Pay an Individual

Payments may be made to individuals for a number of reasons, but it is important to determine the nature of the payment in each situation to ensure that the tax treatment is correct. 

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Any payment made to an individual in return for the provision of work or services is treated as an appointment or engagement. It should be considered carefully to ensure that the right payment route is selected for that engagement.

Different types of engagement include:

  • Employment payments to staff – paid via Payroll 
  • Payments to students in return for work – likely to be paid via Payroll  either via a part-time or variable hours appointment or a casual engagement.
  • Fee payments to visitors (lecturers, speakers or external examiners) may have different payment routes. 
  • Payments to consultants or individuals in return for services provided – if assessed as not classed as employed for tax purposes, payment can be made via Accounts Payable. Note, all invoices relating to payments to individuals for services rather than goods (e.g. consultancies) must be sent to the Payments Team and not input within departments.
  • Payments to agency workers – see the relevant Payroll pages for further information.

Determining Employment Status

It is the University’s responsibility to determine employment status, not the individual concerned. The determining factors are the nature of work done or services provided rather than a generic classification of 'consultant' or 'self-employed'. An individual may be treated as self-employed by one organisation but it does not follow that they should be treated as self-employed by another organisation. 

‘Consultant’ and ‘self-employed’ are both terms that are applied quite loosely, but in all cases the key to correct treatment for tax purposes is not what they are called but the nature of the service or services they provide. This can differ significantly from one job to another, even for the same individual. A person can be self-employed in respect of the work done for one organisation, but employed (for tax purposes) for work done for another. It is necessary, therefore, to consider each job or contract in its own right.

Full details of the proposed work or activity should be documented, including the nature of the work, terms and conditions that will apply, responsibilities and expected outputs. This should be in the form of a contract or agreement which is then assessed against the University's process to determine employment status.

Departments should assess all contractors, including those operating Personal Services Companies (PSCs). The generally accepted definition of a PSC is a limited company that typically has a sole owner and director (the contractor) who generally supplies professional services, either directly or via an agency. If engaging a PSC, the University is responsible for ensuring that tax and national insurance are paid. The PSC page has further information about using PSCs and the Guidelines for payments to a PSC summarise the guidance in a flowchart.

The following steps should be followed when considering engaging an individual:

  1. Identify details of the work or service required and the individual proposed to complete it. 
  2. The Consultancy Test can be used to assess the nature of the relationship to give an indication of whether the engagement is likely to be classed as consultancy. It will also help you gather information that you may need to complete the formal assessment in step 3.
  3. Determine whether the individual should be treated as an employee or a non-employee for tax purposes using the HMRC Check Employment Status for Tax (CEST) tool. Note, the name of the person completing the test on behalf of the department and the name of the individual assessed must be added in the relevant section, even if this is not mandatory for HMRC purposes. The tool should be printed.
  4. The tool should be printed and submitted with the request for payment:
    • If tax should be withheld, the invoice is sent to the Payroll Team for processing.
    • If the individual is assessed as self-employed, the invoice is sent to the Payments Team for processing.

All payments that are made to individuals without deduction of tax are recorded and reported separately to HMRC on an annual basis.

Note: 

Departments are not permitted to input any payments to individuals to the Oracle Financials system themselves.
Under no circumstances may payments to individuals be made from tills or petty cash. 

 

The following are the most common outcomes of the CEST tool with details of action to take:

 

Outcome  Action

This engagement should be classed
as employed for tax purposes

Assessed as an individual – Sole Trader

Set up an appointment in Core Payroll as an employee either:

  • casual for engagements of 12 weeks or less; or
  • variable hours if the engagement is longer than 12 weeks.

 

This engagement should be classed as self-employed for tax purposes

Assessed as an individual – Sole Trader

Paid as an individual via invoice. The Purchase to Pay process should be followed, but send the invoice with CEST outcome attached to the Payments Team. Please note, departments should not enter invoices from individuals onto Oracle Financials directly.

The intermediaries legislation applies to this engagement

Assessed as a Company – PSC

Submit the invoices to the Payroll Team, making sure the invoice has been signed by an authorised payroll signatory and the employee number and full cost allocation have been written on it.

The intermediaries legislation doesn’t apply to this engagement

Assessed as a Company – PSC

Paid via Accounts Payable as a PSC on Oracle. Submit invoice to the Payments Team with the CEST decision attached. Please note, departments should not enter invoices from individuals onto Oracle Financials directly.

We’re unable to determine the tax status of this engagement

Assessed as either a company or individual

It will be necessary to contact HMRC on the number given to seek further advice and to discuss the engagement. The worker cannot be paid without tax and NI deductions at this time. However if payment is urgent you will have to process through the payroll until HMRC have given a ruling.

Expense claims may be submitted by staff, students, visitors or others legitimately involved in the business of the University (e.g. volunteers, study participants, visiting speakers). 

Expenditure should be in line with the principles set out in the Expenses Policy and claims submitted in line with the expenses process.

The University may initiate other types of payments to individuals, for example payments to students of scholarships (which may also be known as bursaries, grants etc); payment of allowed subsistence for Visiting Academics; and payments to participants or volunteers. These can be made using the Payment Request Form.

The following categories of individual may have different types of payment made to them.

Please see the relevant pages for more information:

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Contact us


 : Payment Services
       Finance Division
       University of Oxford
       23-38 Hythe Bridge Street
       Oxford OX1 2ET

 payments@admin.ox.ac.uk
 :  01865 (6) 16016
 :  Team contacts  

 
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