ESM4400 - Particular occupations: sub-postmasters/sub-postmistresses - general

The remuneration of a sub-postmaster or sub-postmistress is in law chargeable under Schedule E/as employment income and subject to Class 1 NICs as earnings from an office.

Tax

Where, however, a retail trade or business is carried on from the same premises as the sub-post office, the remuneration as sub-postmaster/sub-postmistress may in practice be included with the trade receipts and accordingly treated as trade profits.

Where this is done, the Inspector dealing with the accounts should instruct the PAYE office to issue code NT for the salary - see the guidance at BIM66301. The accounts file/SA record should be noted accordingly to ensure that the salary is taxed as part of the trade receipts.

Where no trade is carried on, or the trade is negligible, the remuneration as sub-postmaster/sub-postmistress is chargeable as employment income.

There have been cases where requests for NT codes have been made and, on subsequent examination of accounts, it has been discovered that no retail trade/business was carried on from the same premises. Where a Status Inspector receives a request for the issue of an NT code, the request should be passed to the Technical Support Inspector who should only authorise this code if satisfied that a retail trade is carried on from the same premises as the sub-post office and that the extent of that trade is more than negligible. If the statutory basis is to be applied for both sources of income, the trade profits should be charged Chapter 2 Part 1 ITTOIA 2005 and the remuneration as office holder under Schedule E/as employment income. In such a case, the expenses allowed against trade profits should exclude any expenses which relate to the earnings of the office chargeable under Schedule E/as employment income; any necessary adjustments should, however, be made on broad lines.

Where a retail trade or business is carried on by a company from the same premises as a sub-post office, the Post Office salary is the income of the office holder and not of the company. In practice, however, no objection should be raised to a request to treat the Post Office salary as income of the company provided that the office holder is required to, and does, hand over this remuneration to the company.

National Insurance Contributions

The practice of treating the remuneration of a sub-postmaster/sub-postmistress as a trade receipt of an individual or a company applies for income tax purposes only. The Post Office is liable to pay secondary Class I NICs and the sub-postmaster/sub-postmistress primary Class 1 NICs on his/her salary. Where the remuneration is introduced into the business the amount to be included in computing the trading profits is the gross remuneration before deduction of NICs. National Insurance contributions are not an allowable deduction either from Schedule E emoluments/employment income or from the receipts of the trade. However, with effect from the 2003/2004 tax year onwards, regulation 94A of the Social Security (Contributions) Regulations 2001 excepts from liability for Class 4 NICs all earnings which an earner derives from employed earners employment but which are included in the calculation of trade profits.