April 2017 v2. University of Bristol Guidance for Employment Status Tests - Tax

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1 University of Bristol Guidance for Employment Status Tests - Tax When the University engages an individual to supply a personal service, which may be supplied by the individual directly or via an intermediary company, there is an obligation upon the University to check and confirm whether deductions of tax and national insurance contributions (NIC) need to be accounted for when making payment to the individual or intermediary company concerned. This is called a status test and main status categories recognised by HMRC and the position in regard to tax and NIC deductions, are summarised per Appendix 1. In this regard it important to emphasise that this note is concerned with status from a tax perspective and is not conclusive in regard to related issues covered by employment law. In many instances the contractual nature of the engagement will ensure that it is treated as employment (employee or worker status) and the appropriate payments and deductions of tax and NIC will be accounted for by our payroll and pensions department. Examples are open ended employment contracts, fixed term employment contracts and hourly paid teacher s contracts. In other cases it may be appropriate for the work to be undertaken to be treated as a contract for services, accounted for on a self-employed basis or via an intermediary (such as a limited company). In such cases the University requires either the individual supplying the service or the direct engager within the University to undertake a status test to demonstrate that this treatment is appropriate. It will be helpful for the status position to be confirmed as early as possible in the engagement process such that both parties are aware of the result and such that any written contract that is issued adequately reflects the result. In this regard HMRC have produced an online tool to establish the correct treatment. This approach is now being adopted by the University and the tool can be found at the following web address:- The tool itself gives guidance of what information is required for completion. Appendix 2 of this document gives an overview of certain factors that will influence the result given by this tool. Integrity and honesty must be applied when answering the online tool questions. Engagement with individuals In cases where completion of the status test is appropriate, please complete the status Information capture at and the HMRC online tool. Please both the data capture and the result from the tool to the following address: - finance-vat@bristol.ac.uk The tax team will then review and confirm the result of the status test. At that point a reference will be issued which will allow payment to be made without deduction of tax and NIC. Where the status test indicates that the engagement is one of employment, payment will be required with deduction of tax and NIC. If no status test is completed this will be the default position. Full details in regard to payment procedures are noted in Appendix 3.

2 Engagement with Intermediary direct with University In all cases where personal services are supplied by an intermediary directly engaging with the University completion of status Information capture found at: and the HMRC online tool will be mandatory. Please both the data capture and the result from the tool to the following address: - finance-vat@bristol.ac.uk The tax team will then review and confirm the result of the status test. Where the status test indicates self- employment a reference will be issued which will enable payments to be made via the accounts payable system without deduction of tax and NIC. Where the status test indicates that the engagement is one of employment, a reference will be issued which will enable payment to be made via payroll with deduction of tax and NIC. If the status test is not completed no reference will be issued and hence the invoice submitted for payment will not be able to be logged to the University s systems and as such payment may be delayed. Full details in regard to payment procedures are noted in Appendix 3. Engagement with Intermediary via agency In all cases where personal services are supplied by an intermediary via an agency completion of the status Information capture found at and the HMRC online tool will be mandatory. both the data capture and the result from the tool to the following address: - finance-vat@bristol.ac.uk The tax team will then review and confirm the result of the status test. Where the status test indicates self- employment the agency can be notified that the intermediary can be paid without deduction of tax and NI. Where the status test indicates that the engagement is one of employment, the agency will be notified that the intermediary needs to paid with deduction of tax and NI. Agencies will be paid directly by the University utilising the accounts payable system.

3 Other Points Please note that there are more specific rules applying to Teachers, Lecturers, Tutors and Examiners that are detailed in Appendix 4. Please also refer to frequently asked questions per appendix 5. If any further clarification is required in respect of this guidance please contact the tax team via the address or contact by telephone

4 University of Bristol - Guidance for Employment Status Tests - Tax Appendix 1 Types of Employment Status and Related Tax and National Insurance Position (NB Detailed notes re payment methods are per Appendix 3) Worker A person is generally classified as a worker if they have a contract or other arrangement to do work or services generally for a reward in money or other benefits in kind, only have a limited right to send someone else to do the work (subcontract), they have to turn up for work even if they do not want to, the employer has to have work for them as long as the arrangement lasts, and they are not doing the work as part of their own limited company where the employer is a customer or client. Workers are entitled to certain employment rights usually including getting the minimum wage, protection against unlawful deductions from wages, statutory minimum level of paid holiday, statutory minimum length of rest breaks, entitled to work less than 48 hours per week on average, protection against unlawful discrimination and may be entitled to statutory sick pay, statutory maternity pay, statutory paternity pay, statutory adoption pay and shared parental pay. Workers are usually not entitled to minimum notice periods if employment ending, protection against unfair dismissal, right to flexible working, time off for emergencies and statutory redundancy pay. The term worker usually covers casual or irregular work arrangements where occasional work is offered but does not have to be accepted, is undertaken under supervision of a manager, they cannot send someone else to do the work and the engager supplies the materials, tools and equipment they need to do the work. Workers are paid via payroll and pensions team with deductions of PAYE and employees and employers National Insurance as appropriate. Employee An employee is someone who works under an employment contract. All employees are workers as defined above but have extra employment rights and responsibilities that do not apply to workers who are not employees. The extra rights include statutory sick pay; statutory maternity, paternity, adoption, and shared parental leave and pay; minimum notice periods if employment is ending; protection against unfair dismissal: right to receive flexible working; time off for emergencies; and statutory redundancy pay. Employees are paid via payroll and pensions team with deductions of PAYE and employees and employers National Insurance as appropriate. Self Employed Individuals A person is self-employed if they run their business for themselves and take responsibility for its success or failure. Such self-employed individuals do not have employment rights and the responsibilities of employees.

