Employment status has always been, and will continue to be, a contentious issue for HMRC. And with the escalation in the number of schools converting to Academies or simply transferring away from the Local Authority that attention may well soon be turning to the Education sector. 

Employment status has always been, and will continue to be, a contentious issue for HMRC. And with the escalation in the number of schools converting to Academies or simply transferring away from the Local Authority that attention may well soon be turning to the Education sector. 

HMRC have already launched initiatives looking into private tutoring and our experience shows that they will soon start tackling schools themselves on a wider basis. Indeed in our work with schools the number of “status” enquiries is increasing rapidly. And it is always an area flagged for further attention when we undertake any form of PAYE Healthcheck.

Whether an individual is employed or self-employed is not a matter of choice and employers  must ensure that they are engaging workers under the correct terms and conditions.

An employee will have a contract of services, whereas somebody self-employed will have a contract for services. It is vital to classify your workers correctly as, along with other factors, this will determine the tax and national insurance treatment which they are subject to.

For example, employees can attract an employer’s national insurance liability, whereas a self-employed person will not. HMRC can carry out a status enquiry if there is any doubt surrounding the status of workers and demand reimbursement where they find an incorrect contract is in place.

With a contract of service the employer has a great deal of influence over the worker in terms of the hours they work, where they work and how they do it. The employer provides the equipment they use. The worker has to do the work themselves for which they are provided with a salary as detailed in a wage slip. In return the worker receives employment rights that they may challenge in an employment tribunal if unfairly treated depending on the situation and their length of service. The employer controls the employee.

A self-employed worker is usually provided with a contract for service. With this there is no obligation for the company to use their services. The self-employed worker should have the choice of where to work, which may be at their own premises or those of the company and should use their own equipment. In no way should they be integrated into the company. With the agreement of the company they should have the ability to choose the hours/days they work and may provide a substitute. To receive payment they should invoice the company and manage their own tax and national insurance contributions liaising with HMRC.

They take the risk of whether they get paid or not, chasing non-payment through the small claims court. Furthermore they should obtain appropriate insurance such as professional liability and/or public liability. They should be able to work for a number of companies without restriction.  Although there will always be a degree of control, a self-employed worker will have control over where when and how work is undertaken

This is not an exhaustive list however and the rules can differ across industries. If ever there is any doubt on the status of your worker, advice must be sought.

At Dataplan we offer a number of services for reviewing and handling HMRC enquiries into payroll, PAYE and taxes generally. See our main payroll outsourcing website for details of payroll protection