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A self-employed individual provides the University with his or her services, but remains independent. The contract between the individual and the employer is a 'contract for services’. They might also send different people to carry out the work in question. Self-employed workers are not entitled to statutory employment rights.
Individuals engaged on a contract for services:
- bid or provide quotes to secure work and are likely to have other clients in addition to the University.
- maintain control over how, when and by whom the service will be delivered. This means that, generally, there may be an ability to provide an alternative individual (“substitute”) to carry out the service if the individual is not available.
- are paid on receipt of an invoice for work completed.
- will carry the risk for the success or otherwise of their business. This means that if the University is not satisfied with the individual’s work, the University can refuse to pay an invoice or require the individual to put it right in their own time and at their own expenses.
- account for their own tax and National Insurance payments.
- do not receive holiday pay or sick pay or any other employment benefits.
- provide their own equipment/materials to complete a job.
- do not have employment rights, but they are protected for their health and safety on University premises and they are also covered by our equality standards.
- provide their own insurance cover relevant for the work being carried out.
Yes. If engaging someone on a self-employed basis then a formal contractual agreement should be entered into (see Contract for Services: Terms and Conditions), before commencement of the work required. As well as protecting the University’s position as a purchaser of the service(s), the contract is evidence that the arrangement is a contract for services.
Yes, you will need to establish if they are Sole Trader, Partnership, Personal Services Company (Ltd), or via an Intermediary.
If you will be engaging a casual worker overseas they will still need to meet the criteria for being treated as ‘self-employed’. Please follow the IR35 Process by completing and submitting a TR2. In some cases an HMRC Questionnaire will also be required.
If the engagement is more than 12 weeks please contact the Global Mobility Team.
As per HMRC regulations we need to check that the work is self-employed. If it is not, then we need to account for the tax and National Insurance. The University will need to be able to satisfy HMRC that the work can be paid gross as opposed to being taxable through payroll.
Heavy fines are imposed on employers who do not comply and any taxes not deducted for work which HMRC deem as employment, will be paid by the University.
HMRC periodically request details of payments made to individuals, so the University needs to operate strict procedures for suppliers who are self-employed individuals and retain records within T1 for future audits. You should also retain your own copies for reference.
Yes, we will at some point have an audit by HMRC to ensure the University are following correct procedures. When HMRC audit this area, they will note the Employment Status questionnaire outcome and then look for evidence to satisfy themselves that they accurately reflect the day to day working practices of that particular engagement.
If HMRC decide we have wrongly given self-employment status, HMRC can recover any unpaid tax, NICs, plus interest from the University and may apply additional penalties.
The HMRC outcome is “the individual should be treated as a worker/employed” or “the intermediaries’ legislation applies” - payments will be subject to PAYE tax and NIC deductions by the University – what does this mean?
Engage through HR or Casual Claims process. See business rules
The HMRC outcome is “the individual should be treated as self-employed” or “the intermediaries’ legislation does not apply”
The HMRC outcome is “the individual should be treated as self-employed” or “the intermediaries’ legislation does not apply” - payments are not subject to PAYE tax and NIC deductions by the University
Follow the procurement process and payment will be via invoice.
Departments and managers
HMRC will impose penalties and fines where correct procedure has not been followed and due care and consideration has not been followed. All costs relating to penalties and fines will be directly charged to the department responsible for the engagement.
Before contracting out teaching to individuals who are not employed by the University, Colleges should ensure there is evidence of the competence of the provider to teach to the required standard. This can be assessed through one or more of the following:
- interview (interviews should be undertaken by at least two members of staff who are responsible for the module/programme)
- references from other HEIs
- student feedback and/or peer observation (where the provider has been used previously by the University)
- CV showing qualifications and teaching assignments undertaken elsewhere.
Occasional teaching and other ad hoc teaching support roles should be routed through the Claims Payroll and only be engaged on a self-employed basis in exceptional circumstances. These self-employed engagements should be discussed in the first instance with the HR Advisor and approved by the IR35 Team prior to work commencing.
