Unique Original Articles » Self Employed? Check your liability when accepting benefits.

When acquired as a service provider, receiving benefits from a business client can turn the problem of tax an extremely complex one. Dependant upon the nature of the benefits you obtain, it is rather simple to get drawn into a position during which you closely resemble a member of staff of the company as opposed to a contractor.

By way of example, if, as a contractor, you receive benefits such as: a company vehicle, pension contribution and accommodation, it is plausible for your tax standing to alter for every one of them. Doing your own accounting for contractors is in no way hassle-free, so make sure you are knowledgeable of these concerns when accepting new business.

Every single bonus is addressed individually resulting in a intricate mixture of tax directives and statements. In the situation of a salaried worker the accommodation, the benefit would be determined and reported by the corporation on a P9D. However, someone who is freelance would not have any P9D, bringing about the matter of whether they estimate and declare the advantage themselves in their SA return?

As a member of staff of the business, a pension contribution is a non-taxable bonus but whether this applies to a self employed contractor is another dilemma. Is the self employed employee just as entitled to this tax settlement or is it alternatively something to be qualified as extra wages? Pending a verdict to pay out tax on this contribution, would they also have to pay tax on their own pension contribution? Can they really be categorised net or gross?

The car subject is similarly complicated, as its tax status relies on gross earnings of the worker. This would apply theoretically to the self employed contractor also, but if regarded as taxable, how could they evaluate the taxable reward? Whether or not they should observe equivalent process as that of a typical employee is questionable but ultimately, where it would be reported on the SA return is a puzzle unto itself.

In the long run, receiving benefits in addition to ordinary payment practices can produce a tax nightmare for anyone involved. Whether you use professional accounting services or not, the standing of added benefits should identified at the beginning of the purchase process, clearly determining whether they are provided as additional earnings or otherwise. Be sure to obtain clarity in such matters to steer clear of your own tax horror.
Emily Edwards works for Chartered Accountants 'Eze & Associates'. Offering professional accountancy services as well as advice and assistance in the complex financial market.
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