Business Essentials

The rates you charge for your sessions will depend on a number of factors:

- Location
- Qualification
- Experience
- Requirements of the pupil
- Prevailing market rate

We recommend researching what other programmes in your area charge and offer and what qualifications/experience their team has. This will provide you with an accurate yardstick as to what you can charge. It is also very useful to ensure that your research extends to other sports - anything happening at the same time is a potential competitor to your programme.

You may be able to charge a premium on the market rate if you are able to offer something unique for the area or if you have a captive market.

When a coach/club official uses their own vehicle for business purposes, they can charge the organisation for the use of his/her vehicle using the Authorised Mileage Payment (AMP) rates, which are currently as follows:

- Business mileage up to 10,000 miles - 40p per mile
- Business mileage over 10,000 miles - 25p per mile

Please note that these figures are the same irrespective of the size of the engine of the car or its level of emissions. You should note that travel between home and the 'principle place of work' is not allowable.
Therefore, if the coach does 11,000 miles in a tax year, he/she can charge the business 40p per mile for the first 10,000 miles and 25p per mile for the remaining 1,000 miles, making a tax free payment from the business to the coach of £4,250.

The coach/official should complete a list of the mileage made on an expenses form to back up the claim that the mileage was for business purposes. It is important to keep an accurate record of what business mileage has been done, particularly if you are subject to an Inland Revenue inspection.
You should also note that there are also allowances for using a motorbike or bicycle and an additional allowance (5p per person) if you carry qualifying passengers when travelling on business.

A contract between a client and a self-employed coach is defined as a CONTRACT FOR SERVICES, whilst a contract of employment is defined as a CONTRACT OF SERVICE.

It is a common misconception that a contract has to be in a written format - the contract can be written, oral or implied (or a combination of all three). Where conditions have been verbally agreed, you should be aware that you may need a third party witness to corroborate what has been agreed. The taxman will be able to determine the terms and conditions of a coach/client working relationship from the implied contract in the relative accounts of both parties.

A well-written contract provides the coach and client with a clear definition of their working arrangement and can provide a level of protection against inspection by the taxman by demonstrating to them that you both have a clear understanding of the self-employment regulations.

Both coach and client should take visit the HMRC web site at www.hmrc.org.uk and use the interactive Employment Status Indicator software to determine the status of their relationship. Assuming the software confirms the relationship is one of self-employment, the written contract should then be worded to reflect the actual working relationship as confirmed by the HMRC software. Full details of the factors involved in determining self-employment status and a sample contract are both available to anyone who attends the GBSport Business Essentials course - visit the GBSport web site at www.gbsport.org.uk for further details.

CRB AND VBS CHECKS

Any contract should clearly state that it is the client's responsibility (where applicable) to check the CRB (Criminal Record Bureau) and VBS/PVG (Vetting and Barring Scheme in England & Wales/Protecting Vulnerable Groups Scheme in Scotland) status of the coach, whilst it should be the coach's responsibility to do the same for the staff and volunteers used in the programme if the coach is in charge of the programme.

It is essential for checks to be actively undertaken and proof obtained that the check was undertaken - just accepting a certificate provided by the person being checked is not acceptable and could lead to legal and insurance problems.

There are a number of different types of employment contracts that can provide you with a flexible and cost-effective way to staff your coaching programme, without the cost and commitment of having to take on full-time employees. They may also provide a practical alternative to using a self-employed coach, especially if you believe that the working relationship you require with the coach may not meet the HMRC self-employment guidelines.

The most popular types of employment contract being used in the sports industry are:

ZERO HOUR CONTRACT
This contract means that the employer does not have to guarantee any hours of work for the employee but the employee has to be available to work when required (effectively making them 'on-call'). This may sound very unfair to the employee but will only work in practice if the client is able to provide a level of work that will satisfy the employee's circumstances.

You should note that it is NOT a contract of employment if the 'employee' has the right to turn down the work offered - this is not employment but is in fact casual work (see CASUAL WORKER).

FIXED TERM CONTRACT
This is where the employee works for a specified period of time, until the finish (or cancellation) of a certain event, or until the completion of a specified task. It enables the employer to staff their programme according to demand and to bring in specialist personnel as required (e.g. for performance sessions/courses). You should take care to ensure that fixed term contracts are ended in an appropriate way, usually with an exit interview.

Employment rights such as holiday pay increase with the hours worked by the employee for both of these types of employment.

Further advice and sample contracts are available for GBSport members on the Member Zone area of the GBSport web site at www.gbsport.org.uk.

A coach who declares themselves to be self-employed will still have to satisfy HM Revenue & Customs (HMRC) that they are operating within the self-employment guidelines when the taxman inspects their actual working arrangements with their clients.

The issue of status i.e. whether they are an employee of a client, or simply self employed and providing services to a client, will depend very much on the facts of their actual working conditions.

