Employed or Self-employed
A self-employed person is subject to profits tax with expense
deductions more favorable than those under salaries tax.
If a taxpayer claims to be assessed under profits tax, he has to
discharge
the burden of proof. A business registration is just one of the many factors for
the proof.
An employment exists where there is a legal relationship of
master and servant. An employee is under a "contract of service" whereas a
self-employed person is under a "contract for services".
In Market Investigations v. Minister of Social Security
[1969] 2 QB 173 the judge said: "The fundamental test is whether the person
engaged himself to perform these services performing them as a person in
business on his own account? If the answer to that question is 'Yes', then the
contract is a contract for services. If the answer is 'No', then the contract is
a contract of service. No exhaustive list has been compiled and perhaps no
exhaustive list can be compiled of the considerations which are relevant in
determining that question, nor can strict rules be laid down as to the relative
weight which the various considerations should carry in particular cases. The
most that can be said is that control will no doubt always have to be
considered, although it can no longer be regarded as the sole determining
factor; and that factors which may be of importance are such matters as whether
the man performing the services provides his own equipment, whether he hires his
own helpers, what degree of financial risk he takes, what degree of
responsibility for investment and management he has, and whether and how far he
has an opportunity of profiting from sound management in the performance of his
task... In order to decide whether a person carries on a business on his own
account it is necessary to consider many different aspects of that person's work
activity. This is not a mechanical exercise of running through items on a check
list to see whether they are present in or absent from a given situation. The
object of the exercise is to paint a picture from the accumulation of detail.
The overall effect can only be appreciated by standing back from the detailed
picture which has been painted, by viewing it from a distance and by making an
informed, considered, qualitative, appreciation of the whole. It is a matter of
evaluation of the overall effect of the detail, which is not necessarily the
same as the sum total of the individual details. Not all details are of equal
weight or importance in any given situation. The details may also vary in
importance from one situation to another. The process involves painting a
picture in each individual case."
Click here
for details of the case.
Whether or not a person running a
business on his own is largely a largely question of facts. From time to time, the courts and
tribunals suggest a number of tests --- yet no one is conclusive. The choice of
tests depends on the nature of that particular trade, profession or industry as
well as on the facts of that particular case. In general there are three
common tests: control test,
integration test and
economic reality test.
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