis to the public.
  6. With more manpower employed in upkeep our heritage stock would be kept in a better state of repair.

There is a reason for mentioning the listed building element. Presumably the main case against such tax relief is that it lines the pockets of the already wealthy and is an unfair tax break. The Listed Building element addresses this. Owners of Listed Buildings provide a service of national benefit by maintaining the Nation’s Cultural Heritage. While they often get the benefit of living in attractive properties they are essentially unpaid private guardians, restricted in what they can do to reduce the costly maintenance of their properties because as a Nation we want them to preserve our past. As they get little or no financial assistance for this role and their properties usually require the most labour intensive form of upkeep it would appear not that unfair to assist them in the labour element of looking after our heritage.

And this is the shift in thinking proposed. To see this role in the same light as small businesses. To see the owners of these Listed Buildings as operating in the business of maintaining our heritage. So just as every other business in the country gets a tax break for encouraging employment and employing individuals to help it go about its business, then these private individuals should be given similar treatment and some form of reduction in their income tax liability where that income is going towards the employment of individuals to assist them in the maintenance of our Heritage.

Your comments would be appreciated in this debate.

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Squeezing PAYE employers with the Simplified Deduction Scheme

The dreaded HMRC Employers CD-ROM

When you load the 2009 HMRC Employers CD-ROM you are greeted with this message, ‘A Helping Hand from HM Revenue & Customs’. I think this message is put there to rile all the HMRC customers who they seem incapable of helping.

Take for example PAYE and the Simplified Deduction Scheme. Here is a system where the responsibility to collect HMRC’s taxes was loaded onto the employer. BUT at the time this system was introduced it was recognised that employers of a single domestic employee should not be required to ‘man’ a system as onerous as that of a company employing 10 or more staff. Hence the Simplified Deduction Scheme, which was a scheme open to employers of domestic employees.

The SDS allowed the domestic employer to be spared the complicated forms and the requirement to know the tax system inside out because they completed simple forms and the tax office helped with the calculations and checked your ‘workings’.

Obviously this system couldn’t be open to all and so an upper earnings limit was put in.

And that is where the catch comes. In order to gradually reduce the number of employers on this system and force them into the full PAYE system the upper earnings limit appears to have never moved or at least it has risen well below the rate of wage inflation. The result is that unless you pay below a living wage for a full time employee there is no way in 2009 that a domestic employer could qualify to be on the Simplified Deduction Scheme.

So today a domestic employer with one gardener/housekeeper etc is either required to wade through the full HMRC Employers Pack and play around with extraordinarily inefficient ‘calculators’ on the Employers CD-ROM or pay a professional to calculate the tax for them.

Had HMRC been a privately run organisation with a focus on it’s clients needs it would, of course, realised the Web was the perfect opportunity to offer a simple online calculator for Domestic Employers. Instead the public sector machine rolls along using all its best know how to find ways of un-improving its service without anyone noticing.

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