Question 1 9 marks Tim Rach is a self-employed skiing coach. He usually finds some seasonal jobs during summer to fill the gaps in his coaching work. Tim started a job with Instant Water Service Ltd (IWSL) this summer. IWSL provides bulk water delivery services to rural residents and commercial customers. Tim joined IWSL in January 2020. The company was extremely busy due to the summer draught. The general manager, Richard Barker asked Tim to start his job first and promised to prepare an employment contract for him to sign shortly. However, Tim has never had a chance to sign the contract so far. Tim is assigned a truck with a stainless-steel water tank fixed on it. He is required to pick up the truck from the company's carpark every morning and drives the truck back to the company premises when he finishes the last load of water delivery every night. The truck and the water tank are maintained and cleaned by IWSL to meet the hygienic requirement. The customers are assigned to Tim by the office manager, Joseph Hokinson, on a daily basis. Tim can start his work any time after 6:00 am every day. He organises his schedule independently. When Tim completes the assigned jobs, he can contact Joseph to request some more tasks. If he cannot complete all the delivery jobs assigned to him, he can also let Joseph know, and Joseph can either assign the jobs to another truck driver or postpone some of the jobs to the following day. Tim is not allowed to carry out any delivery service without the permission from Joseph. Tim wears his own clothes when he works for IWSL. Customers usually pay for the water delivery via internet banking. They can pay cash to the truck drivers if they wish. Any cash received from the customers is required to be submitted to the company accountant daily. Tim must issue an invoice to the customers as soon as the water is delivered. The invoice is pre- printed with IWSL's letter head. Tim only fills the quantity of the water delivered and the amount to be paid. Tim's wage is paid into his account weekly. Tim is required to sign a log book every day to record the number of deliveries he completed during the day. His wage is calculated based on the log book records. No withholding tax has been deducted on his behalf and Tim is not entitled for sick leave or any other paid leave. Tim works between 9 to 12 hours every day, but has never received overtime pay Joseph told Tim that the peak season would finish at the end of April. After that, IWSL can still allocate some commercial customers to Tim, but he should not expect to receive the same level of wages as the peak season. Joseph also suggested that Tim could apply for a break period. During the break period, he does not have to work for IWSL, but can come back to work whenever he wishes. Tim would like to know if he is an independent contractor or an employee of IWSL Required: a) Advise whether Tim is an employee or a contractor. Your [7 marks] discussion should include the tests, that are developed by cases and advised by Inland Revenue, to distinguish between an employee and a contractor. Apply these tests to Tim's situation for your conclusion. b) Explain to Tim the different tax consequences of being a [2 marks] contractor or employee of IWSL
