Employment status of Flying Instructors
Thread Starter
Join Date: Dec 1999
Location: Cambridgeshire
Posts: 20
Likes: 0
Received 0 Likes
on
0 Posts
Employment status of Flying Instructors
Just interested to know what the "employment" status of most instructors is with the clubs that they work for. At our club it has been the practice for all to be "self-employed" and to invoice on a monthly basis for work done. A recent investigation by the tax office has ruled this unacceptable; the instructor is to be considered an "employee" for NI purposes but self-employed for tax.
Has this been encountered by any other clubs ? I personally have a limited company and put all my instruction through it. Anyone else working on this basis ?
Has this been encountered by any other clubs ? I personally have a limited company and put all my instruction through it. Anyone else working on this basis ?
Join Date: Dec 2004
Location: UK
Posts: 23
Likes: 0
Received 0 Likes
on
0 Posts
I work on the same basis as you as I also have a limited company. Seemed the only practical way otherwise I would have had 40% tax taking out before I get my hands on it, 40% of peanuts leaves you with the peanut dust!
This way, I cannot make a living out of instructing but I plow the money back into further training, medicals etc.
This way, I cannot make a living out of instructing but I plow the money back into further training, medicals etc.
Join Date: Mar 2002
Location: Euroland
Posts: 2,814
Likes: 0
Received 0 Likes
on
0 Posts
Notamcheck,
I like your idea of not being able to make a living - one must earn about £34,000 to have to pay tax at the higher rate these days..............you must have some very large expenses!
Regards,
DFC
I like your idea of not being able to make a living - one must earn about £34,000 to have to pay tax at the higher rate these days..............you must have some very large expenses!
Regards,
DFC
Join Date: Dec 2004
Location: UK
Posts: 23
Likes: 0
Received 0 Likes
on
0 Posts
I didn't make it clear that I instruct part-time and my full time job is already in the 40% bracket. If I was paid personally for instructing then I would have had 40% income tax taken off before I even see it.
With my limited company, its main income is through selling software (hence my name!) and any extra money earned through instructing all goes into the same pot.
With my limited company, its main income is through selling software (hence my name!) and any extra money earned through instructing all goes into the same pot.
Help regarding these issues....
I have been instructing JAA PPL for two years now, but never worked in the UK, ever before. Only ever worked in Jersey as an employee, where the systems are different to UK. Also, yes I am entitled to work here.
I have just taken up an instructor job in Northern England, and have been told that I will be self employed.
SO:
Who do I see to register for Tax, National Insurance, Health cards etc etc, and how much can I earn, and expect to be paying per month/quarter in NI and tax
Cheers
I have been instructing JAA PPL for two years now, but never worked in the UK, ever before. Only ever worked in Jersey as an employee, where the systems are different to UK. Also, yes I am entitled to work here.
I have just taken up an instructor job in Northern England, and have been told that I will be self employed.
SO:
Who do I see to register for Tax, National Insurance, Health cards etc etc, and how much can I earn, and expect to be paying per month/quarter in NI and tax
Cheers
Last edited by skyfarmer; 20th Feb 2005 at 11:08.
I work as a Limited Company.
I also employ my wife.
The criteria seems to be that you must have more than about three sources of income - I in fact have up to ten in the Summer.
Get yourself a good accountant. He'll be worth every penny.
Good luck.
Sleeve
I also employ my wife.
The criteria seems to be that you must have more than about three sources of income - I in fact have up to ten in the Summer.
Get yourself a good accountant. He'll be worth every penny.
Good luck.
Sleeve
Join Date: May 2001
Posts: 10,815
Likes: 0
Received 0 Likes
on
0 Posts
Its proberly more like what the employer dosn't want to hear.
After IR35 all the rules about running a limited company changed along with some of the self employed rules.
The tax man takes a very dim view of employers making workers have self employed status when they are actually working day in and out in the same job. They look on it as the employer is avoiding their employers NI contributions.
After you start get a m8 to phone the tax office and pretend to be thinking about working for the company and ask about self employed status. The tax man will be down there pretty quick for an audit.
The down side of this is they will proberly be stung for the last 3 years of NI contributions for all self employed instructing staff.
There are also issues being self employed which means you have to personally carry public liability insurance etc etc. If you are employed by the school there insurance covers you.
