Back to School - for Pupils and Tutors

This week marks the start of September and the return to the classroom for thousands of pupils. For tutors, business is picking up again rapidly as parents secure their services early in the term. Now is the ideal time for tutors to reflect on how their business will be run in the next academic year.

Tutors should ensure that all their tax, national insurance and financial records are correct. Tutors who are self-employed or who are paid by an agency which DOES NOT deduct tax and national insurance contributions must register with HMRC within 3 months of commencing self-employment. All self-employed tutors must ensure that they complete a self-assessment tax return by 31 January each year.

There has been much debate in the private tuition industry about the legal status of tutors who work for an agency. Although some facts are indicative of self-employment (such as the choice of when and where to work and the fact tutors provide their own materials), others (such as the control which the agency has over the tutor by setting his or her rate and the fact that tutors must perform the work personally) are more indicative of employment. It is a tricky situation when there are factors indicative of both employment and self-employment and agencies should take legal advice as to whether their contracts are contracts for services (self-employed) of contracts of service (employed).

The present position is that most agencies hire tutors on a self-employed basis but do little to promote tutors' legal obligation to register as self-employed. Most agencies will not ask for any confirmation that the tutor has registered as self-employed. I have however been made aware of one agency which was told by HMRC that a pay-roll system had to be operated. In the future, we may see HMRC take a different view to agencies' assertion that tutors are self-employed.

Tuition agencies must be more responsible. It is no longer acceptable for tutors to be working and earning sums which are often significant without paying tax and NI like they would in any other job. There are no excuses. The system is simple and tutors do not need to engage an accountant as long as they keep detailed and accurate records. HMRC provides a great deal of guidance to the self-employed both on their website and through free workshops which are held across the UK on a regular basis.

So now is the time to ensure that as a tutor, you have your records prepared for the new school year. A little bit of time spent recording monies received through tuition and paying a tax bill by January is certainly worth it. HMRC has the power to issue severe penalties to those who do not register.

For a recent cautionary tale, please see this story -
http://nds.coi.gov.uk/clientmicrosite/Content/Detail.aspx?ClientId=257&NewsAreaId=2&ReleaseID=414345&SubjectId=36

Although the sums involved in this case were relatively large, the same rules would apply for smaller sums and HMRC are actively looking for those who do not declare their earnings to HMRC.