DEFINITION
There is no definition of what makes someone self-employed as opposed to employed. Instead, HMRC provide a set of guidelines and the onus is on the client to ensure they meet the requirements in their relationship with their coach.

A coach would be generally regarded as self-employed if they are:

- In control of the work
- Taking financial risk

Defining what control of the work and financial risk means for a sports coach is open to interpretation which is why it is vital to ensure that these issues are clarified.

The situation is further complicated by the fact that some of the conditions are more important than others so it is vital to get expert advice to ensure that the risk of a coach being declared as employed is minimised.

It should be noted that the lack of a written contract between a coach and client could be taken as an indicator by the taxman that there could be an issue with employment status and is far more likely to warrant further investigation than if there is a clearly worded written contract.

SUBSTITUTION
Substitution is the most important condition to consider when assessing whether a coach meets the self-employment rules and is considered by the taxman to be the most important indicator of control. HMRC considers a coach to be self-employed if they have an OBLIGATION AND RIGHT to send a substitute to do the work required if they are unable or unwilling to do so themselves. Obligation and right means that the coach is required to provide a substitute and is also entitled to provide a substitute.

Ideally there should be no conditions attached to the substitution (other than a requirement that the substitute is suitably qualified and police checked) which means that the client should ideally not state that the substitute must be a person approved by them. In practice, very few clients will be willing to agree to such a substitution clause. A common compromise is for the contract to state that the coach is able to and must provide a substitute but that the substitute must be approved by the client in advance.

In addition to the obligation and right to substitute, the taxman will also want to see evidence that substitution does indeed take place. When it does happen, it is essential that the substitute coach is paid by the contracted coach for the substituted session(s) and that the client pays the contracted coach as usual - this then provides the evidence required by the taxman that the contracted coach has been paid for work they did not personally deliver so the relationship cannot be one of employment (which is defined as personal service).

CONTROL OF THE WORK
Control of the work is a term that can be difficult to interpret for the self-employed coach. Where a coach is required by the client to run coaching sessions, HMRC would expect the coach to have a say in when and where the sessions will be delivered and how the sessions will be staffed.

FINANCIAL RISK
The taxman expects a self-employed coach to demonstrate that they take financial risk. This can be best demonstrated in sports coaching where the coach:

a) Pays a facility fee for the facilities used for the coaching;
b) Provides their own equipment (tools of the trade) to deliver the sessions;
c) Is paid directly by the pupils (rather than being paid a set hourly rate by the client);
d) Is financially responsible for the quality of the coaching i.e. has to give refunds to dissatisfied customers.

The coach will need to meet one or more of these conditions to realistically demonstrate to the taxman that they take significant financial risk in their relationship with the respective client.

OTHER FACTORS
The coach will obviously need to ensure that the usual benefits related to employment - holiday pay, sick pay - are not present in any contract/arrangement.

It is also vital that any self-employment contract does not limit the rights of the coach to work for other clients. If the client does restrict the coach from working for other clients (or required the coach to seek approval for said work), this would be considered a strong indicator of employment, since the client would be demonstrating control over the way the coach operates.

EMPLOYMENT STATUS INDICATOR
You may find that the situation you have between client/coach meets some of the guidelines and not others. HMRC have a very useful online indicator which will assess the circumstances of your particular situation and indicate whether your self-employment relationship is one of employment or self-employment - it can be accessed at the following web address:
http://www.hmrc.gov.uk/calcs/esi.htm

Please note that you should be very careful to ensure that you fully understand the implications of each question asked - the majority of coaches we know who have used the tool have misinterpreted the meaning of the questions, resulting in an incorrect result that can't be relied on.
The training course will have outlined many of the typical scenarios that coaches/administrators may encounter and will have provided further clarification on the respective importance of the various guidelines.

There are a number of different types of insurance cover that a sports coach/client needs to consider for his/her business needs.

PUBLIC LIABILITY COVER
Public liability insurance covers you for potential liability to third parties that experience personal injury, in the event that you or your business is alleged or found to be negligent.

If you don't have public liability cover and a claim is made against you, you may not be able to afford the legal costs associated with defending a claim or paying damages. Public liability insurance will cover the costs and expenses associated with any claim and will also cover any damages awarded to the injured party. We recommend that you obtain cover of £10 million, the level now expected by many of the local authorities in Britain.

EMPLOYERS' LIABILITY COVER
A coach/client is required by law to have Employers' Liability insurance to cover them for potential liability to assistants/staff members/volunteers that experience personal injury because of negligence on the part of the coach/client. Public Liability cover does NOT cover for injury to these personnel because they are not deemed to be members of the public by the insurers.

It should be noted that there are significant penalties for not having this cover in place and for not displaying a certificate of insurance at places where the programme takes place.

PURCHASING COVER
Coaches and administrators should check with their respective governing body to find out what cover is provided as an affiliated/licensed coach/club.

