The playgroup in question had not established that one of its employees also worked elsewhere. According to the Inland Revenue, when this is the case, the employer may be responsible for deducting income tax from the employee at basic rate and may be held liable for any tax owed if this is not done.
Scottish Pre-School Play Association finance manager Ann Motherwell said, 'The playgroup was found responsible for paying the tax which was owed and had to foot a bill of 800, which could close some groups. However, the people involved in the group and the friends of the group rallied round - though that wouldn't always happen.'
Employees are not liable to pay income tax and national insurance until they earn over a certain limit - about 85 a week for tax and 75 for national insurance. A playgroup is responsible for working out whether a member of staff should have tax and national insurance deducted from their pay packet and, if the employee earns above about 85 per week, it is also responsible for paying the employer's national insurance contribution. If an employee has a second job, the playgroup may have to deduct tax at basic rate from their earnings.
Ms Motherwell said, 'Groups are intimidated by tax and national insurance - they don't want to tackle it, because there's so much paperwork. They're often not sure if they're doing the right thing. If they have paid staff, they are employers in the eyes of the law and they have to deal with it, but it's not as bad as it seems - there is plenty of help at hand.' Liz McDermott, chair of the Playgroup Network, which represents 1,500 playgroups in England, said tax and national insurance had become more of an issue since the introduction of the minimum wage, which had bumped many employees' salaries over the thresholds at which deductions start. She predicted that the question of how to tax an employee with another job would become more of a problem, as increasing numbers of childcarers hold down a number of positions, for example, at a pre-school club, as a lunchtime assistant and at an after-school club.
All playgroups should check with Inland Revenue whether they need to register for the PAYE scheme. Its helpline for employers is 0845 714 3143.
