Honoraria Payments and Tax Avoidance.

[fishtank]

It would seem that for years Branches have been handing out Honoraria Payments to Branch Officials and Reps under the misapprehension that these were tax free.

These are the payments made for "unpaid" positions like Branch Secretary/Branch Treasurer/Branch Whatever...

It would seem that HMRC who have been investigating CWU HQ since 2011 have different ideas..

HMRC have further advised that we are required to pay the appropriate tax on all honoraria payments made for the period 2006-2011 and that they also intend to seek recovery of the tax due (plus interest) which they advise is in the region of £369,402 (this figure also includes interest up to the end of August 2012)

Now without getting into the pros and cons of Honoraria Payments i would like to make the following point.
Members have already coughed up for these payments,now on top of that they are expected to take on the financial burden of paying the tax liabilities that came with them.

Surely it's the responsibility of those receiving the payments to ensure that they were tax compliant.
Surely it's their tax bill not ours,at least morally if not legally.

[DGP1]

If I don't pay tax on something I earn then I would expect HMRC to pursue me, if I think I'm paying the tax (ie having it deducted from my wages) then it would be the fault of the employer...............maybe that's just my naivety

[clashcityrocker]

If I don't pay tax on something I earn .....:

This was a payment made to reps etc.
They didn't earn it.

[DGP1]

If I don't pay tax on something I earn .....:

This was a payment made to reps etc.
They didn't earn it.

You could say the same thing about managers but unless it's an expense for things they need for their role they should be paying tax on it.

[dvbuk55]

Is it never f*cking ending..........there should be a true accounting of union funds, whether it's national or local. Getting in the argument of honoraria payments what are they for and how much do they amount to - you hear so many stories of unpaid sacrifice only to find that's a crock of crap and why haven't the members been informed?

It makes you wonder exactly how much is being sqirrelled away by some of these shysters under the guise of expenses/honoraria payments/cheap loans etc.
I for one would love an independant accounting check and balance on who exactly gets the money and why and at what interest rate.

[Lincox]

Unless you are employed by CWU and are taxed through PAYE, I cannot think of any other money apart from legitimate expenses which are non taxable as they are recompense for a personal expenditure made on behalf of CWU, which could become claimable.

[Lincox]

If the tax payable is £369,000 then the amount paid out during the period amounts to in excess of 1.8 Million. nearly 400,000 per year. I think CWU headquarters should be explaining in detail where the bulk of this money has gone.

[dvbuk55]

If the tax payable is £369,000 then the amount paid out during the period amounts to in excess of 1.8 Million. nearly 400,000 per year. I think CWU headquarters should be explaining in detail where the bulk of this money has gone.

This thread seems to have died the death but it certainly needs to be explored in more depth and a true accounting and explanation made to the members and there should be application made under the freedom of information to discover exactly who has received these payments and how much. Especially if your examination of the payment due in tax results from a 1.8 million payout.

[fishtank]

HMRC Audit

Branches will be aware that in summer of 2011 the CWU were contacted by HMRC to advise that we had been randomly chosen for an assurance audit. The purpose of the audit was to ensure that we were “paying the correct level of taxation”.

The audit was to be conducted by the Local Compliance Public Bodies section of HMRC who had recently also conducted similar audits at TUC, Unite, FBU and a number of other “Not for Profit” organisations as part of their planned ongoing strategy to visit all such membership based organisations in the UK.

The CWU audit, which consisted of a site visit to CWU HQ by representatives of HMRC, took place over a 3-day period in late summer 2011 during which the inspectors examined all of the financial records/information that we record and maintain at CWU HQ. This included all electronic and paper files relating to both CWU HQ finances and that of our Regions and Branches.

Following the audit, as is usual in such circumstances, we were subsequently sent a request for further information. Whilst it is fair to say that a great deal of the further information that HMRC required was information which enabled them to obtain a better understanding of the operations, procedures and systems operated by the CWU, they had also identified a number of key areas for which they required more detailed information, primarily these were:

• Branch Honoraria Payments
• Branch Expenses & Regional Payments
• Travel & Subsistence (including Overseas payments)
• Employment Status of National Executive Council/Lay Officials
• CWU P11d Dispensation

As can be seen the above matters are fundamental financial areas that clearly impact on the entire organisation and accordingly from the outset our aim was to bring these matters to a swift and satisfactory conclusion whilst ensuring that we remained legally compliant etc and that we were paying the correct level of taxation.

Additionally we sought the advice of our financial advisors (CVDFK) and immediately engaged them to assist us in our ongoing discussions/negotiations with HMRC. However despite the best efforts of everyone involved the negotiations have proved to be very protracted and extremely complex and at this point we have been unable to reach a satisfactory conclusion and the negotiations remain ongoing. The process has not been helped by the fact that in 2011 HRMC allocated two people to undertake this review. As a result of staffing changes they now only have one individual and this has led to the issue dragging on longer than HMRC originally intended and certainly longer than we had hoped.

Throughout the negotiations we have continued to provide the CWU National Trustees with regular updates and have documented the NEC/FOS on the situation and we will of course continue to do so as and when any significant progress is made.

As I have indicated above at this point in time our discussions/negotiations with HMRC have yet to be concluded and once we are in a more informed position in respect of the proposed settlement/resolution then it will be my intention to provide a more detailed comprehensive report to branches on the outcome of the issues currently being discussed with HMRC.