5 Self-employed individuals are usually paid via Accounts Payable (if VAT registered) or via a bespoke payment method by Payroll and Pensions, if work involves supplying personal services to the University. PAYE and National Insurance are not deducted from such payments. However, as the University is liable for the deductions, interest and penalties on such payments if a person is incorrectly classified as self-employed, the status position needs to be confirmed by the University before the engagement commences. It can be difficult to distinguish between a worker and a genuine self-employed individual and hence the requirement in many cases for a status test to determine correct treatment. Office Holders This covers situations whereby there is no contract or service agreement relating to the appointment of the individual, duties are minimal and only required under relevant statute, constitution or trust deed, there is no salary or regular form of payment and the only payment made is a voluntary payment regardless of the work they do. Such payments are made via payroll and pensions team with deductions of PAYE and employees and employers National Insurance as appropriate. Personal Services provided by an individual but offered via an intermediary This covers individuals who work at the University though their own company or other intermediary, but would be treated as a worker, employee or office holder, were it not for the existence of the intermediary they work through. Such individuals will not qualify for employment rights noted above for employees and workers (as they are employed by the intermediaries they work for), but the University is required to check the status of such arrangements. If the status test indicates that the individual would have been treated as a worker or employee for tax purposes if the intermediary did not exist, then deduction of PAYE and employees and employers National Insurance is required when payment is made to the intermediary. In such cases payment and accounting for the appropriate deductions will be dealt with via payroll and pensions team. Deductions do not need to be made in respect of the part of the payment relating to VAT and direct cost of materials used in performance of the services being considered. If the status test indicates that the arrangement would have been acceptable as self-employment, payment can be made via accounts payable with no deductions.

6 University of Bristol - Guidance for Employment Status Tests - Tax Appendix 2 Status Test - Factors that influence the Result For correct tax and NIC treatment an individual's employment status is not a matter of choice and is determined by the terms and conditions of each engagement between the individual and the University. The HMRC status tool uses a complex grid based upon a large number of indicators to give rise to a decision in each case as to whether employment or self-employment is appropriate. Some common key indicators that may impact on the result are as follows:- Fee Arrangements The fee arrangement for each assignment is important in the sense that if an individual is being paid an hourly, daily or weekly rate for the work undertaken it indicates that financial risk lies with the University which is a strong indicator of employment. Alternatively, if an individual quotes a fixed price for the piece of work or assignment, it indicates that the individual will take on the risk of bearing additional costs if the job overruns. The risk of making a profit or loss on the assignment is an indicator of self-employment. Office Space, phone, If an individual has regular use of a desk or office space and/or a dedicated University of Bristol phone line and/or Bristol.ac.uk address this gives the individual a visibility/identify that appears similar to other employees, hence an indicator of employment. Also if the University requires an individual to undertake an assignment at a particular location or desk this may also indicates employment. Hours of work and the program of work who determines these? Where the University is exercising control over when the work is done (for example regular office hours), what work is done and how this work is done then this is an indicator of employment. Where the individual engaged is using professional judgement to determine what work is required and is free to determine when and where the work is undertaken then this is an indicator of self-employment. The general point here is that the more control that exists by a University department over an individual in respect of an engagement the more likely it is that the status tool will indicate employment.

7 Substitution An employee is obliged to provide their own work and skills. However if there is provision within the terms of engagement for the individual to reserve the right to provide a substitute worker to undertake the engagement if necessary (and pay the substitute from their own pocket), this is an indicator of self-employment. However, it would also need to be established that the University is willing to accept such a substitute if such a clause is to be inserted into a contract. Provision of own equipment and consumables A self-employed contractor generally provides whatever equipment is needed to do the job. For example, where an IT consultant is engaged to undertake a specific piece of work and must work exclusively at home, using the worker's own computer equipment, that will be a strong pointer to self-employment. But where a worker is provided with the necessary equipment, materials and so on by the University that points to employment Provision of services to other customers? If the individual is providing services to a number of customers this gives evidence that the intention of the individual is to work in a self- employed capacity. Hence a useful balance when considering the outcome of other indicators.

