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6 Jun 2006 : Column 18WH—continued
Reinforced by other speakers, my hon. Friend spoke about nurturing talent and helping young people, although I think that we are all clear that “junior clubs” refers to the leagues in which they are involved, not to the age of the players. I absolutely agree with her on the importance in local communities of clubs, whether football clubs or any other kind. I understand only too clearly from my own constituency experience how important those amateur arrangements are, so I have been genuinely perplexed—both by correspondence that I have received and, at times, by
the debate today—about the precise nature of the problem that is being identified. However, I shall try to deal with the points made.
At the outset, I want to make it clear that Her Majesty’s Revenue and Customs is not proposing any change to the long-standing informal arrangements operated by smaller community clubs. I am not sure that I can put it any more clearly than that. I was asked what goes on in England, Wales and Northern Ireland. We are seeking the same treatment in Scotland as in England, Wales and Northern Ireland. Whether I happen to represent an English constituency is irrelevant; I know that my hon. Friend the Member for East Lothian and other hon. Friends feel as strongly as I do that what is important is nurturing talent anywhere in the United Kingdom.
When football clubs of whatever status in England, Wales and Northern Ireland make payments that represent profit to players over 16, they are obliged to operate pay-as-you-earn. As is the case for any employer, when HMRC discovers that a club should be operating PAYE, it requires it to do so. That is what we are discussing today. We are talking about a minority of clubs where quite significant sums of money can be involved.
Jim Sheridan: Will my right hon. Friend give way?
Dawn Primarolo: I shall just finish my point. Such clubs will be asked to operate PAYE.
I was about to come to the point made by my hon. Friend the Member for Paisley and Renfrewshire, North (Jim Sheridan). He said quite clearly that hon. Members contributing to the debate were not asking for anything different from what operates in England, Wales and Northern Ireland. The hon. Member for Manchester, Withington (Mr. Leech) talked about using the common-sense approach. I agree with him and I hope to explain to him what I understand that approach to be. We could then pursue that question if it is not settled here today.
Jim Sheridan: Will the Paymaster General define in layman’s terms what she means by profit? Is £1, or £1,000, or £50 profit?
Dawn Primarolo: That is at the heart of some of the questions asked. Frankly, the point made by the hon. Member for Manchester, Withington, about pursuing a club for £10 is just daft—it would not happen—so let us try to lay out clearly what is going on.
Mr. McGovern: My right hon. Friend refers to clubs as employers who have responsibility for PAYE. Can she define who in the clubs would be responsible for administering PAYE? Would it be the unpaid community volunteers?
Dawn Primarolo:
I will come to that, but let us just keep the matter in perspective. As I understand it, there are 164 of the clubs in question. Forty-five of them are larger—I shall come later to how they got to be larger and to the sort of sums that we are talking about. They have been asked—and they have agreed—to operate PAYE from 2005-06. That is the position with regard to the clubs. As all my hon. Friends have acknowledged,
tax and national insurance law requires employers to operate PAYE and class 1 national insurance. Those requirements apply to all employers, no matter how large or small, whether they are running a business, a club, a voluntary organisation, or even just employing a nanny in their own home.
In the case of the Scottish junior football clubs, a special arrangement, to which my hon. Friends have referred, involving an informal return was introduced. That arrangement will not be disturbed; it is not as if it is being taken away from all 164 clubs. That arrangement was introduced because, at the time, except in exceptional cases, clubs paid only small amounts to cover expenses that would not have been taxable. So although technically the clubs were employers and should properly have come within the scope of the PAYE rules, the informal return, which still exists for the vast majority of clubs, was a pragmatic simplification that saved both the club and the Revenue from having to operate the system fully.
Those arrangements simply required the club to provide a list of players and details of payments made to each of them, and if the payment included any profit element—I shall come to the expenses issue later—that was included in the tax code relating to the players’ main employment. That informal arrangement lasted a long time. It was reviewed for two reasons—this will answer the point made by the hon. Member for Wycombe (Mr. Goodman). The first reason was that the financial circumstances, in terms of the amounts being paid, had changed for some clubs. They were no longer paying only non-taxable reimbursements of expenses—for example, those relating to kit. By the way, kit does include shin pads; I have no idea where the ridiculous suggestion that shin pads could be used for something else came from. I heard clearly what was said about that, so I am saying clearly now that it is an expense. Many clubs are paying substantially greater sums in real terms than they were in the 1960s, and there can now be a real profit element involved. That causes issues at the boundary as they move away from the amateur reimbursement of expenses.
The second reason for reviewing the arrangement was that under the old system—I suppose the question is why it has taken so long to get to this point, but never mind—the informal arrangement meant that things would be picked up through the tax system with the employer, but the introduction of self-assessment in 1997 cut across that, because it was no longer possible to identify third-party information. It therefore became difficult to determine a person’s tax liability. I can see you smiling Mr. Chope. You are no doubt very familiar with this problem from your constituency experience. [Interruption.] Did someone ask me to give way?
