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SBE Lect 2 Part 4: Ch2 & Ch3.1-3.4-SB- The big picture (Arguments of…
SBE Lect 2 Part 4: Ch2 & Ch3.1-3.4-SB- The big picture
Can we distinguish the entrepreneur from the small business?
CHAPTER 3 – DEFINING THE SMALL BUSINESS
In case of a small business, there is
some ambiguity surrounding the status of the entrepreneurs (the self-employed)
, consider the following cases:
◦ A person owning a business but working for one client only
◦ Business with one employee who happens to own the business
Definitional issues of public interest, mainly because of tax reasons
◦ We’ll practice with this in Case 2
Defining self-employment
Chapter 2: Occupational notion (“entrepreneurs” and “managerial business owners”
OECD “those jobs where the remuneration is directly dependent upon the profits derived from the goods and services produced”
No universally agreed definition but tax authorities usually look at:
Control
Integration
Economic reality
Mutuality of obligation
SBE- Case 2
Key Learning objectives
Increase your awareness of the difficulties presented in counting the number of self-employed in an economy
Case relates to discussion in The Netherlands about ZZP (solo self-employed / own-account workers)
that do the work of an employee but are registered as self-employed
Increase your understanding of the ambiguity surrounding the status of the self- employed
The in-class case
What should be the judgment of the Special Commissioner?
Guidelines for judgment
◦ Integration
◦ Economic reality
◦ Mutuality of obligation
◦ Control
Short description case
Mr Jon Bessell – the sole director of Dragonfly Consultancy Ltd – has to pay a tax bill of ₤99,000 because the UK tax authorities judged he was an employee rather than a self- employed worker
◦ Mr Bessell worked on three separate projects for the Automobile
Association group between 2000-2003
◦ Mr Bessell does not want to pay £99,000 and thus brings his case to a Special Commissioner
◦ Mr Bessell is an experienced IT system tester
Arguments of Tax authority
Although Mr B paid for it himself, his home computer was directly linked to the AA offices
Nobody told Mr B how to do his work, but he was expected to complete tasks allocated to him by agreement with the team leader, and the standard of his work was monitored informally
Mr B was able to use the onsite canteen and was invited to attend staff social activities
Mr B attended weekly team meetings and took part in ad hoc discussions