Sole trader working for educational institution - tax implications?

Firstly, I am a sole trader and this is a question regarding my personal tax. So, I hope this is the correct forum and that it shouldn't be in the business tax forum.

I have been a sole trader for 30 years. Tax-wise, I have a perfectly bill of health - tax-clearance cert etc...

I have been asked to do six days of teaching in a national educational institution.

My question is simply this; should I be paid the full amount of the fee (hours worked x hourly rate) or are they entitled to tax any of it?

I have been asked about providing something called tax credits? What are they?

Obviously, I would like to be paid the full amount, and let my accountant sort it out at the end of the year.

Any help appreciated.

Many thanks.

D.

Something called tax credits, I love it!! You obviously leave all that stuff to your accountant!

If they're asking you about your tax credits it's because they believe they'll be employing you as an employee of the college for those 6 days, and operating PAYE on it.

You'll need to clarify whether you're engaging with them under a contract for services (self employed) or a contract of service (employee).

It may be better to be an employee as you might get the extra PAYE Cr thus getting this tax free!!!!

Thanks for the replies.

1. If I go the self-employed route, would I end up charging VAT? i.e. hourly rate X number of hours + VAT? So far, there has only been talk of hours X hourly rate.

2. Joe, when you talk about extra PAYE credit, you may as well be talking Dutch! Please elaborate. I presume their accounts department will fill me in on the options. It makes no difference to them, right?

Thanks again.

D.

Hours x hourly rate sounds like an employee. I'd say that's what they're used to engaging.

Since it's unlikely the body in question can recover any VAT you would charge them, if you're not going in as an employee you'd have to adjust your rate downwards so that the gross would be the hourly rate they're talking about.

Jon Snow said:

Hours x hourly rate sounds like an employee. I'd say that's what they're used to engaging.

Since it's unlikely the body in question can recover any VAT you would charge them, if you're not going in as an employee you'd have to adjust your rate downwards so that the gross would be the hourly rate they're talking about.

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Thanks. I wouldn't want to do that, for obvious reasons. So, I guess I'll have to go the employee route.

D.

Dinarius said:

Thanks. I wouldn't want to do that, for obvious reasons. So, I guess I'll have to go the employee route.

D.

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I think you are missing a fundamental point here which is that you won't really have a choice - it's a question of fact and of law whether the arrangements between you and them will create a contract of service (employment) or a contract for services.

Your choice will probably be whether to take the gig or not!

In practice I understand that most educational institutions operate PAYE on lecturers so you may not have a choice. There was a court case on this a while back and the Revenue issued some guidance in tax briefing. As indicated above you could get an extra tax credit so I'd go down the PAYE route if you have the choice.

dublin66 said:

In practice I understand that most educational institutions operate PAYE on lecturers so you may not have a choice. There was a court case on this a while back and the Revenue issued some guidance in tax briefing. As indicated above you could get an extra tax credit so I'd go down the PAYE route if you have the choice.

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Thanks.

For the record, will let you know how I get on.

D.

you should also consider that if you are working for a state institution you will be liable for the public sector pension reduction. you could contact the payroll department of your chosen institution to confirm.

It all worked out ok in the end. I was taxed very little after providing the necessary tax credit details.

Thanks to all for the replies.

D.