Accounting and Finance: Taxation - Assignment Example

Introduction The employment status of an employee has been categorized as employed or self-employed. This categorization is based upon the terms and conditions of the relevant association. It is important to mention that such classification is important as separate rules have been promulgated which are applicable to specific conditions of employment in special circumstances. It is important for an employee to realise that he/she should be aware of her job description along with lists of the designated authorities to whom he/she is responsible. It is significant to evaluate the capacity of your designation, which shall be verified against the standard classification of employed or self-employed, "it is important to know whether you are working for that person in an employed capacity or in a self-employed capacity as an independent contractor". This classification is significant in terms of imposition of tax bracket, the employment status is crucial to determine "the charge to tax on income from that employment or self-employment, and determines the class of NICs, which are to be paid" (Helen, 2000). Discussion The differentiation between the self-employed and employed is possible after evaluation of "contract of service or under a contract for services". It is important with reference to tax and NIC that "there is no statutory definition of a contract of service or of a contract for services", it is indeed the relationship towards the institution which is significant in assessment. The application of common law principles is critical for the determination of the nature of a contact. The courts have developed specific factors and assessment, the affirmative response towards series of factors helps in the classification of employed personnel. The questions includes, "do they have to do the work themselves?; can someone tell them at any time what to do, where to carry out the work or when and how to do it; can they work a set amount of hours; can someone move them from task to task; are they paid by the hour, week, or month; can they get overtime pay or bonus payment". The affirmative response towards following suggest the strong possibility of self-employed personnel, "can they hire someone to do the work or engage helpers at their own expense?; do they risk their own money?; do they provide the main items of equipment they need to do their job, not just the small tools that many employees provide for themselves?; do they agree to do a job for a fixed price regardless of how long the job may take; can they decide what work to do, how and when to do the work and where to provide the services?; do they regularly work for a number of different people?; do they have to correct unsatisfactory work in their own time and at their own expense?" (Helen, 2000). As per legal regulations, contract has been regarded as oral and/or implied agreement between minimum two parties. The common elements of valid contract service and contract for services include, "the intention to enter into legal relations; an offer (usually of work) and its acceptance (an agreement); consideration (for example, in return for performing work the worker receives payment)". The establishment of contact is essential, it is also important to settle the terms and conditions of the contract against "case law laid down by the courts over the years" (Greg, 2006). Issues The legal requirement envisaged by the courts include "basic approach to identify the factors present; weigh those that point to self-employment against those that point the other way; and then stand back and consider the picture that emerges" (Helen, 2000). The contract shall include the discussed features, which shall essentially reflect the nature of employment and will assist in differentiation of employment status. The understanding and interpretation of relationship between the parties is not of significant interest, "it is the reality of the relationship that matters, the intention of the parties has to be taken into account and can be decisive where the relationship is ambiguous and, or where the other factors are neutral". The lists of the pending cases in the court reflects that "there is no single satisfactory test governing the question whether a person is an employee or self-employed". Two different approaches have been undertaken to develop proper classification of self-employed and employed. The legislative approach has defined "in statute the traits or indicators of ‘employee’ status using criteria established by common law over many years". The intent of affirmative approach was to "reaffirm the criteria as a Code of Practice and to distribute the material to as widely a relevant audience as possible". It has been realised that "statutory definition would provide clarity for anyone dealing with or considering the issue of a person’s employment status". The legal aides have warned against the existence of statutory approach, and have predicted that this will "interfere with flexibility laid down by the courts over the years", whereas specific group has warned that "statutory definition might prove detrimental to ‘employee’ status". The category of employment can by evaluated after detailed investigation of the nature of job performed by the person. The scope of such investigation shall focus upon "the way he or she does it and the terms and conditions under which he or she is engaged, be they written, verbal or implied or combination of all three" (Greg, 2006). Cases and Criteria As specific Supreme Court case of Henry Denny & Sons Ltd. T/A Kerry Foods v The Minister for Social Welfare, the fundamental test to evaluate the employment status of the person include verification that "employee perform certain work performs it as a person in business on their own account was considered among other matters". With reference to specific case of the UK case of Market Investigations Ltd v Minister of Social Security, the criteria for the assessment of employment "was amplified by a series of specific criteria "i.e. does the person doing the work assumes any responsibility for investment and management in the business or otherwise take any financial risk or provide his own equipment or helpers or have the opportunity to profit from sound management in the performance of his/her task". As per court this criteria will "judge whether the person engaged is a free agent and has an economic independence of the party engaging the service". Some important cases have been quoted where classification between employed and self-employed has been difficult. The engagement of the person towards his or her job as per contract of service or under a contact service "is of assistance because of the atypical nature of the engagement". The features associated with the discussed cases include, "the facts were fully established and articulated and relevant legal principles applied by the Social Welfare Appeals Officer", the court did reverted the decision. In one of the cases, the person was "engaged were a demonstrator / merchandiser of food products in supermarkets", such an employment was casual and included "a pool of demonstrators to be drawn from" (Helen, 2000). The casual nature of employment developed "mutuality of obligation “as critical issue "i.e. whether or not the person engaged had an obligation to take each engagement when offered the right of substitution was an issue albeit with the approval of the employer; the employment included fixed term contracts". The Appeals Officer was decided that the employee shall not "be bound by an unreported Circuit Court judgement, dealing with a similar issue under an unfair dismissal claim under employment law, which he did not agree with". The decision of Appeals Officer was based upon "the facts or realities of the situation on the ground”, it was important to review the reality and abstract of "the written contract to arrive at the totality of the relationship". The important statements included in the contract which shall classify employed and self-employed is "deemed to be an independent contractor, it shall be the duty of the demonstrator to pay and discharge such taxes and charges as may be payable out of such fees to the Revenue Commissioners or otherwise, it is further agreed that the provisions of the Unfair Dismissals Act 1997 shall not apply etc, you will not be an employee, you will be responsible for your own tax affairs" (Greg, 2006). References 1. Great Britain (2006). Companies Act 2006. The Stationery Office Publication. Pp. 134-189. 2. Greg Tolhurst (2006). The Assignment of Contractual Rights. Hart Publishing. Pp. 203-217. 3. Deborah R. Barnbaum, Michael Byron (2001). Research Ethics: Text and Readings. NY: Prentice Hall 4. Helen Simons, Robin Usher (2000). Situated Ethics in Educational Research. London: Routledge. Read More