Should Agency Workers Be Subjected to PAYE?
Oct 19, 2011 Taxes
HMRC lost another case in their fight to reclassify workers when the Upper Tribunal upheld a decision of the First-tier Tribunal. The decision was that workers supplied by Talentcore Ltd to act as consultants in duty free shops at airports were not employees of the company. The reason was the workers had an unfettered right to substitution, even though they were subject to, or to the right of, supervision, direction or control as to the manner in which their services were provided.
The company carried on the business of supplying individuals for counter and promotional work to major cosmetic companies in the duty free shops at airports. The company had a database of about 100 individuals whom they supplied to the cosmetics companies and who were referred to as consultants. Unusually there was no framework contract in place between the company and the consultants and the company was free to offer work to the cosmetic companies or not to. The consultants were free to accept or decline work when offered; there were no written contracts between Talentcore Ltd and either the cosmetics companies or the company World Duty Free which ran the duty-free shops.
World Duty Free that operated the duty-free shops were in a position to give directions to the consultants. The consultants worked alongside World Duty Free staff and were subject to the same control as other staff. The cosmetics company was invoiced by the company who attached a list of the people and time worked; the consultants were then paid by reference to the time sheets. Consultants who were unable or unwilling to work an agreed slot were expected to inform the taxpayer and if possible find a replacement.
The First tier Tribunal allowed the company’s appeal against assessments to PAYE tax and National Insurance contributions issued on the basis that the workers were employees of the company. HMRC appealed this decision.
The point at issue was whether the proper interpretation of the statute was that the agency workers were employed by the company for the purposes of income tax and national insurance.
The Upper Tribunal dismissed HMRC’s appeal saying that none of the relevant legislative provisions would apply if the individual was not (a) providing, or under an obligation to provide, personal services; or (b) subject to (or to the right of) supervision, direction or control as to the manner in which those services were provided. The Tribunal found that the second of those conditions was satisfied but that the first was not.
In this case, there was no framework contract and each (oral) contract was for a specific shift. The Tribunal held that under those contracts the consultant’s basic obligation was to ensure that the shift was covered, either by himself or a suitable substitute. The fact that the original consultant had complete freedom to arrange for a substitute if he wished, even if he did not actually do so, constituted an unfettered right of substitution.
The statutory provision only applied for tax purposes if the services were supplied under the terms of a contract made between the worker and the company under the terms of which the worker was obliged personally to provide services to the company’s client.
The contract was entered into before the consultant started to work the shift to which it related, possibly days or weeks beforehand, and it was not replaced by a new and different contract once the consultant started his shift. It was held that how the contract was performed did not alter its terms.
Tags: Taxes
How to Cut Back on Social Security Taxes
Oct 2, 2011 Taxes
Nowadays, Social Security is taxable; something that came about only recently. Most people have yet to know this and only do so when they start getting their tax bills. Taxes on Social Security occur when an individual spends more than what is legally allowed. It always comes as a disappointment to many people given that they always tend to think that it is a tax- free fund. To be on the safe side, one should pay close attention to why these funds are taxable. Prior knowledge equips beneficiaries of Social Security funds with knowledge on how to avoid tax, and how to claim tax relief related to the funds.
- Income sources: Source of income determines whether a person is eligible to pay interest on retirement insurance or not. For calculation purposes, income is considered from the basic level. It is then added to investments that one may have made and which are tax free. All expenses not related to domestic consumption or academic purposes are deducted from the figure obtained. There is an IRS sheet that is used to determine how much tax one should pay, given the different income levels.
- If an individual wants to pay less tax, he/she should avoid placing dividends and interest together with income figures. Dividends and interests increase tax amounts owing to their increase effect on income levels. It is important to scale down income figures if the ultimate goal is to obtain a lower figure on Social Security taxes. Taxes have been paid for any years, but many people agree that it sometimes the Internal Revenue Service is not fair on some tax levies, especially if applied on basic things like Social Security funds.
- One has to take interest to know how the modalities of Social Security systems. Social Security funds are used drive people to save for retirement purposes. They are designed to cater for people’s needs when retire from active employment. There are many factors that can affect payment of taxes related to retirement insurance and so one has to get reliable information about their application. One can visit the client support department of the Internal Revenue Service in order to obtain relevant details.
Anyone who has been paying taxes to IRS is eligible to claim deducible taxes. This applies to both married couples and single individuals. All incomes are reviewed and the correct tax figure reached upon using the MAGI.
Tags: Taxes
Avoid IRS Penalties Or Giving the IRS an Interest Free Loan
Jan 14, 2010 Taxes
About 90% of Americans pay their income taxes via payroll withholding. If you are wondering whether you do or don’t, chances are very good that that’s how you pay your income taxes as well. Essentially how this works is that every time you get a paycheck, a certain amount of money is withheld from your check by your employer. The employer holds onto that money until it’s time to give the money to The Treasury Department. Depending on the amount of payroll taxes the employer owes, the time they get to hold on to the money before sending it to the government can be anywhere from one week to three months.
The amount your employer withholds is actually determined by you. When you first started working, one of the several forms you filled out was a W-4 tax form. Many people fill this out once, and leave it the way it is, but you are actually allowed to change this form at any time. The way it works is that you tell your employer how many “allowances” you have. Essentially, the more allowances you claim on form W-4, the less money your employer will take out of your paycheck to pay your Federal Income Taxes with. On the first page of the W-4 form is a worksheet prepared by the IRS that allows you to determine how many allowances you have. The worksheet is pretty self explanatory, and it is unlikely that your employer will help you fill out the form (not because they don’t like you, but most are not tax experts and they don’t want the liability if you make an error).
If you plan on being in the same financial situation next year, you should look at your current W-4 and look at your tax return to determine whether you will owe taxes or get a refund. If you will make under $150,000 in 2010, you must make sure that you pay at least the total amount of income tax you owed for 2009 or 90% of the total income tax you end up owing for 2010 (whichever is lower) during the 2010 year. If you don’t end up doing that, you will end up having to pay hefty fines to the IRS in the form of interest and penalties.
So, if you owe a lot of money to the IRS in April, you need to make sure that you adjust your W-4 and decrease the amount of allowances, otherwise it’s likely that you will owe fines for 2010.
If, however, you will be getting a big refund check at the end of this year, and you expect the situation to be the same next year (i.e. the refund is not due to a one-time tax credit or other major deduction) then you should increase the number of allowances on your W-4. If this is the case, you are certainly allowed to keep it the same. The IRS has no problem taking more money than they deserve and giving it back to you in April. Essentially, you just gave them an interest free loan, and they will be happy to hold onto your money for you. It is more financially sound, however, to increase your allowances so that you don’t have to wait until April to get your money. Some people, even knowing this, choose to forgo the possible interest and use the IRS as a forced savings vehicle. While we don’t agree with that technique, we certainly understand the logic behind it, and you need to determine the best method for you.
If you have any questions regarding withholding, please don’t hesitate to contact us. If your income is under $60,000 per year, we will assist you for free with setting up your allowances.
Tags: Taxes