Jim Sheridan: I was making reference to my right hon. Friend’s comments about you smiling, Mr. Chope. You are familiar with all these tax complexities. Unfortunately, that is not true of most of the people who will be burdened by the administration.
On a separate point, my right hon. Friend said earlier that out of 164 clubs, 45 fall into the category of making a profit. Will she make available a list of the 45 so that we can make an assessment of it?
Dawn Primarolo:
I will certainly try to do that. I was smiling at Mr. Chope because I was thinking of his
Public Accounts Committee experience. As a Minister, I am used to the probing questions that it rightly asks.
Regarding the list of clubs, I have asked for that information. I would prefer to have it myself, but it is covered by taxpayer confidentiality. If we can find some way of getting those clubs to agree to the disclosure of their names by HMRC, I will be more than happy to pass it on.
There is no question of backdating the system to 2004. The clubs have agreed to operate the system—I shall give some examples of the things that cause difficulty—and as far as we are concerned, the remainder of the 164 clubs are covered by the informal arrangements. Of that remainder, 11 have not submitted an informal return for a number of years—that is where the point about 2004 comes in—or their returns do not make sense. A further discussion will take place with those clubs, which I hope will resolve the matter.
Let us consider the sort of things we are talking about. Some clubs have been asked and have agreed to operate PAYE under exactly the same arrangements for clubs in England, Wales and Northern Ireland. It may be that they have received substantial sponsorship. It varies from the fixed amount, but it could be anything from £3,000 to £200 for advertising at the ground. These amounts, together with gate receipts—which can be up to £1,000 per game for some clubs—and other forms of supported income, help to finance payments to players and coaches. We are trying to ensure that the informal arrangement works in the way agreed and that the rules are applied.
There is no intention to add burdens to what we all agree are perfectly reasonable arrangements. The review referred to commonly made payments, such as signing fees for players that can vary from £150 to £2,000 per player, averaging at £800. Those are not insubstantial amounts. One club paid a player £100 per week. During the review, when the treasurer of one club was asked what happened to the balance of £400 in gate receipts in a particular week after all other disbursements—payments, expenses, running costs and so on—had been made, he said that the club simply paid it to the players by dividing it equally. That falls outside the informal arrangement, which is what the HMRC is trying to deal with.
I absolutely agree with all the pleas that my hon. Friend are making. Where the informal arrangements are working, that is fine: the majority are, and should be, left undisturbed by the recent changes. We should find ways of ensuring a sensible outcome for clubs that have moved beyond the circumstances with which the informal arrangements were designed to deal. Such clubs have agreed to operate PAYE.
Mr. Devine: My right hon. Friend seems to be contradicting herself. Perhaps she can help me because at the beginning of her contribution she said that there has been no change, but she then said that she wants to bring Scotland into line with England, Wales and Northern Ireland. Can clubs still operate the informal arrangement? Can I go back to the junior football clubs in my constituency and say, “The Minister is telling me very clearly that nothing has changed and you can continue to operate the informal arrangement. You can tell the tax department where to get off”?
Dawn Primarolo:
Yes, as long as that club is not paying a profit element, which was never part of the
informal arrangement. As long as clubs are not doing that, they still fall squarely within the informal arrangement. It is a question of the profit element and the payments over and above the norm. I am not referring to reimbursement of expenses or other such matters, but the sharing of the profit element from the club. My point about England, Wales and Northern Ireland is that that is how the rules operate in those countries.
Dr. Gibson: My right hon. Friend made the point clearly and effectively about the distribution of profit among the players. Has she any evidence of how often players do not get paid because the club is in some dire trouble? Players may have to take a cut in wages, or receive no wages at all. I bet that that happens quite frequently.
Dawn Primarolo: I do not have the evidence to hand, but in circumstances where clubs are squarely within the arrangements for amateur clubs—this is also the case in England, Wales and Northern Ireland—there is no PAYE requirement. We are talking about the sharing of payments over and above a certain point and how that should be declared. I want to make it absolutely clear to my hon. Friends that we have not suddenly decided that all 164 amateur clubs, the value of which has been clearly outlined today, have to apply PAYE rules. They are not being asked to do that; that is not happening.
Mr. McGovern: My right hon. Friend mentions 45 clubs that have agreed to operate PAYE. Would she explain what prompted that? Did those clubs simply come forward and volunteer to adopt PAYE or were they chased up by the Inland Revenue? How did the change happen?
My right hon. Friend may be coming on to answer the question I asked earlier, but if a club is regarded as an employer, who is responsible for returning the PAYE forms?
Dawn Primarolo: I shall double check how the change came to pass. I hope that I am giving my hon. Friend the correct information, but I believe that in some areas the informal returns, which are considered periodically on a compliance basis, raised questions about whether clubs had moved beyond the exact requirement in the informal arrangements. That goes on all the time in the tax system and makes sure that the system operates as it should. I am taking part in the Committee on the Finance Bill, which attempts to do that every year.
