When the University pays a sum of money for service(s), consideration must be given to whether the Off-Payroll Worker rules allow those payments to be made gross or whether there is deemed employment for tax purposes. In the case of the latter, PAYE and NICs will need to be deducted (note that if NICs are due then there is an additional cost to the University as Employers’ Contributions at 13.8% and the Apprenticeship Levy at 0.5% will also be payable).
Deemed employment status is not a matter of choice, it cannot simply be decided that someone is not an employee for tax purposes because the individual wishes to be paid gross or that the University wishes to pay them that way. It is not conclusive to just call or consider someone self-employed or to interpose a limited company, partnership or agency between the University and the individual; it is the reality of the relationship between the University and the individual that matters. There is no statutory definition of ‘deemed employment’ or ‘self-employment’ and each case has to be looked at as a whole with all the factors considered. However, it is the University’s responsibility (not the individual’s) to determine the correct status properly. If the correct status is not applied the University will be liable for any unpaid taxes and NICs, which could also result in a liability to pay penalties and interest.
If not deemed employment
It is worth bearing in mind that just because a person is not a deemed employee for the purposes of one contract, it doesn’t necessarily mean that all their contracts will follow suit. The individual can still be considered ‘deemed employed’ for the purposes of another contract with the University at the same time.
It is also possible that an individual who is properly considered not to be a deemed employee when they begin providing services to the University may over time become increasingly integrated into the University to the extent that their status may change to that of a deemed employee. It is therefore important that:
- contractors and service providers are not treated as members of staff (e.g. not issued with a University Card, not given the title of a University Office, not managed through normal disciplinary or grievance procedures in the Staff Handbook); and
if their working with the University lasts for a prolonged period (e.g. more than one year) that it is reassessed to see if they should be paid through the payroll in future.
Contracts for services
Where there is a relationship between a service provider and the University for providing service(s) there should always be a valid written contract in place. Where the engaging Department does not intend to make payment through the payroll, a contract for services is required. A model contract is available from Procurement Services but, for very short low value engagements (up to £3,000 in total) a letter detailing the work to be done, timescale and amount to be paid will be sufficient.
 Apprenticeship Levy – “The Apprenticeship Levy will be a levy on UK employers to fund new apprenticeships. In England, control of apprenticeship funding will be put in the hands of employers through the Digital Apprenticeship Service. The levy will be charged at a rate of 0.5% of an employer’s paybill. Each employer will receive an allowance of £15,000 to offset against their levy payment. It will be introduced in April 2017.” (https://www.gov.uk/government/publications/apprenticeship-levy/apprentic...)