8 University of Bristol - Guidance for Employment Status Tests - Tax Appendix 3 Detailed Procedures for Payment of Invoices Engagement with Individual directly If Status process indicates self-employment For engagements that involve supply of personal services, currently the accounts payable system is only used for individuals that are VAT registered. In such cases the status reference issued by the tax team should be affixed to both orders raised and invoices received from the individual concerned. This will show that the status position has been reviewed. The reference issued will be in the form SEAC43JA0417. The first two digits SE indicate that the individual has been accepted as self-employed for this engagement, the next four AC43 are a reference unique to the individual supplier and per control list maintained by the tax team, the next two JA indicate the member of the tax team issuing the reference, and the final four 0417 refers to the date the engagement will be completed, and again will tie in to a control list maintained by the tax team. For non-vat registered individuals, payment will be made by process dealt with by the payroll team. In this respect a claim form needs to be completed which is available from the following web page. In this respect click on fee claims by non-staff members and then open section on Claiming fees by self-employed individuals and intermediaries. The relevant form when completed will need to include the status reference issued by the tax team. If Status process indicates employment Individuals will be paid with deduction of tax and NI and to obtain payment the individual will need to complete claim form which is available from the following web page. In this respect click on fee claims by non-staff members and then open section on casual contracts and ad hoc claims. Before first claim you will need to complete the non-staff fee set up form and to get claims processed the non-staff fee claim form will need to be completed. It is planned that this process will be updated during Engagement with Intermediaries direct with University Until April 2017 all engagements that involved a supply of personal services via an intermediary were paid via the accounts payable route. This procedure will continue for intermediaries where the status tool test indicates that the engagement can be paid without deduction of tax and national insurance. However, the reference

9 issued by the tax team to confirm the status test result will be required to be entered on invoices presented for payment such that this treatment is allowed. The reference issued will be in the form INTACPA The first three digits INT indicate that the supplier is an intermediary, the next three ACP indicate that accounts payable treatment is appropriate, the next three A01 is a reference unique to the intermediary company and per control list maintained by the tax team, the final four 0417 refers to the date the engagement will be completed, and again will tie in to a control list maintained by the tax team. No accounts should be opened on the accounts payable system, orders raised, or invoices paid in relation to intermediaries without this reference. If the status tool test indicates that deductions of tax and national insurance are appropriate then the tax team will issue a reference in the form INTTAXA This works in the same way as indicated above with the digits four to six TAX indicating that tax and national insurance will need to be deducted from payments arising in respect of the engagement. In such cases, when the reference is issued by the tax team, relevant bank details and information will be requested such that the intermediary can be set up for payment on the payroll. The individual will need to complete claim form which is available from the following web page. such that invoices raised containing this type of reference can be authorised and paid. In this respect click on fee claims by non-staff members and then open section on Claiming fees by self-employed individuals and intermediaries. The relevant form when completed will need to include the status reference issued by the tax team. Such invoices will not be accepted for payment via accounts payable. As well as noting costs relating to the personal service provided, the claim form asks for a split between costs relating to direct costs of materials used by the intermediary, potential expenses reimbursed that would be tax free if made to employee, and VAT. This is important since we only need to account for tax and national insurance on the costs relating to the personal services provided. Engagement with Intermediaries via Agencies The agency will be supplied with the result of the status tool test such that they can determine when paying the individual concerned if deductions of tax and national insurance are required. The University will pay the agency via the accounts payable system.

10 University of Bristol - Guidance for Employment Status Tests - Tax Appendix 4 Special Cases Teachers, Lecturers and Tutors Guidance re status - Employed or self employed A full-time lecturer will always be treated by the University as an employee. This follows from the terms and conditions of engagement which will usually include many of the following features, all of which point towards employment. o o o o o o payment of a salary paid holidays and sick leave availability of pension scheme membership no financial risk for the lecturer control (or right of control) by the University over matters such as conduct and discipline, hours of attendance, where and when lectures are given and, possibly, detailed control over what is taught (for example course to follow a set syllabus), etc. the bulk of the equipment needed will be supplied by the University. A part-time lecturer, whose engagement covers a complete academic term or longer, will usually have similar terms and conditions to a full-time lecturer. Hence University policy is to also treat all such part-time lecturers as employees. As the amount of work to be undertaken in any given prescribed period becomes more occasional, then a claim for self-employment may become more appropriate as not all the above features will necessarily be in place. However, it should be noted that University policy is to place all teachers, lecturers and tutors who deliver teaching for four consecutive weeks or more (or if there is a pattern over a longer period) on to an hourly paid teachers employment contract with automatic deductions of tax and NIC. Such contracts will also cover activities such as demonstrators, teaching support assistants, language tutors, assistant teachers, teachers, associate teacher, senior associate teacher, teaching unit organiser and teaching unit developer as defined by descriptors on our human resources website. It should be made clear that it is not possible for an individual to opt out of these arrangements and request a self-employed contract for services as an alternative. In contrast, a visiting lecturer who gives an occasional talk or short series of talks on a subject about which he has specialist knowledge and which is not part of the core curriculum, will normally have rather different terms of engagement. In such instances use of this procedure to determine status is appropriate. Examiners Undergraduate Examiners HM Revenue and Customs (HMRC) require the University to deduct tax at 'basic rate' from fees paid to undergraduate external examiners. NIC is not required to be deducted. In effect we are required to treat these individuals as employees for tax and self-employed for NIC purposes.