Being self employed puts you out on a limb with both the tax man and if anything happens. I never worked self employed because the companys had all been advised by there accountants that they would be shafted if found out big style.
MJ
After IR35 all the rules about running a limited company changed along with some of the self employed rules.
The tax man takes a very dim view of employers making workers have self employed status when they are actually working day in and out in the same job. They look on it as the employer is avoiding their employers NI contributions.
After you start get a m8 to phone the tax office and pretend to be thinking about working for the company and ask about self employed status. The tax man will be down there pretty quick for an audit.
The down side of this is they will proberly be stung for the last 3 years of NI contributions for all self employed instructing staff.
There are also issues being self employed which means you have to personally carry public liability insurance etc etc. If you are employed by the school there insurance covers you.
Being self employed puts you out on a limb with both the tax man and if anything happens. I never worked self employed because the companys had all been advised by there accountants that they would be shafted if found out big style.
MJ
Join Date: Nov 2003
Location: notts
Posts: 636
Likes: 0
Received 0 Likes
on
0 Posts
Employed v self employed
Mad_jock
You are wrong and appear to have a chip on your shoulder about employers. If the PAYE system should be enforced at flying clubs it would have a much more painfull effect on the employee. In the present situation the instructor can at least set their costs against their income. Under PAYE they would not.
The Inland Revenure have already in most parts of the country visited individual flying clubs and they did this some years ago. However, each Local Tax Office has a different policy with regard to the instructors tax status.
Being that most flying clubs pay instructors pro rata of hours actually flown it would equally be a nightmare for the Revenue to assess the correct liability, per instructor, on a month to month basis. This would explain why one contributor has been told that taxable pay will be assessed on a schedule D basis but NIC must be deducted at source. A not uncommon resolve to the problem and standard within the entertainment industry. If you are full time and salaried then PAYE must be applied in all cases.
As to insurance, i cannot speak for everybody but my employers/public liaibilty insurance applies to my part time 'self employed' instructors just the same as everyone else.
You are wrong and appear to have a chip on your shoulder about employers. If the PAYE system should be enforced at flying clubs it would have a much more painfull effect on the employee. In the present situation the instructor can at least set their costs against their income. Under PAYE they would not.
The Inland Revenure have already in most parts of the country visited individual flying clubs and they did this some years ago. However, each Local Tax Office has a different policy with regard to the instructors tax status.
Being that most flying clubs pay instructors pro rata of hours actually flown it would equally be a nightmare for the Revenue to assess the correct liability, per instructor, on a month to month basis. This would explain why one contributor has been told that taxable pay will be assessed on a schedule D basis but NIC must be deducted at source. A not uncommon resolve to the problem and standard within the entertainment industry. If you are full time and salaried then PAYE must be applied in all cases.
As to insurance, i cannot speak for everybody but my employers/public liaibilty insurance applies to my part time 'self employed' instructors just the same as everyone else.
Join Date: Dec 2004
Location: Manchester
Posts: 16
Likes: 0
Received 0 Likes
on
0 Posts
"After you start get a m8 to phone the tax office and pretend to be thinking about working for the company and ask about self employed status. The tax man will be down there pretty quick for an audit."
"they will proberly be stung for the last 3 years of NI contributions for all self employed instructing staff"
Ho Ho!
What misinformed nonsense.
"they will proberly be stung for the last 3 years of NI contributions for all self employed instructing staff"
Ho Ho!
What misinformed nonsense.
Join Date: May 2001
Posts: 10,815
Likes: 0
Received 0 Likes
on
0 Posts
No problem with employers. I very nearly got shafted for lots when IR35 came into being as an employer of myself. And as alot did ended up working abroad to escape it.
The guidlines currently are given for limited companys/ partnerships
in
http://www.inlandrevenue.gov.uk/pdfs/ir175text.pdf
And self employed in
http://www.inlandrevenue.gov.uk/pdfs/ir56.pdf
The IR56 is the real one to have a look at if your a FI selfemployed
Extracts from IR148
http://www.inlandrevenue.gov.uk/pdfs/ir148.htm
The difference between employment and self-employment
Employment status is not a matter of choice. Parties cannot simply decide to treat working arrangements as either self-employment or employment. The circumstances of the engagement determine how it is treated.
