Sub postmasters operate 97% of the national post office network and whilst the Post Office themselves offer mortgages via rebranding some products through Bank of Ireland, it can be very difficult for sub postmasters themselves, to obtain mortgage finance.
This is because sub masters whilst self employed entrepreneurs are in effect employed by the Post Office to offer branch services. Like anyone who is employed, they receive both standard wage slips and a P60, despite them being on a self employed contract. The confusion is further compounded as they usually have a non-taxable NT Tax code and are looking for mortgages with employed income despite paying no tax directly on this income.
In general terms an NT code suggests that whilst the tax authority assess income as salary arising from employment, by agreement with the ‘Employer’ no tax is actually deducted at source. There is some additional confusion because national insurance is deducted from ‘pay’ as with salary, but the actual amount of income received is then included in self-employed accounts.
HMRC has needed to provide guidance on this issue and interestingly entitles it Tax Treatment of Post Office Employees.
One would anticipate the Revenue therefore deem sub postmasters employed but that does not appear the case.
The guidance states “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.
Trading income from many sub masters is usually and no longer 100% derived from post office services. Many offer other products as the difficulty with remuneration and appropriate payment for services within the industry has forced most to diversify into other areas of retail trading.
Where a retail trade or business is carried on by a company from the same premises as the sub- post office, the situation becomes even more confusing as the Post Office salary is earnings of the sub-postmaster and not of the company.
The Revenue now appear to give special dispensation and despite the guidance, do say that no objection should be raised by an Inspector, with a request to treat the Post Office salary as income of the company. This however, is conditional on the sub-postmaster being required to, and in fact does, hand over this remuneration to the company.
In light of the above difficulties it is little wonder, mortgage lenders are confused.
The situation for sub postmasters who provide an essential non mutualised service is less than satisfactory. Sub postmasters can obtain assistance with these problems and typically we are able to help if you are experiencing difficulty.
