1.5 Tax and National Insurance
- Fee payments made to all appointees are covered by a Simplified Tax Deduction Scheme agreed with HM Revenue and Customs (HMRC). This means that Basic Rate tax (currently 20%) is deducted at source from all fee payments.
If, however, you are not liable to pay income tax (ie your aggregate taxable income, including fees from SQA, retirement pensions, and unemployment benefit , is expected to fall short of the allowances you are entitled to in the tax year), you can apply for an exemption. Explanatory notes and non-liability declaration slips are available on request. If you complete and return the non-liability declaration slip before payment is processed, your fees will be paid without tax being deducted.
SQA must deduct tax at the basic rate from all appointees unless a declaration of non-liability has been completed. However, appointees who are self-employed and deal with their own tax affairs will be exempt if they provide proof in writing (ideally from their accountant) for each tax year, detailing they are responsible for their own tax affairs. SQA will send this letter to HMRC at the end of each year as proof that tax has not been deducted upon request of the self-employed appointee.
The application of basic rate will result in an underpayment of tax if you have a liability for tax at the higher rate (currently 40%). Remember that fee payments from SQA might cause you to become liable to pay tax at the higher rate. Enquiries should be addressed to HMRC.
- Expenses payments for travelling and for reimbursement of expenses incurred on SQA business are covered by a dispensation from HMRC and are not taxable.
- A Payment Advice (P60 substitute) will be issued with each net fee payment, setting out the gross fee and the income tax deduction. You should retain your Payment Advice for tax purposes, as duplicate copies cannot be issued.
- HMRC has asked SQA to record each appointee’s National Insurance number for computer identification purposes.
The income tax treatment of fees payable to appointees is in accordance with an instruction from HMRC. It does not alter your status under this agreement, and should not be construed as indicating any relationship of employee or officer of SQA.
National Insurance is covered by the terms of the Social Security (Categorisation of Earners) Regulations 1978 (SI 1978/1689). SQA does not operate Class I National Insurance on fees.