Payment for services
Guidance to help departments identify when payments for services are required, how to engage the supplier, and how to select the correct route for payment
Payments may be made to individuals or their intermediaries (e.g. Personal Service Companies) for provisions of services. These can include occasional work such one-off talks or a seminar series, assisting on a recruitment panel, performance or roleplay, delivered by staff, students or people external to the University. Often we do not think of these as providing services, but this is the substance of the engagement with the University.
Individuals may work through intermediaries, primarily 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. To manage the risk of these being used as a tax avoidance vehicle, HMRC has in place off-payroll working rules (IR35). These rules form the foundation for treatment of PSCs as explained in these pages. The PSC page has further information about using PSCs.
It is important to determine the nature of each payment to ensure that the tax treatment is correct. Depending on an assessment of the work to be delivered and the employment status of the service provider, the key payment processes for services are:
- Payroll process – Payments made to employees, workers, and Personal Service Companies falling inside the off-payroll working (IR35) rules. Tax and National Insurance (NI) are withheld at source and paid to HMRC by the University.
- Accounts payable process – Payments made to individual suppliers or Personal Service Companies falling outside the off-payroll working (IR35) rules. Tax and National Insurance (NI) are not deducted and it is the supplier’s responsibility to account correctly for tax due on the income received from the University.
Determining employment status
Any provision of paid services by an individual or their intermediary is treated as an appointment or engagement. Each engagement should be considered carefully to ensure that the right payment route is selected for that specific engagement. Service providers may have differing employment status for each engagement. The payment method for the engagement and the tax/NI to be withheld depends on the employment status for that engagement.
The University is responsible for determining the employment status of individuals providing services, not the service provider concerned. This determination is based on the nature of the work to be completed or services provided rather than generic classification as ‘consultant’ or ‘self-employed’. A service provider may be treated as self-employed by one organisation or for one engagement but it does not follow that they should be treated as self-employed in all circumstances. Employment status is assessed using the HMRC Checking Employment Status for Tax (CEST) tool.
The following steps should be taken to arrange for a service provider to be engaged and paid: