“Ellen is a sole trader and is in business as a Chartered Surveyor. Her income statement for the year ended 31 March 2021 was as follows:”

                                                                      “£                         £              Notes”

“Fees receivable                                                                 80,000

Bank Savings interest received                                               10

                                                                                             80,010”

“Less: Expenses

Wages and Salaries                                   18,210                                         1

Office rent and expenses                         22,700                                         2

Communication costs                                 1,800                                         3

General expenses                                       1,100                                         4

Professional fees                                        1,500                                         5

Motor and travelling                                  9,000                                         6

Insurances                                                  1,300                                         7                                             

Depreciation                                                500               56,110

Net profit for the year                                                      23,900”

“Notes

1. Wages included the following: Gross wages for assistant (Zoe) £12,000, Ellen’s self-assessment tax payment for previous tax year £4,210, payment to Ellen’s partner £2,000 (he did not work in the business).

2. Office rent included a premium paid on a new-short lease taken out on 1 April 2020. The premium was £5,000 and the duration of the short lease was 6 years. Ellen sometimes works from home and has not claimed for this. A fair claim would be £400 per annum.”
3. “Communication costs included £480 for mobile telephone costs. The mobile phone was used exclusively for the business. The office line accounted for £820 and the remaining £500 was for all of Ellen’s home phone which is only used 10% for business calls.”

4. “General expenses included: Entertaining - employee at Christmas £120 – entertaining her customers £150 and entertaining her suppliers £100.”

5. “Professional fees of £1,500 consisted of £850 paid to Ellen’s accountants for routine annual accounts work and £650 paid to her solicitors for (unsuccessfully) attempting to get her off a car speeding charge (see 6 below)”
6. “Motor and travelling of £9,000 was wholly in respect of Ellen’s car expenses. Part of the sum relates to a speeding fine of £200, £3,800 is car fuel, repairs, road tax and insurance and the remaining £5,000 is car payments (for her leased car which has CO2 emissions of 148 g/km). Ellen’s total miles in the year were 10,000 of which 4,000 related to business. All car expenses had been included in the Income Statement.”
7. “Insurance consists of comprehensive business cover £900 and life cover for Ellen £400.”

8. “Capital allowances of £ 1,200 have been calculated as due for the year.”

“Required

1. Calculate Ellen’s taxable profits (start with the net profit figure of £23,900 and include adjustment entries for notes 1 to 8 showing a zero (0) if no adjustment is required). 
2. Ellen’s assistant Zoe is due a substantial pay rise and to minimise costs and employee rights Ellen is considering transferring her from employment to self-employment. What are the status tests distinguishing employment from self-employment?