New Rules for Payments to Individuals
From time to time, schools may require specialist services that are often provided by an individual rather than a company. These may include lecturers, teachers, instructors, translators, consultants, etc. It is the school’s responsibility to ensure that proper arrangements are made for paying individuals.
Tax and National Insurance regulations require a set process to be followed when arranging payments for individuals. To avoid unnecessary delay in payments, the individual’s Employment Status should be confirmed before the work is carried out using a Pre-Employment Questionnaire. It is the Employment Status of an individual that determines how they are paid. The method of payment will depend on whether the individual is:
Note:
The individual’s tax status could change depending on the nature of the work they are doing. A new Employment Status enquiry must be done if they are subsequently engaged to carry out a different task. The employment status depends very much on the nature of the employment, not just the individual’s circumstances.
Risk of Financial Penalties
If the correct deductions are not made, the Council may become liable for back payment of taxes, NI contributions and penalties imposed by HM Revenue and Customs.
Employment Status Indicator
HM Revenue and Customs have developed a web-based Employment Status Indicator tool to help determine the status of the individual. To help schools carry out the employment status enquiry, HM Revenue and Customs have provided a list of questions that will help gather all the information needed to enter into the Employment Status Inquiry tool (ESI). You should ask the individual to complete the questionnaire before using the ESI tool and before they are engaged to carry out the work.
Employed Individuals – process for arranging payments
Where individuals are not registered as self-employed and therefore do not make their own tax arrangements, they must be paid through the Council’s payroll so that appropriate tax and National Insurance deductions can be made at source.
Make a copy of the results page from the Individuals Employment Status Indicator enquiry.
Ask the individual to complete a “Claim for Fees and Expenses” (FD700) form.
In the space below “Department/Establishment” write the pay-point of the school.
Send the authorized FD700 form and a copy of the Employment Status Indicator Enquiry, to Liberata payroll, FAO Alan Fox or Joan Armitage.
Liberata will set up the individual on the payroll using details from the FD700 form.
Liberata Payrolls file a copy of the FD700 form for the income tax return.
The individual will be paid on the next payroll run (end of the month) via BACS.
Self-employed Individuals - where individuals are registered as self-employed, but not liable for Class 1 National Insurance Contributions (NICs):
- Make a copy of the results page from the Individuals Employment Status Indicator enquiry.
(Inland Revenue have advised that individuals should still complete this even if they already have a tax status, as they may be self-employed but working for someone else.) - The school can accept an invoice from the individual and pay by cheque as normal. However, they should still:-
- Ask the individual to complete a ‘Claims for Fees and Expenses’ (FD700) form.
- Send the copy of the results page from the individual’s Employment Status Indicator enquiry and just the yellow copy of the authorised FD700 form marked as already paid, to Liberata Payrolls, F.A.O. Alan Fox or Joan Armitage.
- Liberata Payrolls file a copy of the FD700 form for the income tax return.
Self-employed and a teacher/lecturer – process for arranging payments
Depending on what and where the individual is teaching, they may be self-employed BUT liable for Class 1 National Insurance Contributions. (NICs) If so, they must be paid through the payroll as below, if not they can be paid as self-employed as above. If you need any advice or assistance on this issue, please contact Paul Henderson, tel 0114 2735294.
For the first payment only:
Make a copy of the results page from the Individual’s Employment Status Indicator enquiry.
Ask the individual to complete a “Claim for Fees and Expenses” (FD700).Complete a “National Insurance contributions – set up and first payment (pay via weekly roll)” Form.
Send the authorised FD700 form, a copy of the Employment Status Indicator Enquiry and the relevant NI Form to Liberata Payrolls, FAO Alan Fox or Joan Armitage.
Liberata will set up the individual on the payroll using details from the “National Insurance contributions - set up and first payment (pay via weekly roll)” Form.
Liberata Payrolls file a copy of the FD700 form.
The individual is paid on the next payroll run (end of the month) via BACS.
For second and subsequent payments:
Process as above except complete an “Instruction to Liberata to pay fees to an individual with deduction of Class 1 National Insurance contributions” Form instead of the – “National Insurance Contributions - set up and first payment (pay via weekly roll).”
