INCOME TAX REPORT 3

Topics: Tax, Taxation in the United Kingdom, Income tax Pages: 10 (2580 words) Published: February 4, 2015


OUTCOME 1 - UK INOCME TAX SYSTEM

OUTCOME 2 - PAY AS YOU EARN (PAYE)

Introduction4
Procedures4
UK employment status5
1.Employment status5
2.Criteria of differentiate employment and self-employment5 Right of Control5
Financial Risk6
Equipment6
Work performance and correction6
Holidays and sickness6
Exclusivity6
3.Concusions6
UK income TAX7
1.Taxable person7
2.Tax year7
3.Self assessment7
4.Payment dates8
5.Procedures involved in application of surcharges, interests and penalties8 ADMIN OF PAYE SYSTEM9
1.Basis Of Assessment9
2.Tax Codes10
3.Operation Of The Paye System10
4.Paye Forms Used11

Introduction
The report has been compiled for the purpose of given an information and familiarisation with HMRC rules about the UK Income Tax. Also to give Kate an advice is she should be register under self-employment rules or rather she might have been hire as an employee in the company.

Procedures
The information presented in this report was gathered from:
Allan Melville, 'TAXATION-Finance Act 2012' 11 Edition
HMRC website
Notes

UK employment status
Income Tax (Earnings and Pensions) Act 2003 shows the rules and explain how tax is charged from income of employment. First, we have to realise the differences between employment and self-employment.

1. Employment status
The certain rules and conditions must be met to make a decision, if the person is employed or self-employed, and that means it is not the matter of choice. The main distinction between them two is if the person who works for someone else performs work under the contract of service or contract for service. The thing that matters is reality of relationship. If we want to consider the Katy's status as an employee or self-employment we can use the general questions from the HMRC website, and if the answers will be 'yes' it means that in this situation Katy is an employee. A. Does she has to do the work herself? Yes, Katy has to do the work herself. B. Can anyone tell her at any time what to do, where and when to carry out work or how to do it? Yes, the firm has given Katy subcontracts small jobs. C. Is she working a set amount of hours? Yes, records time spent on each client. D. Can someone move her from task to task? The company sets Katy jobs to do and the same company can ask her to move to another task. E. Is she paid by the hour, week, month basis? Yes, she is paid by an hour worked at an agreed hourly rate. F. Can she get overtime pay or bonus payment? She is paid on her hours worked, and on a G. Self-employed basis, so she is not entitle to be paid on any overtime or bonus payments.

2. Criteria of differentiate employment and self-employment Laid down some factors and tests by the courts, over the years, which are relevant may be useful to determine the nature of a contract.

Right of Control
The engager has a right to control the employee but it is not necessarily must be used in practice. This kind of control usually used by engager to control when and/or were the employee perform his/her services, how it is perform, and what tasks has to be performed but in some kind of work (where employee is an expert) this control will not be important. Under the self-employment the person who perform the work is usually free to choose when and where to do so.

Financial Risk
The main distinction in financial risk between employee and self-employment person is that the second one is ready to risk own money by buying a materials needed to perform the work, and also paying for overheads and bearing the running costs. The employed person not bear any expenses related to the conduct of economic activity. If any of additional cost in case of job overruns will be required the self-employed person must bear them on own risk.

Equipment
In this situation self-employed person might have to buy assets and equipment to perform...
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