People are self-employed if they are in business on their own account and bear the responsibility for their business's success or failure. There are a number of pointers which would indicate whether or not your worker is self-employed.
Right of control - the degree of direction or control a contractor has over a worker is an important factor to consider. The greater the degree of control by the contractor, the more likely it is that the worker is an employee. It is important to establish who has control over
- what work is done
- when it is done
- how it is done.
You should consider not just the degree of supervision, but also your right to direct the worker if you so choose.
If a worker supplies any expensive/heavy equipment which is necessary to do the work, this suggests self-employment.
On the other hand, if you engage workers to operate such equipment or plant that you have hired from another source, it is much more likely that the worker will be regarded as an employee. This factor will be very important in the case of drivers/operators of heavy plant, such as JCBs, lorries, heavy tarmacing equipment, demolition plant, etc.
The supply by craftspeople of small tools which are traditional and normal in the industry will not be of the same importance.
The greater the degree of financial risk for the worker, the more likely it is that he or she will be self-employed. The basis of payment and the surrounding financial circumstances of the arrangement will therefore be important.
For example, if you pay a worker for all hours of attendance at an hourly rate, he or she faces little, if any, financial risk, and is, therefore, more likely to be an employee. On the other hand, a worker may be contracted to carry out a defined task or activity at a fixed price. If the completion of this task is vulnerable to delay, for example because of bad weather or it proves more difficult than anticipated, it is more likely that the worker will be regarded as self-employed.
Other relevant factors include the nature and degree of expenditure which the worker incurs on his or her own account, and whether the work contract was won as a result of a competitive tendering process.
If a worker has the freedom to hire and pay someone else to do the work, that suggests self-employment.
The length of engagement may be a factor, but will not be decisive. You must consider the terms of engagement even where a worker is engaged only for a day. Long periods working for one contractor may be typical of an employment, but even a very short-term engagement could amount to employment. Regularly working for the same contractor, even under daily or weekly contracts, points towards employment. The fact that a worker moves from site to site with the same contractor is also likely to suggest employment.
The only way the school could get round this is by employing the FI through an agency (which is the way the oil industry went as well as lorry driving, admin staff etc etc). Which would then sort out all the red tape but the FI would still be an employee of the agency not self employed.
And also not forgetting
"Remember
If you do not follow the correct tax and National Insurance rules, you may have to pay the Inland Revenue for any unpaid tax or NICs and you could also be liable to penalties and interest."
MJ
The guidlines currently are given for limited companys/ partnerships
in
http://www.inlandrevenue.gov.uk/pdfs/ir175text.pdf
And self employed in
http://www.inlandrevenue.gov.uk/pdfs/ir56.pdf
The IR56 is the real one to have a look at if your a FI selfemployed
Extracts from IR148
http://www.inlandrevenue.gov.uk/pdfs/ir148.htm
The difference between employment and self-employment
Employment status is not a matter of choice. Parties cannot simply decide to treat working arrangements as either self-employment or employment. The circumstances of the engagement determine how it is treated.
People are self-employed if they are in business on their own account and bear the responsibility for their business's success or failure. There are a number of pointers which would indicate whether or not your worker is self-employed.
Right of control - the degree of direction or control a contractor has over a worker is an important factor to consider. The greater the degree of control by the contractor, the more likely it is that the worker is an employee. It is important to establish who has control over
- what work is done
- when it is done
- how it is done.
You should consider not just the degree of supervision, but also your right to direct the worker if you so choose.
If a worker supplies any expensive/heavy equipment which is necessary to do the work, this suggests self-employment.
On the other hand, if you engage workers to operate such equipment or plant that you have hired from another source, it is much more likely that the worker will be regarded as an employee. This factor will be very important in the case of drivers/operators of heavy plant, such as JCBs, lorries, heavy tarmacing equipment, demolition plant, etc.
The supply by craftspeople of small tools which are traditional and normal in the industry will not be of the same importance.
The greater the degree of financial risk for the worker, the more likely it is that he or she will be self-employed. The basis of payment and the surrounding financial circumstances of the arrangement will therefore be important.
For example, if you pay a worker for all hours of attendance at an hourly rate, he or she faces little, if any, financial risk, and is, therefore, more likely to be an employee. On the other hand, a worker may be contracted to carry out a defined task or activity at a fixed price. If the completion of this task is vulnerable to delay, for example because of bad weather or it proves more difficult than anticipated, it is more likely that the worker will be regarded as self-employed.
