National Insurance Contributions – Employment status of lecturers, teachers and instructorsWednesday, October 14th, 2009
When a person starts in a new employment, the employer is required to determine whether the engagement constitutes a contract of service or a contract for services. In other words, the employer must decide whether the person is to be treated as employed or self-employed, for both PAYE tax and NICs purposes.
For NICs purposes, if the person is an employee, both the employee and the employer are required to pay Class 1 NICs on the employee’s earnings. Payment of Class 1 NICs gives the employee entitlement to a range of contributory state benefits, including jobseeker’s allowance and the basic and additional state pension.
In certain specific situations, the Social Security (Categorisation of Earners) Regulations 1978 dictate that a self-employed person must, nevertheless, be treated as an employee for NICs purposes. The workers affected by these rules are those working under conditions that are similar to employment and whose security of employment is such that they would be exceptionally vulnerable if they were not entitled to contributory state benefits. Among the workers specified in the regulations are lecturers, teachers, instructors and other persons working in a similar capacity. They are treated as self-employed for tax purposes but as employees for NICs purposes.
The text of the Regulations relating to lecturers, teachers, instructors, etc, is:
Employment …. as a lecturer, teacher, instructor or in any similar capacity in an educational establishment by any person providing education being employment in which the person employed gives the instruction in the presence of the persons to whom the instruction is given except where the employment is in the Open University; and the earnings in respect of the employment are paid by, or on behalf of, the person providing the education.
There are two specific exclusions from the application of the Regulations:
- the person employed has agreed, prior to giving the instruction, to give it on not more than three days in three consecutive months or
- the instruction is given as public lectures.
The term “educational establishment” is defined as including
- a place where instruction is provided in any course or part of a course designed to lead to a certificate, diploma, degree or professional qualification; or
- a place where instruction is provided in any course or part of a course being the same as, or substantially similar to, any course or part of a course as is referred to in (a) above but which is not designed to lead to a certificate, diploma, degree or professional qualification.
HMRC is satisfied that most engagers are operating these rules and their application is generally well understood. However, despite making improvements to guidance, difficulties in applying the rules have been indentified in the First Aid training sector due to the diverse circumstances in which first aid training is delivered. Concluding that a further revision of the guidance will not help, HMRC is proposing to make adjustments to the Regulations themselves and, to that end, has published a consultation document, aimed at engagers and individuals in the First Aid training sector.
The consultation document explains in great detail the issues that are being addressed and it is not necessary for the purposes of this summary to rehearse them in full. In principle, the two key problems areas are (a) distinguishing between vocational and non-vocational training, and (2) vocational training that is provided other than in an educational establishment.
HMRC’s proposals for amending the Regulations include removing the concept of the “educational establishment” on the basis that, in reality, such a place is anywhere where education is delivered. They also take into consideration that the Regulations have to be relevant across the whole of the education sector and, accordingly, the consultation document seeks the views of educationalists, training providers and other interested parties from all areas of education.
The specific proposals are as follows:
- to clarify that all instruction given by a person in the presence of the persons to whom it is given, irrespective of where it is given, falls within the Regulations (other than instruction in a private dwelling where the person giving the instruction is paid directly by the person in receipt of the instruction)
- to define instruction as all academic and vocational instruction (but excluding “recreational” instruction) and to define “academic”, “vocational” and recreational”
- where the instruction provided is a mixture of vocational and recreational, to apply the Regulations to the total tuition fees paid for the mixed instruction
- to clarify who is the secondary contributor.
The intention is to introduce the amended Regulations from 6 April 2010. Feedback on the proposals is requested by 8 January 2010.
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