Distinguishing Employment from Self Employment in Business Taxation

BUSINESS TAXATION

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
Question 1........................................................................................................................................3
The criteria which can be used to distinguish employment from self employment....................3
Question 2........................................................................................................................................4
The six badges of trade................................................................................................................4
VAT scheme available to the VAT registered business..............................................................5
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................1

INTRODUCTION
Taxation is a means by which government levies tax on its citizens and different business
entities. It is divided into direct tax and indirect tax. In this report, we will discuss about the
criteria through which we can distinguish between employment and self employment. In this
report, we will also understand the six badges of trade along with different VAT scheme which is
available to the VAT registered business.
MAIN BODY
Question 1
The criteria which can be used to distinguish employment from self employment
In self employment people run their own business while in case of employment people
work under the different business entities as an employee(Burnap, and et.al., 2018). But someone
can be both self-employed and employed as well. The criteria which distinguish between the
employment and self employment are:
Criteria Employment Self- employment
Right and
responsibilities
In this person have employment
rights and responsibilities.
In this person do not have
employment rights and
responsibilities.
Supervision In this, employee has to work
under someone's supervision.
In this, self-employed person work
without the supervision of anyone.
Registration If the person is in employment they
need not registered themselves to
HMRC.
If the person is self employed they
need to registered themselves to
HMRC.
Control In this, the person themselves do
not have any control over their
work.
In this, the person have full control
over their work because they
themselves run the whole business.
Tax Rate Under this, the person is liable to
pay tax by following individual
slab rate.
Under this, the person is liable to pay
tax on the basis of flat rate
depending on their types of business.