Note: Split payments are currently only available to companies based in the United Kingdom; they were built with Employment Agencies in mind, but can still be used by Employment Businesses - more on that within the FAQ section below.
US based companies can utilise Automated Payouts, which acts very similarly to Split Payments.
Split payments is a feature powered by Stripe that allows you to split any payments made by your Clients between your company and your Tutor(s).
Whenever an Invoice is paid by one of your Clients, the payment is instantly split into two payments; one for your company, and one for your Tutor(s). Whenever a split payment Invoice is raised, a Payment Order is automatically created for your Tutor. When that Invoice is paid via Stripe, the payment is automatically divided into your company’s commission rate and the Tutor’s pay rate, and Stripe will then process both of those payments to their respective payees.
Note: Because split payments are processed by Stripe, split payment Invoices can only be paid through Stripe. Direct Debit with GoCardless, Client credit and offline payment are all unavailable on them. See 'How split payment Invoices can be paid' below before setting up Direct Debit mandates for these Clients.
Enabling Split Payments
In order to use split payments, you will first need to sign up to a Stripe Express account via TutorCruncher. Once that is done, navigate to System > Settings > Payment Integrations > Card Payments with Stripe and open the ‘Settings’ tab of your Stripe account overview, where you will find the ‘Split Payments’ checkboxes - here you will have the option to enable or disable split payments on your branch.
Note: These will read slightly differently if you are acting as an Employment Agency - here you will instead have the option to split all available payments, or only split payments for Invoices to Clients where you are acting as an Employment Agency.
You will also need to ensure that the Tutor assigned to the Job/Lesson that you want to have split payments for has signed up for a Stripe payouts account. Your Tutors can do this by logging into TutorCruncher and opening the 'My Profile' section of their dashboard. From there, they can select Sign Up Now within the 'Payouts Account' panel on their profile to sign up for a Stripe Payouts account.
An example of a Tutor's profile, with the 'My Profile' tab and 'Payouts Account' panel both highlighted.
Note: Tutors based in certain countries cannot currently sign up for a Stripe payouts account.
Enabling/Disabling split payments on a per-Client basis
Simply navigate to People > Clients > select the Client > Actions > Edit Profile > Accounting & Client Manager and then disable the 'Use split payments for this Client' checkbox.
The 'Use split payments for this Client' checkbox.
Note: This checkbox has no effect for a Client you are acting as an Employment Agency for. Employment Agency Clients always use split payments. To stop using split payments for that Client, you first need to change them to an Employment Business Client on the same tab.
How Split Payments Invoicing works
Split payments Invoices are raised at the point a Lesson is marked as ‘Complete’. If you have split payments enabled, there will be an indication of whether or not the Lesson is going to be paid using split payments in the Lesson’s status panel.
An example of a Lesson status panel where the Lesson will be paid for using split payments.
Marking a split payments Lesson as ‘Complete’ will automatically raise an Invoice for the Client and Payment Order for the Tutor. Invoices and Payment Orders raised using split payments will appear in the respective Raised Invoices/Raised Payment Orders and will be labelled as such.
An example of a Raised Invoices page, showing Invoices raised using split payments.
If you navigate to a raised split payments Invoice, you can quickly find the associated Payment Order for that Invoice under that Invoice’s payment summary.
An example of an Invoice, with the payment summary section highlighted.
How split payment Invoices can be paid
Split payment Invoices can only be paid through Stripe. Opening one under Accounts > Invoices > select the Invoice > Take Payment will show the following methods as unavailable:
Direct Debit with GoCardless - unavailable even where the Client has an active mandate and has Direct Debit set as their default payment method. The Take Direct Debit Payment button will not appear on these Invoices.
Client credit - credit already on the Client's balance, from Credit Requests, account top ups or a manual balance adjustment, cannot be used.
Offline payment - cash, cheque or a bank transfer recorded manually cannot be marked off against these Invoices.
Note: Administrators see unavailable methods greyed out with the reason shown alongside them. Clients do not - unavailable methods are hidden from the Client's own payment page entirely, so a Client will simply see no Direct Debit option and no explanation of why it is missing.
Auto Charge follows the same restriction. If a Client's default payment method is Direct Debit, their split payment Invoices will not be charged automatically - they will simply remain Unpaid, with no error shown. To have these Invoices collected automatically, set the Client's default payment method to card under People > Clients > select the Client > Actions > Edit Profile > Accounting & Client Manager, make sure the Client has card details saved, and enable Auto Charge under System > Settings > Accounting > General.
Note: On Invoices raised while operating as an Employment Agency, only the Client can initiate payment. Administrators cannot take payment on those Invoices by any method, and will see the message 'This Invoice has been raised with the company acting as an Employment Agency and therefore only the Client linked can initiate payment.'
Refunding a split payments Invoice
Refunding Invoices paid via Stripe works the same way as refunding any Invoices (read more about that here) - the difference lies in how that refund is processed.
When refunding an Invoice that is being processed via Stripe, TutorCruncher will check both your Stripe balance, and that of the associated Tutor on the Lesson for that Invoice. If both parties have enough funds available in their respective Stripe accounts, then we will initiate a transfer from your accounts to ours, then onto the Client. Both the Invoice and Payment Order will be marked as ‘Void’.
