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Replies to Queries - 3 - Jobs galore!

14 November 2001
Issue: 3833 / Categories:

I act for a market researcher who may carry out work for between twenty and thirty different agencies in the course of a year. I can identify four ways of dealing with this person's tax return. They are:

(1) Follow strict Inland Revenue advice and complete an employment page for every different agency who has dealt with the matter under Schedule E.

I act for a market researcher who may carry out work for between twenty and thirty different agencies in the course of a year. I can identify four ways of dealing with this person's tax return. They are:

(1) Follow strict Inland Revenue advice and complete an employment page for every different agency who has dealt with the matter under Schedule E.

(2) Treat all the earnings as from self employment, claiming appropriate expenses, and claiming credit for any pay-as-you-earn tax deducted at source by use of box 3.98.

(3) Complete an employment page for any earnings that have had pay-as-you-earn tax deducted at source, and bunch together the rest of the earnings paid without deduction, as being from self employment.

(4) Selectively take out the larger amounts of earnings and enter them on employment pages, and treat the rest as coming from self employment, again claiming any small amounts of pay-as-you-earn tax under box 3.98.

I like to make life easy for myself and the Inspector of Taxes and have tended to follow method (2) and, to a certain extent, method (4). I have some qualms about method (4) as there is an avoidance of Class 4 National Insurance contributions under this method. I am not so much looking for expert advice as to which method is right or wrong, but would be interested to know the general approach taken by other practitioners given similar circumstances. This will indicate whether I am out of line in taking what I deem to be a sensible and short-cut approach.

(Query T15,910) – Easylife.

 

In my client's case, I have treated all of the market researcher earnings as Schedule E income. This is due to not only the tax, but also because of the less frequent Class 1 National Insurance contributions deductions.

When, in the past, faced with the approximately 60 tax return pages E1 and E2, I was also tinkering with the idea of self employment. However, following telephone conversations and correspondence with the tax office concerned, it was agreed that submission of single pages E1 and E2, showing the relevant totals, together with a separate single page summary of the different sources, and obviously a note outlining this in the additional information box on page E2, would suffice.

From what 'Easylife' says, I think it may well depend on the relevant tax office(s) opinions, as to which approach is acceptable, and it is always worthwhile sounding them out, to see if the way that suits you best, also suits them! – Goldstone.

 

The qualms expressed over option (4) of this impressive permutation are wholly unfounded. Class 4 as such might be avoided, but assessment under Schedule E involves a total National Insurance contributions cost rather higher than that arising on Schedule D. Try a pair of comparative computations for someone with taxable income just large enough to absorb all of the income tax basic rate band.

I have a client trading as an entrepreneur whose activity, for several years, included some market research rounds, some rounds subjected to pay-as-you-earn and some not. We:

* included all the receipts in Schedule D turnover;

* treated the pay-as-you-earn as tax paid on account;

* withheld Class 2 National Insurance contributions until the end of the tax year, and offset Class 1 deductions against them;

* offset Class 1 deductions against Class 4.

Market research demands a home, office and a car, and it is clear, from the sheer volume, that the circumstances of the client in this case match those of my client in principle. The practitioner should not consider any option but the second one. The client is clearly self employed and beyond the level of supervision expected in connection with an employee.

As a precaution, each contract should be examined to ensure that it reflects contractor status, as distinct from a master and servant relationship, when measured by the pay-as-you-earn office questionnaire:

* How detailed is any supervision by the principal?

* Is there an entitlement to paid annual and bank holidays?

* Is there paid, or state supported, sick leave?

* Is there a right to redundancy payments or membership of an employee pension scheme?

* Is the subcontractor the only one suable for defective work by him?

* Must, or does, the subcontractor have professional indemnity (or product liability) insurance?

It is sensible to arrange subcontract details so as to meet that test as far as possible, so averting official harassment. – Man of Kent.

 

Extract from reply by 'Bear':

Options (2) and (4) would be hazardous, but might be necessitated if substantial expenses remain unrelieved under Schedule E. Each engagement could represent a distinct employment with a permanent workplace.

Strictly, written decisions ought to be sought in accordance with Revenue leaflet IR56. The case of Market Investigations Ltd v Minister of Social Security [1968] 3 All ER 732 is a pointer, not a binding precedent.

If 'Easylife' adheres to existing procedures, the position should be put on record with the client.

 

Editorial note. Paragraph ESM4220 in the Revenue's Employment Status Manual affirms that 'market research interviewers are usually engaged under contracts of employment'. Both 'Goldstone' and 'Man of Kent' have made valid points. 'Status' is a matter of law, and if the client wishes to take the risks of contending for self employment, including a self assessment enquiry, he should be given that opportunity.

Issue: 3833 / Categories:
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