This is not always as straight forward as it seems. An employee will usually have a contract of employment. This will set out the terms and conditions of the job.
A self-employed person will issue an invoice. The self-employed person will have a degree of control over when and how the job is done and be exposed to risk of profit or loss on the job.
The onus is on the self-employed person to prove they are in fact self-employed:
How would they do this? (this list is not exhaustive)
- Account for their own taxes
- Control their own hours of work
- Provide their own materials
- Provide their own insurance
- Burden of risk and responsibility rests on them
- Contract may exist as a service provider
- May have their own employees
They must provide a valid invoice. A valid invoice should have the name and address of the supplier and customer. A unique invoice number. Clear description of the goods and/or services provided. VAT amount if applicable. Total amount due. The person provides a tax clearance certificate and the person provides a copy of their own business insurance. The onus is on the self-employed person to prove they are self-employed.
A valid invoice should have the name and address of the supplier and customer. A unique invoice number. Clear description of the goods and/or services provided. VAT amount if applicable. Total amount due. Terms of payment.
It is generally preferable that the contractor provide their own insurance, so that any claims that may arise can be claimed against this rather than the school’s insurance.
For one off jobs/services an invoice should suffice. But if the contract is for ongoing work for which more than one invoice will be received, it is probably advisable to draw up a contract. Cleaning services would fall into this category.
Employees have paid holidays, sick leave, possibly paid overtime/time in lieu and employee tax credit. It is generally to a person’s advantage to be classed as an employee.
It is possible for people to have more than one employment and also for someone to be employed and self-employed in different employments at the same time.
It matters because getting it wrong can be an expensive mistake. If Revenue conduct an audit of your business and see that individuals have been paid as self-employed, when in fact they should have been treated as employees, you can be hit with a big tax bill equivalent to the amount of payroll tax which should have been charged. As well as the taxes, they can also charge you interest and penalties. The costs add up very quickly.
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