Is an individual who earns all her income from one client deemed to be an employee?
29 April 2015
Posted by: Author: SAIT Technical
Author: SAIT Technical
Q: I do the
payroll administration for a client of mine. They employ many people on an
hourly basis. In order for me to code their IRP5 3616 (independent contractor) I
ask for an affidavit stating that not more than 80% of their income is earned
from this client. One individual cannot give this affidavit as the work for the
year has been 100% for the client. This individual lives in Durban and flies to
and from Durban to Johannesburg each week. She also rents a flat in
Johannesburg in order to have a place to stay. Are her flight and accommodation
expenses claimable against her earnings from my client and if so how should
these be coded on the IRP5? Also can I code her earnings as 3616?
A: We are not
sure why the 80% of the income of the company affidavit or solemn declaration
is called for. From the facts the person
concerned is not a personal service provider and paragraph 2(1A) of the Fourth
Schedule to the Income Tax Act does not find application here.
We submit that what is relevant in this instance is the
first proviso to exclusion (ii) to the definition of remuneration in paragraph
1 of the Fourth Schedule.
It deems that a person is NOT "deemed to carry on a trade
independently as aforesaid if the services are required to be performed mainly
at the premises of the person by whom such amount is paid or payable or of the
person to whom such services were or are to be rendered and the person who
rendered or will render the services is subject to the control or supervision
of any other person as to the manner in which his or her duties are performed
or to be performed or as to his hours of work”.
From the facts, she flies to the employer and works there
for the working week, we accept your view – i.e. she is deemed to be an
As such she will only be permitted to make the deductions
allowed under section 23(m). The travel
between home and work would be seen as private travel and we submit that no
deduction may be permitted.
The use of code 3616 is available for person carrying on an
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constituting tax advice or a tax opinion. An expert should be consulted for
advice based on the facts and circumstances of each transaction/case. Even
though great care has been taken to ensure the accuracy of the answer, SAIT do
not accept any responsibility for consequences of decisions taken based on this
query and answer. It remains your own responsibility to consult the relevant
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