It is my understanding that the treasurer and secretary are responsible for the informal return. It would depend on the structure of the club, I suppose, but I presume that they would be required to do it. My problem in answering my hon. Friend’s question is that I do not know in how many different ways I can say that the vast majority of such clubs will still fall within the informal return arrangements and that that is where they will stay.
There has been considerable discussion with the Scottish Junior Football Association since 2002 about the problems and the need to clarify the arrangements. The new provision was not simply dreamed up. Questions arose
about what was happening in some clubs, which were then raised with the clubs. Discussions took place and 45 clubs have agreed to operate PAYE if it is necessary for the payments that are to do with making a payment—a wage, or a share of the profits—other than the reimbursement of expenses.
Anne Moffat: My experience is that the clubs in my constituency have had PAYE imposed on them by the Inland Revenue, not that they have happily agreed to do it. Would my right hon. Friend look favourably on the clubs that are saying that that is the case?
Dawn Primarolo: I would certainly look favourably on clubs that take the view that they have been unreasonably asked to operate PAYE, but if they are making payments that are, in effect, a wage or a share of profits and that take them beyond the informal relationship, they have put themselves under the law that every employer in this country has to apply if they make payments in a particular way. I cannot say on the Floor of the House that we will let some employers not operate the system. That would be a disaster in the exploitation of people.
We have entirely reasonably said that we need an informal arrangement when clubs are amateur and are not making such payments. They should not have any contact with the tax authorities, but should simply complete a return to confirm that they still fall under the informal arrangement and to supply the information that is requested.
Jim Sheridan: I thank the Paymaster General for giving way yet again. In her many discussions with the SJFA, has she or any of her officials offered it any resources in assistance? Could the SJFA engage an accountant to deal with all the clubs that would have to pay? Would there be a tax exemption if someone were engaged to do that?
Dawn Primarolo: It is not for me to advise on how to plan tax from this Chamber. I am not aware whether such discussions have gone on. I have not had such discussions, but I will take my hon. Friend’s point away and check with my officials. I operated a PAYE system, many years ago, before I was in this House, and I am rightly required to understand the system now as Minister.
Mr. McGovern: Will my right hon. Friend give way?
Dawn Primarolo: I will just finish this point, and then I will give way.
I assure my hon. Friend the Member for Paisley and Renfrewshire, North that there are a lot of simple, quick and easy ways to fulfil the obligations, most of which come in the form of software and require simple applications, such as putting in figures so that returns are automatically done. I will certainly check whether, if someone were employed to do it all for the club, that would be tax deductible as a business expense. I think that I know the answer but I do not want to get it incorrect.
Mr. McGovern: My right hon. Friend said that the 45 clubs that have agreed to operate PAYE did so because the Inland Revenue felt that their informal returns moved beyond an exact requirement, which sounds pretty definitive to me. Could my right hon. Friend tell me what that exact requirement is and when a club moves beyond it?
Dawn Primarolo: In some cases, clubs were not even submitting the informal declaration or return, or were missing out some of the information. I said earlier that the return required them to explain the expenses payments they made, so they would have to submit a list of what they had paid out. The Department has business support teams, which have offered to assist the clubs that are operating PAYE if they have any questions or requirements.
We are coming to the end of the debate and I want finally to —
Mr. David Anderson: Will the Minister give way?
Dawn Primarolo: I want to make this point, and then I will be happy to give way before I conclude.
Many important points have been raised. I hope that I have been able to clarify some of the misunderstandings, but I can see that there would be value in meeting interested Members to try to ensure that the final elements are sorted out.
Jim Sheridan: The minimum wage?
Dawn Primarolo: My hon. Friend prompts me on the issue of the minimum wage, but frankly £100 for a day’s play or a couple of hours’ play probably exceeds the minimum wage requirements.
Mr. Anderson: I want to raise the same point. The Paymaster General might be right that one person might get £100, but if we are saying that at least 45 clubs must now accept that they are employers what will that mean for them? Will everyone who plays for them attract the minimum wage? Will they attract national insurance contributions? That is a big difference from one person getting a one-off payment of £100.
Dawn Primarolo: That is difficult to deal with at this stage. I am perplexed that I need to go through the national minimum wage on this occasion. We are talking about people being paid from a profit or made another payment when they might well be working elsewhere.
Mr. Devine: Will my right hon. Friend give way?
Dawn Primarolo: Just a minute. I know that my hon. Friend thinks the matter is important and I am keen to hear him, but I need occasionally to answer a question before the next one comes along.
I am advised that the national minimum wage is not an issue when it comes to the payments that we are discussing. Clubs do not have to run the scheme for everyone, and the payments involved significantly exceed what would be considered the hourly rate for the national minimum wage.
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