Lecture 3- Employment income

Employment income includes all [blank_start]salaries[blank_end], [blank_start]fees[blank_end], [blank_start]wages[blank_end] & [blank_start]profits[blank_end]. Therefore, it is anything received as result of [blank_start]office[blank_end] or [blank_start]employment[blank_end]

Total taxable employment income includes [blank_start]salaries[blank_end] & [blank_start]wages[blank_end] & [blank_start]items[blank_end] provided for employee unless specifically [blank_start]exempt[blank_end] & other [blank_start]benefits[blank_end] provided where monetary value must be established deduct [blank_start]pension contributions[blank_end] made by [blank_start]employee[blank_end] & amounts [blank_start]spent[blank_end] by employee which are allowable for tax

Basis of assessment is way in which [blank_start]income[blank_end] is allocated to correct [blank_start]tax years[blank_end] for [blank_start]income tax[blank_end] payment purposes. It is on [blank_start]receipts[blank_end] basis (i.e. an employee is [blank_start]taxed[blank_end] on what they [blank_start]receive[blank_end] during tax year)

In relation to basis of assessment, for employees “[blank_start]receipts[blank_end]” means that an item will be [blank_start]taxed[blank_end] on earliest of receiving [blank_start]income[blank_end] & being entitled to its [blank_start]receipt[blank_end]. However, for directors it will be taxed on earliest of date that [blank_start]income[blank_end] is [blank_start]credited[blank_end] to director, if amount of [blank_start]directors fees[blank_end] have been decided by end of [blank_start]period[blank_end] of account & [blank_start]date[blank_end] amount is determined

One important difference between employment & self employment is [blank_start]expenses[blank_end]. Those in self employment can usually [blank_start]deduct more expenses than[blank_end] those in employment

Another important difference between employment & self employment is [blank_start]tax payment dates[blank_end]. Those in self employment pay their [blank_start]tax much later[blank_end] than those in employment

Third important difference between employment & self employment is [blank_start]national insurance[blank_end]. Those in employment have much [blank_start]higher national insurance contributions[blank_end] than those in self employment

Essential difference between employment & self employment is those in employment are under [blank_start]contract of service[blank_end] whereas those in self employment are under [blank_start]contract for service rendered[blank_end] (made)

One criteria that has been taken into account for determining between employee & self employed is [blank_start]control[blank_end]. This refers to [blank_start]control[blank_end] employer has over worker i.e. whether they can say [blank_start]when[blank_end] & [blank_start]where[blank_end] they have got to do work ([blank_start]employee[blank_end]) or [blank_start]when[blank_end] & [blank_start]where[blank_end] they are going to do work ([blank_start]self employed[blank_end])

Another criteria that has been taken into account for determining between employee & self employed is [blank_start]financial risk[blank_end]. An employee is generally paid [blank_start]fixed salary[blank_end] & have to [blank_start]attend[blank_end] work whether or not there is much work whereas self employed [blank_start]do not[blank_end] get paid [blank_start]fixed salary[blank_end] as [blank_start]money[blank_end] coming in depends on how much [blank_start]work[blank_end] there is

Third criteria that has been taken into account for determining between employee & self employed is [blank_start]equipment[blank_end]. If you are an employee you will be [blank_start]provided[blank_end] with all [blank_start]equipment[blank_end] needed for that work whereas those who are self employed will have to [blank_start]provide[blank_end] their [blank_start]own equipment[blank_end]

Fourth criteria that has been taken into account for determining between employee & self employed is [blank_start]substitution[blank_end] ([blank_start]who does work?[blank_end]). For employee they have to [blank_start]come in[blank_end] & do [blank_start]particular work[blank_end] whereas for self employed they [blank_start]do not[blank_end] have to [blank_start]come in[blank_end] & do [blank_start]particular work[blank_end]

Fifth criteria that has been taken into account for determining between employee & self employed is [blank_start]further work[blank_end]. If you are an employee, you are employed on [blank_start]continuing basis[blank_end] & therefore would be [blank_start]expected[blank_end] to come into work [blank_start]next week[blank_end] & [blank_start]continue[blank_end] whereas if you are self employed, you have one [blank_start]particular job[blank_end] & wouldn't be [blank_start]expected[blank_end] to have work at that particular workplace [blank_start]next week[blank_end]

Sixth criteria that has been taken into account for determining between employee & self employed is [blank_start]responsibility[blank_end]. Those who are self employed have [blank_start]more responsibility[blank_end] but if you are [blank_start]director[blank_end] or [blank_start]manager[blank_end] you are an [blank_start]employee[blank_end] & have [blank_start]responsibility[blank_end]

Seventh criteria that has been taken into account for determining between employee & self employed is [blank_start]number[blank_end] of [blank_start]people worked[blank_end] for. If you are an employee you generally have [blank_start]one employer[blank_end] or possibly [blank_start]two[blank_end] whereas if you are self employed you may have [blank_start]many clients[blank_end]

Eighth criteria that has been taken into account for determining between employee & self employed is [blank_start]holiday & sick pay[blank_end]. If you are an employee you are [blank_start]entitled[blank_end] to [blank_start]holiday & sick pay[blank_end] whereas if you are self employed you [blank_start]are not[blank_end]

Overall, [blank_start]intention of parties[blank_end] must be looked at do determine whether you are an employee or self employed

Allowable expenses- Expenses you can [blank_start]deduct[blank_end] from amounts of [blank_start]salary[blank_end] which gives [blank_start]taxable[blank_end] employment income. Certain expenses specifically allowed such as [blank_start]pension contributions[blank_end] by employee, [blank_start]subscriptions[blank_end] to professional bodies, [blank_start]donations[blank_end] to payroll giving scheme & necessary [blank_start]travel expenses[blank_end]

Travel expenses are [blank_start]travel[blank_end] in course of [blank_start]duty[blank_end] & as it is difficult to identify exact cost, there are [blank_start]approved mileage rates[blank_end] in place which an employee can [blank_start]claim[blank_end] & employer can [blank_start]reimburse[blank_end] (repay) without incurring any [blank_start]taxable[blank_end] benefit on employee

Benefits in kind- [blank_start]Income[blank_end] in form of [blank_start]goods[blank_end] & [blank_start]services[blank_end] provided to an [blank_start]employee[blank_end], or member of their family. In order to tax these items, [blank_start]monetary value[blank_end] must be determined

Items not taxed include [blank_start]meals[blank_end] in staff canteen (if [blank_start]available to all[blank_end]), [blank_start]in-house[blank_end] sports facilities, staff [blank_start]entertaining[blank_end] up to [blank_start]£150[blank_end]/head/year, [blank_start]parking space[blank_end], “[blank_start]green[blank_end]” commuting benefits, [blank_start]long service[blank_end] awards, [blank_start]non-cash[blank_end] gifts from [blank_start]other[blank_end] than employer, [blank_start]mobile telephone[blank_end] & [blank_start]trivial benefits[blank_end] (flowers for retirement/illness)