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HMRC internal manual

Employment Income Manual

Tax treatment of Post Office employees: sub- postmasters: general

The remuneration of a sub-postmaster is in law taxable as employment income. Where, however, a retail trade or business giving rise to Trading Income is carried on from the same premises as the sub-post office, the remuneration as sub-postmaster may in practice be included with the trade receipts and accordingly assessed as Trading Income. Where this is done, the Inspector dealing with the Trading Income accounts should instruct the processing office to issue code NT for the salary. The accounts file 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 should be assessed as employment income.

Where a sub-postmaster also carrying on a trade requests the statutory basis of assessment for both sources of income, the trade profits should be assessed as Trading Income and the remuneration as sub-postmaster as employment income. In such a case, the expenses allowed in the Trading Income assessment on the trade profits should exclude any expenses that relate to the sub-postmaster’s earnings assessable as employment income; any necessary adjustments should, however, be made on broad lines.

Further guidance on the status of sub-postmasters is in the Employment Status Manual (ESM).

Retail trade carried on by a company

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 earnings of the sub-postmaster 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 sub-postmaster is required to, and does, hand over this remuneration to the company.

Treat for National Insurance purposes

The practice of treating the remuneration of a sub-postmaster as a trade receipt of an individual or a company applies for income tax purposes only. HMRC continues to require payment of Class I National Insurance contributions by the Post Office. The amount to be included in computing the trading profits is the gross remuneration before deduction of National Insurance contributions. National Insurance contributions are not an allowable deduction either from employment income or from the receipts of the trade.