Income Tax Essay
TITLE PAGE INCOME TAX Assessment - Report writing NAME: xxxx xxxx STUDENT NUMBER: xxxxxx HND Accounting TUTOR: xxxx xxxx
DATE: April 2012
ACKNOWLEDGEMENTS.
I would like to thank my tutor, xxxx xxxx for the valuable advice and support given to me to enable me to write my report.
INTRODUCTION.
The purpose of this report is to fully evaluate Katy’s situation by providing detailed information about the different issues regarding employment and self-employment to enable her to determine her employment status.
Question 1
Employment and Self-employment
It is highly important to establish a person’s employment status. The key test to be applied when trying to determine a taxpayer’s status is concerned with the nature of the contract between the taxpayer and the person who is paying for the work done by that taxpayer. * If a contract of service exists then the taxpayer is regarded as an employee for tax purposes. * If a contract for services exists then the taxpayer is regarded as a self-employed person who is rendering services to a client.
The criteria that would be used to determine Katy’s employment status are as follows: * Control: a contract of service is more likely to occur when more control of work is at the hands of the person paying for the work compared to the person doing the work. Employees in this category have no say when it comes to choosing when, where or how to do the job. Self-employed people on the other hand can make these decisions themselves. * Remuneration and Financial risk: employees are paid their wages regularly whether or not their employer is making any profit, and in any situation, they do not risk their own capital in the business. Self-employed people are paid for each job they do, and they make more profits or losses depending on the particular job, and they may also loss their capital if business fails. * Equipment: self-employed people tend to provide their own equipment but generally,
DATE: April 2012
ACKNOWLEDGEMENTS.
I would like to thank my tutor, xxxx xxxx for the valuable advice and support given to me to enable me to write my report.
INTRODUCTION.
The purpose of this report is to fully evaluate Katy’s situation by providing detailed information about the different issues regarding employment and self-employment to enable her to determine her employment status.
Question 1
Employment and Self-employment
It is highly important to establish a person’s employment status. The key test to be applied when trying to determine a taxpayer’s status is concerned with the nature of the contract between the taxpayer and the person who is paying for the work done by that taxpayer. * If a contract of service exists then the taxpayer is regarded as an employee for tax purposes. * If a contract for services exists then the taxpayer is regarded as a self-employed person who is rendering services to a client.
The criteria that would be used to determine Katy’s employment status are as follows: * Control: a contract of service is more likely to occur when more control of work is at the hands of the person paying for the work compared to the person doing the work. Employees in this category have no say when it comes to choosing when, where or how to do the job. Self-employed people on the other hand can make these decisions themselves. * Remuneration and Financial risk: employees are paid their wages regularly whether or not their employer is making any profit, and in any situation, they do not risk their own capital in the business. Self-employed people are paid for each job they do, and they make more profits or losses depending on the particular job, and they may also loss their capital if business fails. * Equipment: self-employed people tend to provide their own equipment but generally,