Tax status; are you employed or self-employed?

If you would benefit from being self-employed rather than employed, or vice-versa, you may be interested in this article. HM Revenue & Customs have recently published new guidelines to help taxpayers decide if they are employed or self-employed. We have reprinted below some of the criteria that they suggest you use in order to arrive at a decision.

The comments that follow are quoted from the HMR&C publication.

"In most cases your employment status will be straightforward. In general terms, you are employed if you work for someone and don't have the risks of running the business. You are self-employed if you are in business for yourself and are responsible for the success or failure of that business.

To help you check your employment status, answer the following questions. These also apply if you are a casual or part-time worker. If you have more than one job the same questions apply for each job.

Employed - if you answer yes to most of the questions you are likely to be employed:

Do you have to do the work yourself?
Can someone tell you where to work, when to work, how to work or what to do?
Can someone move you from task to task?
Do you have to work a set number of hours?
Are you paid a regular wage or salary?
Can you get overtime pay or bonus payments?
Are you responsible for managing anyone else engaged by the person or company that you are working for?

Self-employed - if you answer yes to one or more of the questions you are likely to be self-employed.

Can you hire someone to do the work, or take on helpers at your own expense?
Can you decide where to provide the services of the job, when to work, how to work and what to do?
Can you make a loss as well as a profit?
Do you agree to do a job for a fixed price regardless of how long the job may take?

If you can't answer yes to any of the above questions, you are still likely to be
self-employed if you can answer yes to most of the following questions.

Do you risk your own money?
Do you provide the main items of equipment (not the tools that many employees provide for themselves) needed to do the job?
Do you regularly work for a number of different people and require business set up in order to do so?
Do you have to correct unsatisfactory work in your own time and at your own expense?"

Please note that the opinions quoted above are those of HMR&C; we do not necessarily agree with all of the comments made! If you are at all uncertain about your tax status can we suggest that you give us a call and we will provide you with advice based on your own individual circumstances.

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		Tax Traps
	A couple of current “tax traps” Annual Investment Allowance – from April 2008 most businesses are entitled to an Annual Investment Allowance for Capital Allowance purposes of £50,000 – this amount can be written off against taxable profits in full (effectively a 100% first year allowance on £50,000). However whilst this applies to individuals, partnerships and companies – and in some circumstances an individual and a company they control get an allowance for each – it doesn’t apply to partnerships if any of the partners are companies. So if you have a partnership, where one or more partners are companies, then please seek our advice on the best structure for you. Entrepreneurs Allowance – from April 2008 the old Business Asset Taper Relief regime for Capital Gains Tax is replaced by Entrepreneurs allowance on the disposal of business assets in certain situations, normally aligned with the disposal of a whole / significant part of a business. The practical effect of this is that if you sell a business asset, eg a building, at some time other than the sale of your business you will not receive a privileged Capital Gains Tax treatment – however roll over relief, to defer the tax charge, will often be available. However if you sell a property at the same time as selling a business then Entrepreneurs Relief will normally be given meaning the first £1m gain is taxed at 10% rather than 18%. There is one exception to this however – if the property has been rented to a partnership / company of which you are a member / partner then the Entrepreneurs Relief will be denied to the extent that the rent is in proportion to a commercial rent. Over recent years it has been common place for commercial properties to be owned outside of businesses and rented to the company / partnership and if this is the case then relief will be affected, even if, as is common, the rent only relates to interest charged on a mortgage loan. If the business uses the property rent free then there is no restriction. NB1 periods before April 2008 are disregarded. NB 2 this doesn’t apply to “renting” part of your home to your business as an office. So, if you have a company or partnership, and rent a property to that company / partnership, even if the rent is just to cover loan interest, then please seek our advice on options available to you. Back to top

		Hedge Funds
	The term ‘hedge fund’ covers a wide range of investment strategies, from the lower risk, aiming to preserve capital, through to the very high risk, perhaps even using large amounts of debt – gearing – to try and boost returns. They usually have high minimum investment levels and lack the transparency of traditional funds – indeed, many will not reveal how they make their money in case it moves the market and jeopardises their returns. They are also generally unregulated and most are based offshore. For example, a hedge fund manager might aim to produce 'absolute' returns of, say, 10% per year, regardless of whether equity markets go up or down, as opposed to 'relative' returns, where a fund manager aims to outperform a benchmark. They might aim to do this by using a technique called 'shorting' to make money from a stock if its price falls, as well as holding stocks in a traditional way to make money if its price rises. Other more sophisticated 'macro' techniques might aim to make money from currencies or interest rates. And some hedge fund managers will borrow to try and magnify their returns - and it is these highly-geared funds that have been the source of most of the well-publicised problems. Because of all these different techniques, hedge funds are only suitable for the most sophisticated or experienced investors who can understand the processes and therefore appreciate the full extent of the risks involved. If you would like help rebalancing your investment portfolio your experienced Garbett’s Financial Strategies team is here to help. Call us on 01983 527111 www.garbetts.com/gfs Back to top


	DISCLAIMER - PLEASE NOTE: The ideas shared with you in this email are intended to inform rather than advise. Taxpayers circumstances do vary and if you feel that tax strategies we have outlined may be beneficial it is important that you contact us before implementation. If you do or do not take action as a result of reading this newsletter, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.