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HMRC internal manual

Business Income Manual

HM Revenue & Customs
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Meaning of trade: exceptions and alternatives: co-workers of the Camphill Association


The Camphill Association was founded in 1940 and there are now over 80 centres in 17 countries including 37 communities across Scotland, England, Wales and Northern Ireland. The communities within the Association are inspired by Christian socialist ideals and were set up to help vulnerable children and adults, many with learning difficulties, to live, learn and work with others. Co-workers assist the vulnerable members within each community, living together in houses, sharing money and making joint decisions. The communities are funded mostly by local authorities for looking after vulnerable people.

Co-workers do not receive wages or salaries but receive their accommodation, food, clothes and other living expenses from the community. The Association has agreed with us a single approach for all co-workers.


How a Camphill community operates

All members of a community within the Camphill Association are equals, whether they are vulnerable members or co-workers. The possessions of the community and all income is pooled and shared between members as they need it. Each community consists of one or more houses where members live together. Each house has its own budget from which food, bus fares, clothes, cigarettes and other day to day items are bought. The house is required to maintain a cash book showing income and expenditure and to prepare a monthly statement to present to the community council. The community as a whole decides on larger items of personal expenditure for example payment of holidays for co-workers, or school fees for the children of co-workers.

There are two types of co-workers:

  • short term co-workers, and
  • permanent co-workers.

Short term co-workers are people, often foreign students, who want to experience living within a community for a short time (generally between six months and two years) but who are not committed to a permanent life in the community. The communities recognise that short term co- workers are unlikely to be ready to live in a society where money for all personal items must be agreed by fellow members and therefore they are paid pocket money for their own personal expenses.

Permanent co-workers are permanent members of the community and are also known as ‘long term co-workers’, ‘house parents’ or ‘career volunteers’. Some permanent co-workers have outside jobs and their own property or other income. Many, but not all, gift their outside income to the community. Many communities have become quite wealthy and are able to pay for substantial benefits to co-workers that would be subject to tax in other parts of the economy.


Tax status of co-workers

HMRC have agreed with the Camphill Association that:

  • the short term co-workers will not be liable for tax because their pocket money is likely to be below the tax threshold and they are in the country for short periods of time only, and
  • the permanent co-workers have a vocation and that the profits of their vocation should be taxed as profits from a profession.

Most of the co-workers are unlikely to have a tax liability but we want to encourage co-workers to register with us to ensure they apply for any tax credits to which they are entitled. (Working or child tax credits.)


Calculating the income of permanent co-workers

Where the co-worker has received cash from the community which is for the purpose of meeting personal expenses of the co-worker and, or, his or her family, the amount received will be an income receipt to be included in the tax computation.

However most of the income of co-workers is received in the form of non cash receipts or benefits. There is no trading equivalent to the earnings benefits legislation so the taxable value of each non cash receipt and benefit depends on general principles and case law. Non cash receipts and benefits should be included as receipts in the computation of trading income to the extent that they can be converted into cash. The amount to be included is the second hand value. In practice many of these items are likely to be of negligible value and so they will not be taken into account.

  • Where the co-worker has used a community cheque to pay for personal items, the amount of the payment will be an income receipt for the purposes of the computation.
  • Where the co-worker has entered into a contract for a personal item, the cost of which will be reimbursed or paid for by the community (e.g. using a personal credit card or booking a holiday in the co-worker’s own name) the cost to the community will be an income receipt of the co-worker.
  • Where the co-worker has bought items for the community for example food, household goods and appliances, there will be no tax charge.
  • Personal items include items bought for the co-worker’s family.

The table below gives details of the principles of how individual items should be treated and includes the comments supplied by the Camphill Association to their communities.


Inspecting records

Because the communities operate on the basis of pooling their assets, many may not have kept detailed records distinguishing between personal and community expenditure or of expenditure attributable to individual co-workers. The Association has advised communities to keep sufficient records of their expenditure and has agreed to allow HMRC to inspect the records of individual communities at any time by prior agreement. You should only consider inspecting a community’s records on this basis if you are concerned that the community may not be operating the agreement properly.


