Income Tax - Outcome 1 Hnd Accounting

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Outcome 1 – Income Tax Question 1 HMRC uses a variety of different tests in order to decide whether a person is employed under a contract of service or self-employed under a contract for service. HMRC uses a control, remuneration and financial risk, equipment, work performance and correction, holidays and sickness and exclusivity. The case study states Katy is given “small jobs... and she does them as and when she can”. The company has control over which jobs they choose to give Katy, however, Katy has full control over when to do these. There is an aspect of self-employment and employment involved here. Katy is paid a separate fee for each hour she works regardless of profits or losses made by the business, “Agreed hourly rate”. Katy has little financial risk, if any as she uses the equipment of the company such as “one of their PC's” and “the accountants stationery”. With regards to remuneration, financial risk and equipment, Katy looks to be employed by the accountancy firm. Any hours spent doing each clients' books is charged to the accountancy firm “invoices the accountants for her hours worked”. This is regardless of any corrections needed to be made, any corrections will be at the companies expense so for this aspect, Katy looks to be employed. This case study clearly states at the end that Katy would have preferred to be employed as she “would have been entitled to holiday and sickness pay”. This is an important point as Katy looks to be self-employed due to not receiving holiday and sickness pay. Katy chooses not to work for any other business so is exclusive to her current firm for work. If she were to be seen as self-employed she could gain more wages. From this aspect she seems to be employed. I believe based on the tests provided Katy is employed by this firm. She has a steady work flow at an agreed rate, she need not pay for

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