This is the time of year that most clubs start to plan their summer programme of coaching and club activities and it is therefore a perfect time to ensure that any self-employed coaches you use in delivering your programme are truly self-employed, i.e. they would pass scrutiny by HMRC (tax authorities) should they decide to investigate your club.
It is important to understand that a club cannot just declare that they are in a self-employment relationship with a coach. A club would have to prove to the tax authorities that the manner in which they work with the coach is genuinely a self-employment relationship, and not one of disguised employment, i.e. the manner in which the club works with the coach is actually one of employment/worker.
If HMRC find that the manner in which a club is working with a self-employed coach is actually one of disguised employment, they will declare the relationship to be one of employment/worker and pursue the club for owed employers national insurance contributions, interest and penalties, dating from when the coach started at the club.
There are three ways that a club can work with a self-employed coach to ensure they would pass inspection by HMRC. Each will require a contract of services to be in place between the club and the coach outlining the actual working arrangements.
The three ways are as follows:
- The coach can and does send a suitably qualified coach in his/her place when he/she is unable or unwilling to deliver a scheduled coaching session. The club will need evidence that the coach does this (his/her invoice detailing who the substitute was) and that the club paid the scheduled coach and NOT the substitute coach. Please note that HMRC have stated in a revised statement on their website (April 2017) that the substitute coach should not be someone who is ‘not from a pool or bank of workers regularly engaged by the end client’, i.e. it should not be a coach currently working at the club.
- The coach determines their own hours and the content of the lessons for the club. It is usually a head coach who can pass this requirement.
- The coach pays to the club a fee for use of the club’s equipment/facility and for access to a ready-made customer base (the club members). This fee should be reasonable and should be charged irrespective of what hours the coach actually works. The fee can be in the form of time and/or money, i.e. you can require your coach to provide the club with a number of hours of coaching/administrative work per week/month.
There are some practical requirements for each of these methods which we cover in detail on our training workshops.
If the club is unable to satisfy any of these methods, the relationship is likely to be deemed one of employment by HMRC. The club should in this instance consider employing the coach and run all payments to the coach through a payroll system.
Please note that there must be a CONTRACT FOR SERVICES in place between club and coach to confirm how the working relationship qualifies as self-employment – HMRC will not just take the club’s word for it.
Employment Status Indicator
It is important that the club uses the employment status indicator (ESI) software to confirm that their working arrangements will pass scrutiny by HMRC. ESI is legally binding on HMRC so, assuming you answer the questions honestly, you will pass scrutiny from HMRC is you have an ESI printout that states that your working relationship is self-employment, as outlined on the HMRC website:
HMRC will stand by the result given unless a compliance check finds the information provided isn’t accurate.
HMRC won’t stand by results achieved through contrived arrangements designed to get a particular outcome from the service. This would be treated as evidence of deliberate non-compliance with associated higher penalties.
It is therefore essential to print off/save the RESULTS and ENQUIRY DETAILS pages of ESI once you have finished – without these, the result will not be legally binding on HMRC.
As well as the ESI checking, it is equally important that the club confirms that the coach is registered with HMRC. This can be achieved by getting the coach to sign a declaration that they :
- Are registered as self-employed
- Are responsible for their own tax and NI
- Will inform you if their status changes
This self-declaration will ideally be the first clause in the contract for services you will require them to sign.
Contract For Services
A robust CONTRACT FOR SERVICES is therefore essential between club and coach to prove the relationship is one of self-employment and to confirm that the coach is registered.
We provide a complete contract for services template for a cost of £55 in the resources section of this website – click HERE to access the details
We recommend that the contract and ESI requirements are completed annually.
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