HMRC’s latest attack on the employment status front has focused on the world of education and coaching.

All organisations paying teachers, lecturers or coaches directly and not as employees can expect attention from HMRC in the coming months if they have not already had a formal information request. While HMRC’s current actions implicitly accept some individuals will be self-employed, there are still risks for organisations that use them.

In October 2011, HMRC launched a new tax disclosure facility, the tax catch up plan (TCUP) for teachers and coaches, as it had identified a significant risk of such self-employed income being untaxed. For the TCUP, it is using its legal powers to obtain bulk information on payments made by, for example, academic institutions and sports and leisure organisations. The deadline for individuals to register for this facility has now passed and recent experience of such ‘amnesties’ has shown that take-up is likely to have been limited.

Therefore, it is expected that HMRC will have to actively pursue teachers and coaches to generate a meaningful tax yield from this exercise. This is likely to start after the 31 March 2012 disclosure and payment deadline for the facility. In investigating such individuals, it is inevitable that HMRC will identify that some should have been classed as employees, and may also approach the employer for past NIC (and PAYE in some cases). HMRC has also been consulting on possible repeal of the Social Security (Categorisation of Earners) Regulations 1978 which treat some self-employed individuals as employed earners for Class 1 NIC purposes only.

The regulations only apply to certain classes of self-employed individual but include a “lecturer, teacher, instructor, or in any similar capacity in an educational establishment by any person providing education”. Organisations who use self-employed teachers, lecturers or coaches and who have failed to account for Class 1 NIC should seek to put matters right now as HMRC will be looking to collect unpaid NIC for the current and past years even if the regulations are repealed for the future.

This update is provided courtesy of our strategic partner PKF(UK) Ltd.