Branch Honoraria Payments (2012 Onwards)

Branches will recall that the union had previously issued guidance regarding Branch Honoraria payments, however during our discussions HMRC have stated that the arrangements previously adopted by the union are no longer applicable or acceptable and any honoraria payments made by branches, irrespective of the amount paid, are subject to tax and therefore all payments must be made via PAYE. They wrote to us seeking confirmation that such procedures are in place. Whilst initially we had argued with HMRC that we wanted all outstanding issues dealt with in one final document they are instructing us that on honoraria payments changes must take place immediately.

HMRC have further advised that we are required to pay the appropriate tax on all honoraria payments made for the period 2006-2011 and that they also intend to seek recovery of the tax due (plus interest) which they advise is in the region of £369,402 (this figure also includes interest up to the end of August 2012). We are currently discussing the payment arrangements for this with HMRC and will write further on this particular item early in the New Year.

As a result of the above developments we are now required to introduce revised arrangements for the payment of Branch Honoraria and in order to ensure that we comply with HMRC the NEC has determined that with immediate effect all honoraria payments must be made in accordance with the following policy;

1. All honoraria payments (for 2012 and onwards) will be made via CWU HQ Payroll system.
2. Branches will need to advise CWU HQ (by completing the attached form) of the details of the individual payments to be made.
3. Payments will be made direct to individual representatives by bank transfer and any HMRC deductions due (currently 20%) will be taken at source and sent directly to HMRC by CWU HQ.
4. Payments will be made in arrears and made as a single annual payment (i.e. following the conclusion of each yearly term of office)
5. Unless there are exceptional circumstances then payments will only be made by bank transfer direct to the individual representative’s bank account. Representatives will be sent the details of payments and deductions etc in the form of a payslip.


In conclusion, with respect to the revised arrangements for branch honoraria payments whilst we fully understand that the above changes may not be greatly welcomed by many of our branch representatives who receive payments we also hope that they will understand that the sole purpose of these changes is to ensure that we (the CWU) remain fully compliant with our HMRC requirements and that we pay the correct level of taxation.

As I have stated above we remain in discussion with HMRC to bring the other items that they have raised to a conclusion. Once we arrive at that point a full report will be forwarded to Branches outlining our actions and the position adopted by HMRC and the consequences for the CWU.

If you require any further information regarding the above matter then please contact the SDGS dept at CWU HQ.



Tony Kearns
Senior Deputy General Secretary

[dvbuk55]

Well in 23 years this is the first time I've heard of honoraria payments being made so I would still like to know who's getting them, why they are getting them and how much it amounts to.

[fishtank]

A Branch may allocate up to 5% of Branch rebate income for the remuneration of their officials.
How that is allocated is down to the Branch although at least the vague method must be published in the Branch Model Constitution if not the details of exactly who gets what.
It varies a lot from Branch to Branch but then...doesn't everything?
It's usually a few hundred a year,in some branches it goes to the reps,in others you have to have Branch-Something in your "job title".

[dvbuk55]

A Branch may allocate up to 5% of Branch rebate income for the remuneration of their officials.
How that is allocated is down to the Branch although at least the vague method must be published in the Branch Model Constitution if not the details of exactly who gets what.
It varies a lot from Branch to Branch but then...doesn't everything?
It's usually a few hundred a year,in some branches it goes to the reps,in others you have to have Branch-Something in your "job title".

Obviously it bears thinking about taking a great deal more interest in what goes on at Branch and despite my age I believe it deserves to be aired - it seems to be tantamount to a "bonus scheme" for the few and the less entitled you are the bigger the bonus for those who are entitled. Perhaps that money would be better spent in educating the members into the workings of the branch and recruiting new members. There's a great deal about the union finances that needs to be looked at.

[fishtank]

If a branch has 2000 full-time equivalent members that gives a branch membership annual income of around £350k.
The branch is entitled to 29% as rebate which means a branch rebate of around £100k giving the Branch up to £5,000 to hand out as Honoraria Payments.
20% tax on that is £1,000 per branch per year since 2006.
These are just rough figures but they are not far off as an average.
And the Honoraria Payments are only one of the things HMRC are looking closely at...

[dvbuk55]

If a branch has 2000 full-time equivalent members that gives a branch membership annual income of around £350k.
The branch is entitled to 29% as rebate which means a branch rebate of around £100k giving the Branch up to £5,000 to hand out as Honoraria Payments.
20% tax on that is £1,000 per branch per year since 2006.
These are just rough figures but they are not far off as an average.
And the Honoraria Payments are only one of the things HMRC are looking closely at...

Just so ft, so how damaging could this turn out to be do you think? Wonder if Billy paid tax on his £29k ex gratia?????

[fishtank]

Just so ft, so how damaging could this turn out to be do you think?

On it's own the final bill could be as much as £500,000 which is manageable if HMRC agree to a payment plan but coupled with the ongoing issues with the 3 pensions,the fact that CWU wage costs have increased by over a million in the last two years,the sudden urge by National Officers to "withdraw" in cash banked holidays i would say we're pretty near to broke.

Broke or not it's pretty disgusting just how much of members money,given over supposedly in return for representation is not actually going on representation but on covering up financial ineptitude and over indulgence.
That's the real story here.