24 Jan Paying a Retainer to a Self-Employed Coach
The word retainer is often used in sport to describe a fixed fee paid by a club to a self-employed coach/worker for certain services, with the fee usually being paid on an annual basis.
This is not strictly speaking a retainer in the correct meaning of the word – an actual retainer is a fee paid to ‘retain’ the services of a worker, i.e. a payment to ensure that the worker is available to work for the club when required. It would typically be paid to an experienced coach as an inducement to stay at the club.
Whatever type of retainer a club pays (for services or as an inducement), it is important to ensure that the fixed fee passes the self-employment guidelines checklist so that the self-employed worker is not considered an employee by the tax authorities should they scrutinise the club/coach relationship.
In order to ensure that the fixed fee is not seen as a payment to an employee, the club should ensure the following:
- The services provided for the money should be listed in a contract for services, clearly stating that the worker is required to be registered as self-employed.
- There should not be a specific number of hours listed for the services, e.g. ’10 hours administration for the annual junior tournament’. Instead, the services required should be listed as tasks to be completed, e.g. ‘Administration of the annual junior tournament’ WITHOUT a specific number of hours. Listing a service without specific hours demonstrates ‘financial risk’ – the worker is undertaking to perform a service for a fixed fee and runs the risk that the work may take longer than anticipated, thereby reducing the potential profit from the work. Specific hour work is not fixed fee work – it is payment per hour.
- The services listed should not detail the time and place the work will be carried out, e.g. listing work as ‘Administration of the annual junior tournament’ with no time and place for said work suggests that the coach/worker is in ‘control of the work’ – they decide where and when this work will be carried out.
- The retainer should not be paid more frequently than quarterly (for an annual fee) and should be paid in arrears, i.e. when the work has been completed to the satisfaction of the club.
- The club only pays on submission of a detailed invoice.
If a club is paying fixed fee and hourly paid work to a coach/worker, HMRC (tax authorities) are likely to separate the two types of work and assess the worker’s self-employment status as though the worker was two persons. In such circumstances, they may then rule that the fixed fee work qualifies as self-employment but that the hourly paid work does not, resulting in a potential tax liability for the club.
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