Contracts with individuals for services

Determine employment status

Before sending invoices to Finance from individuals for specialist services, first determine if the individual is an employee or self-employed. This will confirm if the invoice is to be paid via payroll or if gross payment is to be made to the individual (without deducting income tax).

Determining employment status form

If we settle an invoice when the payment should have been made via payroll, the University would be held liable by Inland Revenue for the tax due. The Revenue would assume that the actual payment had been made net of tax and would calculate the tax accordingly, charging the University 28% on top of the value of the invoice (22/78). There might also be interest and/or a penalty levied by the Revenue.

Inland Revenue guidelines

The following guidelines from the Revenue will help determine whether the contractual arrangement with the individual can be regarded as self-employment, in which case payment can be made gross, or whether it is employment, in which case payment should be made via payroll.

Step-by-step guidance is available on the Inland Revenue website.

Further information is provided in the Inland Revenue Employment Status Manual.

The Inland Revenue also have a useful tool to aid the decision making in such a situation.

By completing the online questionnaire a result will be given with an associated explanation. This can be printed out and used to justify treatment of the payment.

If you are unsure how to treat a payment, please contact Fay Allan who can assist in the decision making.