Taxation Assignment Example | Topics and Well Written Essays - 1500 words

valuateation - Assignment ExampleWhether some peerless is occupied or self employed depends upon the terms and conditions of relevant engagement. The tax and National Insurance contributions (NICs) rules do, however guard special rules that apply to sealed special categories of workers in certain circumstances. If you work for someone else it is important to know whether you are working for that person in employed skill or in a self- employed capacity as an independent rationalizeor. (HMRC)ii Self employed taxpayers have the advantage of claiming wide range of expenses against the receipts of self employment run. The decision to become self employed can also be affected by tax system.(David G Blanch flower and Chris Shad forth)iii at that place is also an advantage of payment of income tax by instalments as against taxes being withheld by the employer under the pay as you earn scheme. It becomes extremely difficult in many cases to distinguish between self employment preco ndition and employee status of a tax payer. Whenever any taxpayer is working on part sentence basis with more than one entity it is always the desire of HMRC to consider the tax payer under the employee status. This is because of easy and quick collection of taxes and NI under PAYE scheme on an income where only limited range of expenses can be claimed and indeed providing higher amount of taxes. In fact these are the nature of activities of the taxpayer that decide the status of the tax payer. If on that point exists a contract of services then it is easy to consider taxpayer as an employee of the entity with whom the contract has been executed to commit the services. But when such contracts exist for more than one entity the taxpayer would be treated as self employed rendering services to a number of entities. What will happen when there is no such contract? Under such conditions the issue is decided on basis of certain criteria. The main criteria are sway over the mental pr ocess of activities, fixidity of payment of net even when the entity is not earning, ownership of equipments used by the taxpayer during the performance of the duties, and exclusivity of providing services to one entity among other considerations. In our case Sam is now providing services exclusively to westmost London Company, and that is why HMRC wants tax him under the status of an employee and not under the status of as a self employed person. When you are not your own master and control of your activities and the performance is guided by the person providing you the remuneration, the status of the taxpayer is treated as an employee of the person providing him/ her the remuneration. You are responsible for your own taxes and NI contributions (Directgov)iv In the case of Sam his activities are now completely controlled by West London Company. Company is providing a fixed monthly remuneration of ?7500 even though he is operating from home. At the same time company is also provid ing him access to a desk, telephone, computer, and also stationery in the office. No reimbursement of expenses is allowed under the understanding as the remuneration is fixed at ?7500 per month. There is exclusivity as Sam is also not providing services to any other entity or client. It should be noted that employment income is taxed on the basis of receipt of remuneration and not on accrual or earned basis which is applied when the taxpayer