I recently did some teaching work in an FE college. Belatedly, the agency which solicited my services issued me with a contract that says I am self-employed. I disagree that I am self - employed as the work I did on this temporary contract is almost identical to the work I did when I was employed full time to teach in FE colleges. I have asked HMRC for a ruling on my status but their reply does not provide an answer despite me setting out the circumstances and a copy of the terms and agreement upon which the agency engaged me.
To undertake the college work I had to obtain an enhanced CRB check. The legislation demands this. Also, the CRB check is not portable - it applies soley for the college and role I occupied. Hence, it seems to me, the CRB check is necessarily, wholly and exclusively incurred in the course of my business. HMRC says it will not allow me the cost of the CRB check because it was not incurred in the performancy of (my) duties. Is this a correct reading of the legislation?
The agency also deducted so-called indemnity insurance from my gross pay. The deduction is a percentage of my gross pay so that I only pay the indemnity insurance when I am earning. HMRC says this cost may be allowable and that I should seek advice. Again, I had no choice about the matter - I had to pay it. It is a wholly, exclusively and necessarily incurred cost. I would not be permitted to undertake the work unless I had cover. Surely, because it is a variable cost, ie it increases in sympathy with my earnings (or with time spent teaching), the cost of this so-called indemnity insurance must unambiguously be incurred in the performance of my duties?. Could someone confirm this is tax deductible please?
One final point, both of these costs were incurred wholly, exclusively and necessarily in relation to the work. My understanding is, therefore, that it does not matter whether I am an employee or self-employed for these costs to be tax deductible. However, there is the possibility that I may be a "worker" which may mean I am neither employee or self-employed. If it is possible for individuals to be neither then there is a chance that the legislation applying to employees and self employed does not apply in this case. Can anyone advise please?
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Self-Employed etc.
It is up to the contractor/employer if the contract you are working on is one of employment or self employment (workers don't come into this bit) so you don't have a choice and that is the likely answer you had from HMRC.
For the self-employed any costs for training etc proir to starting work are not allowable as they weren't incurred during the course of self-employment. Capital Assets are treated differently because they will be used in your work. As the Insurance was incurred while you are working then it is allowable. If you are on PAYE then you will find most expenses not allowable although incurred in your work. There are certain expenses allowed for certain trades, but these are normally fixed.
The term "worker" is a Euro blip and basically says that although self-employed you still have certain rights eg. holiday pay. So no you can't be a "worker" and nothing else.
Most self-employed use Accountants to lead them through the minefield as tax for most is "taxing".
This is a very general reply as there are many permutations.
Stephen,
most Accountants will agree with you but we are bound by what Tribunals and the Courts decide.
A classic example always used by HMRC is the case of a Barrister trying to claim the cost of the clothes that are only used for court appearance wholly and exclusively for her work. Not allowable as she had to wear something. Overalls however are allowable because they are protective clothing.
The employment status IS a matter of fact which is decided by the contractor and, of course, can be challenged by HMRC.
You decided that the terms of the contract didn't suit so you resigned.
No, Tax shouldn't be a minefield but IT IS. Just read all the comments on this site and you will realise just how ludicrous some of the rules and regulations taht we have to deal with are.
Enduring Benefit
The claim for costs of a CRB check may have been rejected because they think it is in the nature of expenditure putting you in a position to trade. If you were self employed then I would challenge this. If you do not accept that you were self employed in this engagement then you will probably have no success with any expense claims (with the probable exception of the insurance).
If you do accept that you were self employed in this engagement then you will presumably have a problem with late registration as self employed.
FWIW I don't think it is very likely that your status in this engaement was that of a self employed person, but I would need to see the contract and to discuss with you the way in which it was implemented before being able to venture an opinion.
With respect, Stephen,
a negotiated agreed contract between you and the employer/contractor does not mean self-employment. It is what the e/c decides and then, for protection from HMRC challenges, words the contract so it becomes a "contract for services" rather than a "service contract". These days most agencies insist that you trade through a Limited company to put the onus back on to yourself via a wonderful piece of Bownism called IR35.
As I said previously there are many permutations.
Depending on your earnings for the year it is quite likely that your Tax Return will sail through without challenge.
Teensy Bit Off Topic
And I apologise it is off topic - I have been reading this with great interest. This post will doubtless be a bit rambly - I am typing as I am thinking!
Firstly - at our school whether you be peripitetic music (not employed by the school), a teacher, a parent volunteer etc, the school obtains the CRB at their expense. As you say it is not transferable and were I you I would be arguing they cannot take you on legislatively without it. Stick in an expense claim to the college!
Secondly - teachers' pensions...... I know I have to put everyone - however short the time they were with us on the payroll and IN teachers pensions scheme. The TP part, as I am sure you know, is compulsorary (worse luck for us!). Not sure how you can be paying PAYE if you weren't on the payroll. Then I am easily confused! I would be interested to hear Teachers Pensions view.
Thirdly - if your hours were set by the 'employer' or client, and exactly what you were required to do was set up and not negotiable I don't see how you could be self employed really... there is no way I can see that you would not be a worker and therefore enjoy the rights of a worker.
Are you in a Union? They might be a good source of advice.
Stephen,
in theory you are quite correct, however in practice it can be very different, as you have found out. The problem exists because self-employment cannot be negotiated. It is up to the E/C to decide status. So, in some cases, we have a scenario that works backwards. In order to save eers nic the E/C decides (perhaps affordability may be the reason) to have their workforce as self-employed. Next stage is to word the "contract for services" so that it will withstand any challenge from HMRC and "hey presto" you have a contract that hasn't been negotiated yet your self-employed. Looking at it from your point of view, you would be doing nothing illegal by agreeing to the terms. The onus is on the E/C, or agency in this case. As a self-employed taxpayer you would then be able to claim all the expenses incurred (not CRB) and perhaps some Capital Allowances, which should lower your tax liability. I admire the fact that you thought the agency was wrong and stuck to your guns.
What is the difference
bewteen this situation (CRB) and a nurse who must havean NMC registration in order to practice: Or, for that matter, an accountant who must have a P/C?
The stupidity
of it is that although the first check is not allowable the renewals are!!!!!!!!!!!!!!
Welcome to the world of tax
Nothing to do with common sense or reality.
Jaffa cake anyone?