Payroll Query

BIG WAL Registered Posts: 133 Dedicated contributor 🦉
I do the payroll for a small charity. Two of the people employed are husband and wife, with the husband paying tax at 40%. The committee have agreed an annual 10% increase for each of them.

As she will still be taxed at 20%, it will be more beneficial for the whole of the increase to be allocated to the wife. (Assuming they both agree). It is not intended there will be any change in their respective roles. Concerns have been expressed that HMRC would perhaps query this. I feel that it’s nothing to do with HMRC how much an employer chooses to pay staff. Is this correct, or are there any further thoughts?


  • pinksponk
    pinksponk Registered Posts: 57 Regular contributor ⭐
    Income Shifting springs to mind.
  • Poodle
    Poodle Registered Posts: 711 Epic contributor 🐘
    Hi BW

    I don't think that income shifting applies here as it is a charity and those rules have been put back anyway in the PBR.

    However, the charity commission might not like this if the work being carried out by the wife does not justify the pay scale and the reason that you give is minuted. Also the employee may be saving tax but will this cost the charity more in NI?

    You say the 'committee' do you mean the 'Trustees', are the trustees aware of this?

    If there is a properly conducted meeting and the trustees approve the pay structure for the charity then I see no tax problem, just the charity commission. But I stand to be corrected on this.

    It is a bit unsual to voice this openly normally people are a bit more subtle i.e. for example you may have a meeting to set the budget for salaries for the comming year. Everyone gets the same percetage but you would review some positions for additional pay and support the reason for this in your minutes. I would suggest that going about this the way that you have is not wise. 10%???

    This type of thing is problematic with small charities with a few people involved and often some feeling that they have more/deserve more, clout, than others and the charity commission is fully aware of this and keep an eye out for it. This is the reason for the extra narrative that you have to submit with your financial statements.

    I was once involved with a charity commission visit with a charity that did it's best to achieve it's 'charitable objectives' but if something did not look right they would not close a case until they were 100% satisfied.

    BIG WAL Registered Posts: 133 Dedicated contributor 🦉
    Thanks to all for your input. We had not thought about the Charity Commission implications, and will take particular note of these comments.
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