Any modules taught by self-employed providers should be subject to the same student evaluation procedures and peer observation as other programmes/modules and the outcomes of such reviews, together with any relevant comments made by external examiners and/or examination boards, should be taken into account before any further work is offered to them.
Members of staff should not be directly involved in decision-making in cases where work is offered to their former colleagues, close friends or family of staff. Where this is not possible, because they have lead responsibility for the module/programme, they should ensure that senior staff are involved in the decision-making progress.
While it is recognised that the specialist nature of such teaching assignments will (in most cases) prevent Colleges from seeking quotations from more than one supplier, Colleges should consider other methods of assessing that the arrangement is 'best value'. For example:
- Is the rate for the work commensurate with the rate that would be paid to an occasional teacher or a contracted member of staff?
- What evidence is there that a market premium is justified?
- What negotiation has taken place with the provider about price before the contract is agreed?
It is very unlikely that HMRC will accept that an individual who is employed by the University can also act as a self-employed consultant supplying services to the University. This is the case even where the individual is operating through a limited company or other business structure. In most cases, where such additional work is approved (see procedure for payment to academic staff for additional teaching) any additional payment will be paid through payroll and be subject to statutory deduction.
If you do want to contract an employee at the University on a self-employed basis then approval must be given by the HR Director as well as the Head of the College/Service within which they are employed, prior to any additional work taking place. This is to ensure that there are no conflicts of interest or health and safety implications.
The supplier only provides goods, do I still need to assess Employemtn status using the HMRC Employment Status Questionnaire?
Yes if the supplier is providing services and some materials then they could be affected by the legislation and an HMRC assessment is required.
No. If the supplier is only or predominantly providing goods then an HMRC assessment is not required.
Yes, sole traders need to be assessed.
If the supplier is already registered with the University, do I still need to assess Employment status?
Yes. If you have never engaged the services of a particular supplier then you will be required to undertake an employment status check before you engage with them. How you engage with the supplier may be different from how they interact with another department.
Yes. The outcome of the Employment Status assessment should be notified to the supplier. The HMRC questionnaire must be completed by the individual who understands the day to day working relationship. In some instances this can provide a useful mechanism to resolve any points of clarity particularly where the outcome is deemed to be ‘Undetermined’. The prospective Supplier does have the right to challenge our assessment and f they request to have a copy of the questionnaire this must be provided within 31 days (or there is a fine).
Save it and send it to Temporary Resourcing Unit along with the TR2 Form
Suppliers should be aware of this legislation and whether it applies to them via their Accountant. The supplier can also check their status on the HMRC website.
Any suppliers that are deemed to be a PSC, and Off-payroll working rules (IR35) Do Not Apply to the engagement, i.e. we may treat as a 'supplier of services'. In this instance the supplier will need to receive a Purchase Order from the University and submit their invoices which will be paid in full, without deducting Income Tax and National Insurance contributions.
Where suppliers are deemed to be a PSC and the Off-payroll working rules (IR35) Apply to the engagement i.e. treat as ‘employed’ for tax purposes. The University will need to operate PAYE on their earnings. In this instance the worker should register for E-Claims via the Casual Claims Process.
Three steps are to be undertaken;
- View Finance webpages
- Indicate if the supplier is a personal service company from the HMRC questionnaire in the notes field on the Supplier Set Up form
- The supplier/ worker will be set up on T1 and you will be notified when this is done
What if the individual refuses to complete the work unless they are paid as self-employed with no deduction of tax or NI?
The University is legally obligated to deduct tax & national insurance (NI) in line with policies set by HMRC. The individual has the right to accept or decline the offer of work under the terms specified.
Yes the process is the same for UK and Overseas workers they will need to be set up as suppliers to the University, receive a Purchase Order and submit an invoice for payment on completion of the work or at the agreed billing stages.