As per HMRC regulations it is the actual work that determines the employment status, taking into account any pre-agreed arrangements. The University may need to be able to satisfy HMRC that the work can be paid gross as opposed to being taxable through payroll.
Not only are heavy fines imposed on employers for failure to comply but any taxes not deducted from payments for work which HMRC deem as employment, are due from the University.
The fact that a person is registered with HMRC as self-employed does not necessarily mean that HMRC would regard the work to be provided to the University under this contract is of a self-employed nature.
Before paying an invoice to an individual for a fee, HMRC expect that the University checks the employment status of the person being paid the fee. HMRC periodically request details of payments made to individuals, and may also review such payments as part of a wider PAYE review. In the light of this, the University needs to operate strict procedures for suppliers who are self-employed individuals and to retain records within the College/Service in the event of an audit by HMRC. Hard copies of invoices should therefore be retained for at least the last closed tax year i.e. 2012/13 kept until January 2014.