Treatment of expenditure by co-workers for tax purposes

### Expenditure ### Tax treatment ### Notes, comments
Pocket money Only short-term co-workers receive pocket money. HMRC will not require completed returns for short term care workers.  
(Short term - normally young people taking time out during or after school or higher education for periods of 6 months to 2 years maximum.) Short term co-workers receive benefits other than pocket money. However, by and large these are benefits which are either discretionary or non-transferable, or both, and therefore do not give rise to a tax liability.
Some short term co-workers stay longer than 2 years, yet still remain on pocket money. HMRC will treat co-workers as short term for three years maximum after which they should be treated as permanent co-workers for tax and NIC purposes.    
  Cash Permanent co-workers, house parents have access to cash.

This should be recorded and regarded as the co-worker’s own income subject to a claim for allowable expenses.

Amounts passed on to other co-workers should be regarded as the other co-workers income. All cash given to co-workers is regarded as that co-worker’s ‘income’ and is liable for tax.
However, if some of that cash is spent on things for the community these are considered ‘allowable expenses’ and can be deducted from the amount of cash received. The balance is the taxable income of the co-worker who received the cash.      
  Food, lodging, heating, laundry These are costs of running the community. Any benefit to the co-worker will have no realisable value as they cannot be turned into cash or money’s worth by the co-worker. Costs must be incurred by the community.
  Use of pool vehicles owned by the Camphill Association No realisable value, therefore no tax charge. There are some situations in which a vehicle is dedicated primarily for the use of one household or neighbourhood and that in practice this may mean that it is mostly used by one individual or couple. However, it is available for use by others as needed - and this does indeed happen from time to time.
  Clothing and personal items The purchase of exceptional items by the community has to be agreed by each community as a whole. Provided this happens treat the ‘benefit’ as nil.  
Second-hand value will be negligible in most instances. Tax liability depends on who incurs the expenditure. If the community incurs the expenditure then no liability will arise on the co-worker. (See next section on the basic principle which needs to be followed throughout.)

Where exceptional personal items (for example a wedding dress or an expensive camera) are agreed by and purchased by the community (or neighbourhood) no liability will arise.

All money given to a co-worker to purchase personal items will be assessable for tax.    
  Holidays Depends on how the holiday is contracted.

If the Association contracts with the travel company, and the holiday cannot be transferred by the co-worker, then no liability will arise.

If the co-worker contracts direct with the travel company and receives money from the Association to meet their pecuniary liability then the cost should be included as the individual’s income for the year in which the cost was met.

Cash given to spend whilst on holiday will be assessable for tax. If the community contracts with the holiday provider the cost does not give rise to a tax liability for the individual.
If the individual contracts with the holiday provider or if the holiday is purchased on a personal credit card or by a personal cheque then, even though the community reimburses the amount, the cost does give rise to a tax liability. For no tax liability to arise it needs to be clear that the community, and not the individual, has contracted for the holiday. The individual cannot sell or transfer the holiday, nor would s/he personally receive a refund if the holiday were cancelled.    
  School fees As above.
Depends on how contracted. As with holidays it is significant that the community (not the parent) contracts with the school for the payment of fees. If the parent contracts with the school and the community pays the bill, then the community is meeting a ”personal liability” of the parent and this will give rise to tax liability. (As most Camphill parents have no resources, it is in the school’s interest to contract with the community.)
  Payments of personal liabilities, for example:
  • adoption expenses,
  • child support payments,
  • medical expenses of dependants,
  • repairs to privately owned property. Where a liability has been incurred by the individual co-worker, or a member of their family, and this liability is met in whole or in part by the Association the amount paid should be treated as the individual’s income for the year in which the liability was met. The community is meeting the co-worker’s personal liability. Privately owned property:
If a co-worker owns a property which is used by the community and the contract stipulates that repairs to that property are the responsibility of the tenant (the community) the costs of such repairs would not be income to the co-worker. Any rent received by the co-worker would, of course, be liable for tax.  
  Personal medical and dental costs.
Private health costs & insurance. Depends on how contracted. Follows basic principle outlined under “holidays” above.  
  Computers. Provided these are owned by the Association no liability will arise. What matters is who owns them rather than who uses them or how they are used.
  Payment on leaving a community. Treat as voluntary gift - no liability It was recognised that the needs of a co-worker who had been with Camphill for a long period might be greater than the needs of co-workers leaving after a relatively short time. Such gifts are not liable to income tax provided they are:
  • discretionary,
  • not based on expectations or entitlement,
  • not given for services rendered,
  • not based on length of service,
  • personal to the co-worker,
  • a one-off payment, not a regular income over a period of time,
  • based on the perceived needs of the former co-worker and his family,
  • based on what the community can afford.