Other relevant factors include the nature and degree of expenditure which the worker incurs on his or her own account, and whether the work contract was won as a result of a competitive tendering process.
If a worker has the freedom to hire and pay someone else to do the work, that suggests self-employment.
The length of engagement may be a factor, but will not be decisive. You must consider the terms of engagement even where a worker is engaged only for a day. Long periods working for one contractor may be typical of an employment, but even a very short-term engagement could amount to employment. Regularly working for the same contractor, even under daily or weekly contracts, points towards employment. The fact that a worker moves from site to site with the same contractor is also likely to suggest employment.
The only way the school could get round this is by employing the FI through an agency (which is the way the oil industry went as well as lorry driving, admin staff etc etc). Which would then sort out all the red tape but the FI would still be an employee of the agency not self employed.
And also not forgetting
"Remember
If you do not follow the correct tax and National Insurance rules, you may have to pay the Inland Revenue for any unpaid tax or NICs and you could also be liable to penalties and interest."
MJ
Last edited by mad_jock; 22nd Feb 2005 at 21:40.
Hovering AND talking
Join Date: Feb 2003
Location: Propping up bars in the Lands of D H Lawrence and Bishop Bonner
Age: 59
Posts: 5,705
Likes: 0
Received 0 Likes
on
0 Posts
Mad Jock is correct.
Yes, the PAYE system is more painful for the employee and the employer, that is why the Inland Revenue enforce the rules in order to collect more tax.
Some establishments may well have dispensations and extra-statutory concessions to run their payroll differently but essentially "self-employment" for only one or two "employers" is not deemed to be Schedule D.
I know of too many employers (not necessarily in aviation) who have been caught with this and heavily penalized.
Cheers
Whirlygig
Yes, the PAYE system is more painful for the employee and the employer, that is why the Inland Revenue enforce the rules in order to collect more tax.
Some establishments may well have dispensations and extra-statutory concessions to run their payroll differently but essentially "self-employment" for only one or two "employers" is not deemed to be Schedule D.
I know of too many employers (not necessarily in aviation) who have been caught with this and heavily penalized.
Cheers
Whirlygig
Join Date: Nov 2003
Location: notts
Posts: 636
Likes: 0
Received 0 Likes
on
0 Posts
Tax Status
If flying clubs are paying people illegally then it is them that is at risk. They would do well if they haven't already done so to approach the Revenue and make an agreement with them. The defination of 'self employed' is not clear cut. You don't become an expert reading a form.
But what are the consequences to the instructor. A Revenue agreement for schedule D status allows you to set against your income all those expenses incurred, such as; Training, Test fees, CAA charges, Medical expenses, Journals, text books. some travel (not to and from work) and reasonable postage and telephone costs. These are just a few.
The last survey of professional pilots indicated that in excess of 80% of current airline crews were 'self improvers', that is they had paid for their own training and progression in the industry. Schedule D status does not mean that you are self employed but put simply, you may account for you income/expenditure on an annual basis. It is a recognision that you will have considerable out of pocket expenses but an uncertain income. In the case of pilots/instructors it is as true as it is with say an actor/entertainer.
Don't throw the baby out with the bath water for it will cost you. The last time that this industry did so was with regard to NVQ tax relief. Don't be a fool, put the brain in gear before opening the mouth - comes to mind.
But what are the consequences to the instructor. A Revenue agreement for schedule D status allows you to set against your income all those expenses incurred, such as; Training, Test fees, CAA charges, Medical expenses, Journals, text books. some travel (not to and from work) and reasonable postage and telephone costs. These are just a few.
The last survey of professional pilots indicated that in excess of 80% of current airline crews were 'self improvers', that is they had paid for their own training and progression in the industry. Schedule D status does not mean that you are self employed but put simply, you may account for you income/expenditure on an annual basis. It is a recognision that you will have considerable out of pocket expenses but an uncertain income. In the case of pilots/instructors it is as true as it is with say an actor/entertainer.
Don't throw the baby out with the bath water for it will cost you. The last time that this industry did so was with regard to NVQ tax relief. Don't be a fool, put the brain in gear before opening the mouth - comes to mind.