11 Any travel and subsistence payments expenses claimed on top of the fees paid will need to be accounted for in line with financial regulations that apply to employees in regard to tax only. Postgraduate Examiners It is not a requirement to deduct tax or NIC from fees for external examiners examining at postgraduate level. In effect we are allowed to treat these individuals as a self-employed individual. As a result it is acceptable for any travel and subsistence expenses claimed in addition to the fee not to be subjected to tax deduction. All external examiners are paid utilising a special fee claim form that can be downloaded from the finance services website.

12 University of Bristol - Guidance for Employment Status Tests - Tax Appendix 5 Frequently Asked Questions I operate utilising a limited company or limited liability partnership is this procedure relevant to me? Prior to April 2017, limited companies and limited liability partnerships (LLP s), which are separate legal entities to individuals, would not have needed to determine status position with University and would have been paid without deductions of tax and NI for relevant engagements. From April 2017, since the University is defined as a Public Body for the purposes of new legislation coming into force, the onus shifts to the University to determine correct status of relevant engagements and to deduct tax and NI if appropriate. As such, if you are supplying personal services to the University via one of these entities there is a requirement to undertake the status test. Payments will be made via the procedures outlined in Appendix 3 Which types of payment will always be made with deduction of tax and NIC? For the avoidance of doubt, and to ensure that the University meets its obligations as noted above, individuals engaged by the University under employment contracts, either full-time or part-time, and utilising hourly paid teaching contracts, will be paid by the pensions and payroll department and appropriate deductions will be made for tax/nic accordingly. Further self employed assignments are to be undertaken for the University can I keep the same reference when claiming payment and is an additional status test required? Each specific assignment that you undertake for the University needs to be assessed on its own merits if you are claiming self-employment status. Hence an additional status test and reference will be required for each specific assignment. If you are being engaged on a more ad-hoc arrangement for example your services will be required on an agreed basis over a period of time, you will only need to complete the status test once per each tax year to 5 th April. Please indicate the nature of this arrangement on the online data capture to be sent in to the tax team with result of the status test. I am working for the University via an employment agency do I need to undertake the status test? Only if you are working for the University via an intermediary, such as a limited company. In this case the status test needs to be completed on the basis of the assignment to be completed for the University. The agency will then be informed as to whether deductions of tax and NI are required when they pay required amounts on to the intermediary. My work for the University involves both teaching and other self-employed work what do I need to do? If the other work is in relation to, or linked to, the teaching you are undertaking then it all needs to be considered per the principles outlined in Appendix 4. If this involves work for a period of greater than four weeks then all should be dealt with via an appropriate hourly paid teaching contract.

13 If you undertake both teaching and other work, and the other work is independent of the teaching activity, you can request self-employed status for the additional work via this mechanism if you wish. The teaching will need to be dealt with via the principles outlined in Appendix 4. I am employed by the University on a full-time/part time basis but also undertake additional duties paid for by fee claim what do I do? Under normal circumstances the expectation is that the additional income would be subject to deductions of tax and NIC. If this work is independent and not related to your full time/part time post, self-employment status may be reasonable for this additional work if you can fulfil the status tests. As such you are welcome to complete the procedure to determine status and the position can then be considered by the tax team. I am paid an allowance to participate in research experiments for the University do I need to undertake the status test? No, you are not an employee of the University, nor a self-employed person for this type of activity. Further guidance is available if required regarding University policies and methods of payment for this type of activity. I am required to complete a fee claim form for payment but the arrangement is not employment or self-employment what do I do? The details need to be clearly outlined on the fee claim form to ensure that deductions of tax and NIC are not taken from your payment. An example is payment to Benjamin Meaker visiting professors. If you are uncertain of treatment please speak to the Payroll and Pensions Manager or The Group Tax Manager. I am supplying goods only to the University do I need to undertake the status test? No this procedure is only required for individuals who are supplying personal services to the University.