Engaging External Consultants/Contractors
- Introduction
If you are considering engaging an individual as external consultant/contractor then it is important to establish the correct method of doing so prior to making any formal agreements with the consultant/contractor.
For the work that they are doing with us it is our responsibility to establish whether someone can be engaged on a genuinely self-employed basis (those who are regarded as in business in their own right and are paid free from tax and NI)or whether we are responsible for deducting their tax and NI. We will consider a number of different factors and a decision will be taken in line with HMRC guidance.
We will not engage existing staff of the university as an external consultant/contractor. Any duties for which payment is appropriate in addition to normal salary will be paid through the payroll.
We are notable to engage consultants or contractors to undertakecore activities such as teaching and/or research. The only exception to this is where an academic collaboration agreement has been entered into as part of a research funding application.
In accordance with Home Office guidelines we are not able to engage individuals on a Tier 4 (student) visa on a self employed basis.
- Self- Employment versus Employment
An individual can be self employed as a ‘Sole Trader’, as part of a Partnership or if they have their own limited company via a ‘Personal Service Company’. They are distinct from larger limited companies who employ a number of people and are not affected. Individuals with their own ‘Personal Service Company’ who are engaged as an ‘interim’ via an external agency are also affected.
Before you engage an external consultant or contractor you should discuss with the budget holder and/or Resources Manager.
In order to establish whether someone is self-employed and therefore able to be paid free from tax and NI you will need to complete this e-form and forward to your HR Manager by email. They will normally be able to advise you within 3 working days. This replaces the HMRC ESI tool and Engagers will not be required to send documents directly to Finance when submitting invoices for payment.If the individual is engaged via an external agency the Engager should let the agency know the outcome of the employment status check.
Prior to making a decision we will consider issues such as:
- The work we want them to undertake
- The extent to which they are integrated into Anglia Ruskin
- Whether they use our equipment and premises
- Whether Anglia Ruskin is their main place of work or they work for other people alongside working for us.
- Whether they are contracted for a pre-defined and specific task only or could be moved from task to task.
- Whether they can decide what work to do, when and where, and how they do it.
- Whether they can appoint a substitute (including a subcontractor) to undertake work on their behalf without checking with Anglia Ruskin.
- Whether they get paid a fixed price for their work which includes all expenses.
- Whether they work a set number of hours or whether there is any pattern to their working hours.
When you are deciding how to engage a contractor/consultant the way you set out your requirements will help determine the employment status of that individual. For example, agreeing to pay a set fee (which is inclusive of all expenses) is more indicative of self-employment than payment of a daily rate with expenses paid on top of this.
If the decision is that the individual is outside of the IR35 intermediaries legislation (self employed and paid free from tax and NI)or inside of IR35 legislation (self employed and paid with tax and NI deducted) you will need to contact the legal team who will be able to advise on the right agreement to be offered. They will normally be able to advise you on the appropriate agreement within 3 working days assuming that the correct information has been provided to them.
Financial Services will check that an Employment Status Checklistand the appropriate legal agreement are in place prior to paying the invoice.
- Engagements within IR35 Intermediaries Legislation
If the decision is that the individual is inside IR35 intermediaries legislation (i.e. self employed) there are several options available;
- An employment contract
- Engaging the individual via the Employment Bureau or an external agency
- Payment via an F15 form which will subject to tax and NI deductions (although this is only appropriate for a one off piece off work)
- Payment of the invoice via our payroll which will be subject to tax and NI deductions.
If payment is made via our payroll it is the Faculty or Service’s responsibility to ensure that they have obtained confirmation of the individual’s eligibility to work in the UK before the consultant/contractor does any work They should follow the Right to Work guidance notes for Panel Chairs on HR Online.
If it is not possible for the consultant/contractor to come on site then the Faculty/Service can arrange for a colleague to meet with them off site to carry out this check if it is convenient to do so. Alternatively, the consultant/contractor could send their original documents to the Faculty/Service and a Skype interview arranged to verify them.
Please see flow chart overleaf to identify the steps you should take when engaging an external consultant/contractor.
Version 4
March 2018
Process to identify whether an individual is self employed