Companies such as Direct Line sell Office Policies for small businesses that will include Public Liability and Employers' Liability cover, as well as cover for computer equipment/software and office furniture used for your business.

REASONABLE CARE
Insurers will require policyholders to take 'reasonable care' when running their coaching sessions to ensure that the policy will pay out when expected to do so. The coach/administrator should therefore carry out the following as an absolute minimum:

- Carry out a written risk assessment before a coaching session (following Health and Safety guidelines)

- Ensure that the coach taking the session is suitably qualified and capable of safely delivering the required coaching

- Ensure the coach/customer ratio in the session meets governing body guidelines

Pay As You Earn is the government scheme through which an employer deducts tax and national insurance from an employee's wages and then sends this on to Revenue & Customs, together with any employer national insurance contributions due.

An employer is legally obliged to operate the PAYE scheme for any employee whose earnings reach the National Insurance Lower Earnings Limit (LEL) which for the tax year 2010-11 is £97 a week, £421 a month or £5,044 a year.

It is a common misconception among clubs and coaches that the administration required to operate PAYE is onerous - it is in fact very simple and easy to administer. Revenue & Customs provide comprehensive online and telephone help and support for calculating the tax and national insurance due, together with all necessary documentation.

Registering for PAYE can be done online at www.hmrc.gov.uk.

The carrying out of risk assessments is not a standard requirement of the insurance cover provided by most insurers. However, in this day and age, it is not unreasonable to expect coaches to carry out a risk assessment when delivering sessions in order to demonstrate that they have taken 'reasonable care'.

This would involve them checking that the facilities provided are suitable and documenting the fact that they have done so, the principal being that if it isn't properly recorded then it didn't happen. The Health and Safety Executive produce a useful form that can be used for risk assessment.

You can download the assessment form and access a wide range of invaluable advice from www.hse.gov.uk/pubns/indg163.pdf

Clients and coaches need to be aware of the complex rules surrounding Value Added Tax (VAT) in respect of sports tuition.

Organisations/businesses must register for VAT if the total of their taxable sales is more than the VAT threshold (currently £70,000 as at 1 April 2010) for any 12 month period.
Taxable sales are any goods and services that are subject to VAT at any rate, including zero rate.

LESSONS
Coaching lessons are considered to be VAT exempt (and therefore not to be considered when calculating the total taxable sales) if delivered personally by a sole trader (or partners in a partnership), and where the sport being taught is considered by HMRC to be a sport that is 'normally taught in schools' (see VAT folder on the CDRom for a list of the agreed sports).

This means that coaches who work as a limited company or whose lessons are delivered by other coaches as part of their business (even of those coaches are sole traders) must consider those lessons to be standard rated and therefore must be included in their calculation of their VAT threshold total.

EQUIPMENT SALES
Sales of equipment are standard rated for VAT and must therefore be included in the taxable sales turnover calculation for VAT purposes.

REGISTRATION
If the client/coach has to register for VAT, he/she must then add the current VAT rate (currently 17.5% as at 1 April 2010) to the value of all lessons that should be standard rated and pay this money to the government every three months (effectively working as an unpaid tax collector).

Having to increase the cost of lessons/stringing/equipment sales etc. by such a substantial amount makes growing a coaching business past the VAT threshold figure very difficult and creates something of a 'VAT trap' for such businesses.

Care should be taken if considering splitting your business into two to avoid VAT registration - it is possible that HMRC may view such action as a tax avoidance method.

Currently, the best method for managing the transition to a VAT registered business is to register for the HMRC Flat Rate scheme, where the organisation/business pays a reduced flat rate on all taxable sales (typically around 6 to 8% for sporting businesses) - check with your accountant for further details.

EDUCATION EXEMPTION
Many organisations get confused over what types of coaching service are exempt from VAT when the coaching is deemed to be for 'educational purposes', e.g. at a school or college.

If your organisation provides school, higher or further education for a charge, and your organisation is an 'eligible body', then the lessons provided will be exempt from VAT. An organisation is an 'eligible body' if it is one of the following:

- School, university, sixth form college, tertiary college or further education college or other centrally funded higher or further education institution (defined as such under the Education Acts) or the governing body of one of these institutions;
- Local authority
- Government department or executive agency
- Non-profit making body that carries out duties of an essentially public nature similar to those carried out by a local authority or government department
- Health authority
- Non-profit making organisation that meets certain conditions (see the HMRC web site for details)
- Commercial provider of tuition in English as a foreign language (EFL) - in which case special rules apply
- Sole trader/partnership

One other situation where lessons may be exempt is where the lessons provided are funded directly by local or central government grant. In general, direct funding by local or central government is outside the scope of VAT and is therefore VAT exempt.

It is important to obtain expert help when considering whether your business/organisation is required to register for VAT because of the complex nature of the VAT rules with regard to sports coaching.