ESM4504 - Particular occupations: teachers, lecturers and tutors – Committee of Vice Chancellors and Principals (CVCP) guidance

Prior to 6 April 1996 some universities were not operating PAYE on some expense payments made to employed lecturers - following earlier incorrect HMRC guidance. The earlier guidance was withdrawn from 6 April 1996.

New guidance was issued to the universities in March 1996 by the Committee of Vice Chancellors and Principals (CVCP) concerning the employment status of lecturers and the tax treatment of expense payments made to employed lecturers. These notes have been approved by HMRC and should be followed when dealing with the affairs of both universities and, where appropriate, lecturers. The text of the notes relating to fees and expenses can be found at SE70700. The text of the notes relating to employment status is as follows

`TAX GUIDANCE NOTES: LECTURERS ENGAGED BY UNIVERSITIES

INTRODUCTION

These guidance notes are intended to help universities and lecturers with two issues that sometimes cause difficulty

• whether lecturers are employed or self-employed
• the tax treatment of fees and expenses paid to lecturers who are employed.

The guidance has been prepared in consultation with HMRC and is based on the law in force at 6 April 1996. It has no binding force and does not affect the right of appeal on any point concerning liability to tax.

These notes apply only to lecturers. The tax treatment of external examiners engaged by universities is currently under review by the CVCP and HMRC. In the meantime, examiners up to and including first degree level should be treated as employees of the university. Tax should be deducted from fees paid to employed examiners whereas their reimbursed expenses may normally be paid gross, including payments for travel from home.

Further information

There is general guidance on employment status in the HMRC leaflet IR56. HMRC booklet 480 is a guide to the tax treatment of expenses and benefits. You can also ask your Tax Office for further advice.

Employed or self-employed?

1. General

Different tax rules apply to employees and to people who are self-employed. So whenever you engage a lecturer you need to decide at the outset whether the contract is one of employment or self-employment. If the lecturer is an employee then you must, by law, operate PAYE.

You must also account for Class 1 National Insurance Contributions (NICs) for the amounts paid to lecturers who are within the Department of Social Security's special regulations. This applies irrespective of whether the lecturer is employed or self- employed for tax purposes. The DSS regulations are explained in paragraph 7 below.

HMRC (formerly HM Customs and Excise) have agreed that this guidance will also apply for the purposes of deciding whether VAT is payable in respect of a particular engagement. (Where individual lecturers are in any doubt about whether they need to register for VAT they should contact their local HMRC VAT office.)

2. The difference between employment and self-employment

Employment status is not a matter of choice but follows from the terms and conditions of the engagement. There is no statutory definition of `employment' or `self-employment' so the decision depends on a number of criteria derived from case law. In deciding whether a particular lecturing engagement amounts to employment or self-employment you need to look at the terms, conditions and facts surrounding that engagement. The following notes are intended to help both universities and lecturers in deciding status for a particular engagement for tax purposes. Where doubt remains you should get advice from your Tax Office as early as possible.

3. Full-time lecturers

A full-time lecturer will normally be an employee. This follows from the terms and conditions of engagement which usually include some or all of the following features that point towards employment.

• 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) 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.

4. Part-time lecturers

A part-time lecturer whose engagement covers a complete academic term or longer and who has similar terms and conditions to a full-time lecturer is likely to be an employee. But someone who is taken on for a whole academic term or year but only for say two or three hours a week, and on different terms and conditions to full- time lecturers, is more likely to fall within the guidance given for occasional lecturers below.

5. Visiting lecturers

A visiting lecturer who gives a one-off talk or short series of talks on a subject about which he or she has specialist knowledge and which is not part of the core curriculum will normally be engaged on rather different terms and conditions and is likely to be self -employed.

6. Occasional lecturers

Sometimes lecturers are engaged on a less formal basis to give, for example, a series of lectures on a particular topic. They are the group whose employment status for tax purposes is often the most difficult to decide. In each case it is necessary to consider all the circumstances, including

(a) The terms and conditions of the engagement:

• Control (or right of control) over conduct and discipline, hours of attendance, where and when lectures are given, course content, etc. (Generally the more extensive control the more indicative it is of employment). For example a lecturer required to teach in accordance with a set syllabus would be more indicative of employment than if the lecturer was engaged to talk about a specific subject but was left to determine the content of the lecture.
• Whether the individual must undertake the lecturing personally or whether a substitute can be sent. (On the lecturer's part, to send a substitute is a strong pointer towards self-employment although the absence of such a right is not a particularly strong indicator the other way.)
• Who is to supply the equipment necessary (where the contractual terms require the lecturer to supply his own equipment [for example, overhead projector and handouts] at his own expense this would point towards self- employment).
• Whether any financial risk attaches to the engagement (financial risk would be a pointer towards self-employment - but most engagements will lack any element of financial risk).

(b) Factors personal to the lecturer:

The following factors point towards self-employment. But they are only relevant where both university and lecturer intend that the terms of the engagement amount to self-employment:

• Many short-term lecturing engagements with different institutions.
• A business approach to obtaining and organising his/her engagements and expenditure in this area of a type not normally associated with employment (for example, provision of office accommodation, office equipment, etc.).
• Self-employment in a related full-time (or substantial) profession or business where occasional lectures are regarded as part of the individual's profession or business.

(c) The intention of the parties to the contract:

• A university that wishes to take on an occasional lecturer as an employee has that right. Where a contract, freely signed by both parties, specifically states that the engagement amounts to a contract of service (employment) - and the terms and conditions are consistent with that - then that will conclude the matter.
• Where a review of other factors indicates that the engagement is on the borderline between employment and self-employment a common intention expressed in the contract, whether for employment or self-employment, will decide the issue.

7. National Insurance Contributions – employment status

As explained above, for tax purposes whether a particular lecturer is employed or self-employed depends upon the particular circumstances. For NICs the position is slightly different. The Department of Social Security has special regulations which apply to lecturers for the purposes of determining the charge to NICs. If a lecturer is employed under a contract of service he or she will be an employee and liable to pay Class 1 National Insurance Contributions. If a lecturer is not employed under a contract of service, the Social Security Regulations mean that Class 1 NIC will be due unless:

• the lecturer is engaged to lecture on not more than three days in three consecutive months; or;
• the instruction is given as a public lecture which anyone can attend.