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Sam
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Category: Tax
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I do work as a chair for Fitness to Practice for regulators

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I do work as a chair for Fitness to Practice for regulators in the medical profession. I am on a contract which governs our working relationship, and am called upon for specific hearings. I am paid through invoicing for fees and expenses. Because of other work I do I am registered for VAT. I have been told that I have to add VAT to my fee charge because I am VAT registered. This obviously results in my receiving 20% less in fees because the regulator states this is not their responsibility as they contract to pay a certain fee, so I have to invoice for a lower fee so that the total is their agreed rate.
in a different area, a colleague has argued similarly that he should not be charged for class 4 NIC, and HMRC have acknowledged that the work is not a business or self employment for NIC purposes. I believe the same logic applies to VAT since I am under an employment contract for an agreed daily rate of payment that is nothing to do with my self employment business which is about Child protection.
Can you comment please.
Submitted: 2 years ago.
Category: Tax
Expert:  Sam replied 2 years ago.
Hi
Thanks for your question I am Sam and I am one of the UK tax experts here on Just Answer.
At first glance of your question, my view on this was to argue otherwise, that this is a trade, as you are paid for your expert services in the form of a fee (its not voluntary where just expenses are paid) so both tax National Insurance and VAT should apply if you are over the said thresholds.
However - if you have an employment contract that this income should be reported as employment and not fall under your guise of self employment which is earned from the child protection work, and therefore should be reported on the employment section of your self assessment tax return, and therefore, not included as profits for tax purposes (or Class 4) and not be considered within your threshold for VAT.
Do the engagers of this chair attendance pay you through their payroll? If not is it possible that they do so? Is tax deducted from this work? Please advise further
Thanks
Sam
Customer: replied 2 years ago.

Some interesting points, Sam. Taking your queries in turn because I have had to charge VAT, but there is no reason why I can't do it as an individual.

One big difference is that my self employed work is charged at a negotiated rate, whereas for this work I am told what the rate is when I am offered the 3 /4 year contract and that is fixed for the period unless the organisation concerned does increase its pay per day for everyone.

The two organisations where this is an issue expect me to charge them at the same time as I charge for expenses. They do not pay by payroll. A third organisation expects me to claim the daily fee on their expenses claim sheet. No tax or NI is deducted from this work (I am over the NI rate in terms of age)

Expert:  Sam replied 2 years ago.
Hi Ian
Thanks for your response
Then this sits in a very mid area.HMRC are clear cut on what constitutes employment and that which is self employment.
And with that then comes the obligations that fall on the engager (employer) to pay via the payroll and award entitlements such as holiday and sick pay.
If this is NOT employment then as its connected within the current self employed work, then due to way its being paid, then it must be added together with the income from child protection, and then sadly must suffer both Class 4 and VAT
But if its employment then the engager (employer) HAS to operate the payment of this money (and any expenses due) through payroll.
Self employment (as you are probably aware) must demonstrate
The fact you can provide your services to many (not just one engager)
That you set the rate at which you wish to be paid (its ok for there to be negotiation), and you can make a profit as well as a loss of the fee
That you provide your own tools to undertake the work
That you advertise your services
That you work to a timetable that suits you
These are a few of the main criteria that HMRC stand by -
There is on the HMRC website an interactive tool, know as the Employment status Indicator, it asks a series of yes/no questions, and on most occasions can advise whether it deem that work to fall within employment or self employment.
I have added a link for you to take yourself through this process to see what HMRC indicate this work might fall under.
http://www.hmrc.gov.uk/calcs/esi.htm
My initial opinion is that this chair work leans more towards employment - due to the nature of the work and the way in which the fees are agreed on (set rates!!no negotiation) and the fact they are not prepared to suffer the VAT (a huge indicator that they know they should be employing you, if you are having to lower your money to absorb the VAT position!)
However - as they are not paying you through the payroll and seem unwilling to do this, yet HMRC (through the Employment Status Indicator) states that its employment - then by asking HMRC to intervene - may see them being forced to operate payroll on all chairpersons who they engage.
But it will allow you to then ague this with HMRC both for Tax (Class4) and VAT purposes to then exclude this income from the trade/self employed side of matters. (the tax position remains the same regardless, as all income, as you know will be added together, personal allowances considered and tax charged on the net income)
Do use the Employment Status Indicator, and see what decision it produces and I will advise how to proceed on this matter.
Thanks
Sam
Customer: replied 2 years ago.

Thanks, ***** ***** think I need to think about this. The whole thing really is that by having to include VAT, with one of the employers I receive less than the agreed rate. The other employer recognises this and allows me to charge VAT as an extra cost that they bear. If I do this with the first of these two they will stop giving me so much work so I lose out another way. I will certainly try the site you have pointed me to, but this will have to be tomorrow because I'm now off to the station to pick my wife up and we are then out for the evening.

I suppose the real rogue is the employer that will not allow me to claim VAT as an extra, but they have too many budgetary issues to be able to afford it.

Please respond so I can rate this call.

Ian

Expert:  Sam replied 2 years ago.
Hi Ian
I can certainly understand you dilemma
The fact is unless you can ask HMTC to agree (Tax side of matters) that this is employment, can you then separate this money from the trade/self employment , advise HMRC (VAT) of why the income position has decreased so as not to suffer the VAT position (and make this lesser amount with one of the engagers)
Because then you will just invoice them - and if they choose not to operate PAYE (Payroll) then its between them and HMRC, but you are above board and setting the position as it ought to be.
And you are right if this one engager would just pay the VAT on top of the agreed rate, this would simplify matters but then would they still be paying you incorrectly - if they should be considering you as an employee .....
I shall be around and about tomorrow (have a couple of client appointments) but will respond as soon as I am back at the computer.
A rating in the meantime would be very much appreciated, so thank you
Thanks and have a lovely evening with your wife
Sam
Sam, Accountant
Category: Tax
Satisfied Customers: 13707
Experience: 26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
Sam and other Tax Specialists are ready to help you
Customer: replied 2 years ago.

Hi Sam,

I thought you were going to make one or two additional comments from the words in your last paragraph. I am interested in your view (which i put in a follow up yesterday) oj the HMRC comment to someone that the fees from a statutory office can never be regarded as business activities.

I want to finish this today so I can decide if and how to approach the VAT office on Monday.

Thanks.

Ian

Expert:  Sam replied 2 years ago.
Hi Ian
I was advising that I would be around later if you had any follow up questions, on the information I had provided. (but failed to add in "if you have any follow up questions") many apologies
But you cannot approach VAT until HMRC agree this is employment and not self employment - its not enough to argue that fees from a statutory office cannot be treated as trade activity (which I should advise isn't strictly correct) its the fact that you have an employment contract and also consideration for the way in which you provide your services, that the crux of the issue, that you need HMRC (taxes) to rule on. You need HMRC to rule on this, as
1) One of the offices you chair for, will not allow you to be paid as one that trades, as they refuse to pay the VAT due and thereby reduce your income, as you have to suffer the element representing the VAT due plus
2) You state that you have an employment contract (which I imagine is the verbally setting of the rate payable for the work you undertake, rather than an employment written contract)
But they refuse to pay you via the payroll, so you need HMRC to intervene and make the ruling.
Thanks
Sam

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