NIM02215 - Class 1 NICs: Earnings of employees and office holders: Local Exchange and Trading System schemes (LETS)
Local Exchange and Trading System schemes (LETS) operate in numerous locations. The schemes provide a system of local “currency”. A person will undertake a task or provide a service for another member of the scheme and collects “credits” in return for what he has done or provided. The credits can be called by a range of names such as bobbins, brads, newberries, beacons and acorns. The scheme may also refer more closely to a monetary value in that they may use a place name [town or city] followed by coin, pound, bitcoin etc or it may also be referred to as a digital currency. The effect of each has the same outcome.
The credits can be used to ‘buy’ goods or services from other participants in the scheme. No money changes hands and all transactions are conducted in terms of the credits of the particular scheme.
Most people who participate in a LETS are not employed and would not therefore be liable for NICs. If, however, you come across a situation where a liability does exist you need to be aware that the LETS credits will be earnings for NICs purposes. See NIM02010 for general guidance on the meaning of “earnings” for NICs purposes.
The value of credits may be established in two ways:
- if the organisers of the scheme have equated the value of the credits to a monetary value (for example, one credit equals £1) then the amount of earnings can be readily established; or
- if no monetary equivalent is available, the value of the goods or services can be decided by considering
- how the number of credits is decided
- whether the number of credits earned vary with the type of service provided
- the value of the credits in terms of what they ‘buy’ in the scheme
- what the average local rate of pay is for the work performed.