These are the different refund statuses and what they mean:
Transfer Transaction is Pending: The money transferred to the company/Tutor hasn’t yet reached their account and as such isn’t yet available to be paid out to their banks. The refund will execute once the money has reached the recipient banks.
Tutor Transfer is Available: The money has reached the Tutor’s Stripe balance (this takes around seven days). We can now take the money from the company.
Company has Insufficient Funds to Pay on Behalf of Tutor: When paying on behalf of the Tutor, we don’t allow the refund to go ahead if the company has not got enough funds in their Stripe account.
Company is allowed to go negative: Stripe allows us to take money from an account even if the money isn’t there yet - this is capped by default at -£200. Only companies are allowed to go in the negative; not Tutors.
Timeline for Companies receiving funds for split payment Invoices
The initial payout for every new Stripe account typically occurs 7 days after the first successful payment is received. After that, companies will receive funds in their Stripe account within 3 business days. Once the funds are in your account, they will be transferred to your company’s bank account 3 days later. You can easily track these payouts in TutorCruncher by navigating to System > Settings > Payment Integrations > Card Payments with Stripe > Payouts.
Timeline for Tutors receiving funds for paid split payment Invoices
Tutors typically receive their funds in their Stripe account within 7 calendar days. While the payment is being processed, the Tutor will receive a notification indicating that the money is on its way, and they can track this through their Stripe account, accessible via TutorCruncher.
Once the funds are in their Stripe account, payouts will automatically occur on the last day of the month, although Tutors can adjust this timing if they wish. Additionally, Tutors can initiate one manual payout to their bank account per month. Unfortunately, we can't offer more frequent manual payouts, as Stripe charges us per payout, making it cost-prohibitive.
Frequently Asked Questions
Do I need to operate as an Employment Agency if I’m using split payments?
Not necessarily - while we built split payments functionality with Employment Agencies in mind, you can still use split payments even when acting as a regular Employment Business. That said, with split payments it is currently only possible to charge VAT on your company’s commission rate - we do not advise using split payments if you are seeking to charge VAT on the full charge to a Client.
Can credit paid via Credit Requests or account top ups be used to pay split payments Invoices?
No - Invoices using split payments have to be via Stripe - they cannot be paid for using pre-existing credit that a Client might have in their balance from Credit Requests or any other means. The same applies to Direct Debit and to offline payments - see 'How split payment Invoices can be paid' above.
What if a Client wants to pay by Direct Debit?
A Client cannot pay a split payment Invoice by Direct Debit. To collect from them by Direct Debit, they need to stop being a split payments Client, which means unticking 'Use split payments for this Client' under People > Clients > select the Client > Actions > Edit Profile > Accounting & Client Manager. If you are acting as an Employment Agency for that Client, you will also need to change them to an Employment Business Client on the same tab first, as Employment Agency Clients always use split payments.
Any Invoices already raised for that Client keep the settings they were raised under, so they will still need to be paid through Stripe. To bring them across, void them first, then change the Client's settings, then regenerate and re-raise the Invoices.
Why am I being charged a transaction fee?
The transaction fee is an automated payout fee of 0.15% deducted from your company’s share of the payment whenever you issue an Invoice using split payments. This is the charge that TutorCruncher collects each time you process an Invoice in this way - you can read more about those charges here.
If split payments Invoice is paid for using American Express, then an extra 2% fee will be added - as passing card fees onto the customer is illegal in the UK, this extra fee will be incurred by the company.
Why have we built this feature for our Clients?
We've developed this feature for several key reasons. The primary objective is to ensure that UK-based companies operating as Employment Agencies can comply with the 2020 High Court ruling (EWHC 2461). According to this ruling, it is illegal for agencies to control the compensation owed to Tutors (whether self-employed or not) introduced to Clients, unless the agency itself, rather than the Tutor, is delivering the tuition service. In such cases, the agency must charge VAT on the Tutor’s portion of the fee in addition to its commission.
In simpler terms, if you want to function as an Employment Agency with Tutors acting as self-employed contractors, you must not control the payments they receive. You cannot collect payment from the Client and then pass it on to the Tutor. Further details on the ruling can be found here.
The split payments feature ensures compliance with the aforementioned ruling by eliminating the need for tutoring agencies to handle any payments. Compensation is automatically divided between the Tutors and the agency at the point of payment, removing any control over the funds.
Beyond legal compliance, the split payments feature also streamlines Tutor payroll operations and reduces associated costs. Tutors receive their earnings as soon as the Client makes a payment, eliminating the need for managing monthly bank transfers. Even if your company isn’t directly impacted by the ruling, this feature simplifies the process of receiving payments and paying Tutors.
Does this workflow suit BEIS requirements?
This workflow has been reviewed and approved by BEIS. However, if the solution is misused, there is a risk that this approval could be revoked.
The key takeaway is that companies currently not in compliance (i.e., those using self-employed Tutors while controlling the compensation paid to them) need to demonstrate that they are actively working to adjust their business model.
As long as the industry shows a willingness to adapt, everyone should remain satisfied; BEIS has no intention of undermining the industry.