Nottingham City Guide to Engaging Self Employed Individuals.
HM Revenue & Customs places the onus for determining whether an individual is self employed or deemed to be an employee of the City Council.
Therefore, if you are engaging a worker in a self employed capacity, you need to be certain that they are actually self employed. It is not sufficient for the Individual to merely state that they are self employed, the person who is engaging the individual cannot simply choose that the individual will be self employed. It will all depend on the facts, terms and conditions of the engagement.
An individual may be registered as self employed with HMRC, but this does not necessarily mean that they will automatically be engaged in a self employed capacity with the City Council, it is the terms and conditions of each contract that will determine employment status.
If a person is deemed to be an employee, the individual will be subject to PAYE, and must be paid through payroll. This ensures the correct amount of tax and national insurance is deducted and paid to HMRC.
If you are engaging a worker in a self employed capacity, you should follow the guidelines below.
- You must complete an employed/self employed checklist prior to any engagement. This checklist asks a number of questions and once complete will indicate the employment status of that individual.
The person carrying out the engagement should complete this form with the individual, taking into account the terms of the contract. You may also want to send the individual “guidance to determining employment status” which will explain the rules and is available on the intranet on the link below.
You need to retain this form and send a copy to the taxation advisor who will retain for HMRC inspection if required.
- The person you are engaging must then fill in an employed/self employed assessment form and return to you.
- If the individual is self employed the invoice can be paid through OneWorld, however if the individual is an employee they must be paid through payroll and tax and national insurance deducted as necessary.
The assessment states the information required to enable an individual to be set up in the payroll system and to be paid, therefore, a copy of this form should be sent to your payroll section.
Please also send a copy of the assessment to the taxation advisor.
- If you have completed a checklist and are still unsure of the employment status, you can use the employment status indicator tool on HMRC’s website. www.hmrc.gov.uk/calcs/esi.htm
This tool will guide you through some basic questions and give you a ruling on the employment status of the individual, along with some guidelines on how the ruling has been reached (you may choose to share this with the individual).
A guide to using this tool is available on the intranet (follow the link below), or a copy can be obtained from the tax team.
If an individual has worked for you before in a self employed capacity, it does not necessarily mean that they will be self employed in the future, therefore a checklist will need to be completed each time you engage the individual.
If you are engaging a company limited by guarantee, then a checklist is not required, the payments can be made on receipt of an invoice. You need to ensure that the company is registered, so you need to check that a company registration number is shown on the face of the invoice.
The checklist, assessment form and guidance can be found on the intranet on the following link http://intra.nottinghamcity.gov.uk/stagingintranet/cs_home/cs_our_structure/cs_finance_matters/cs-fm_guidance/cs-fm_taxation-3.htm