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Homework answers / question archive / Maggie delivers bread for the Italian Bread Shop ("IBS") based in Parnell
Maggie delivers bread for the Italian Bread Shop ("IBS") based in Parnell. IBS bakes and distributes a variety of fresh breads and cakes. Maggie is engaged to deliver the bread throughout Auckland's eastern suburbs. Her contract contains a number of terms and conditions but does not directly address her work status. For her work Maggie must provide her own van which she purchased with a bank loan for $15,000. IBS paid a further $1,000 to have the van painted in Italian colours and sign-written with the IBS logo. While working Maggie is required to wear the IBS uniform provided to her. She must deliver the bread to the outlets and at the times directed by IBS. The contract also requires Maggie to: purchase and maintain a mobile phone maintain a goods delivery drivers licence take out insurance against loss or damage to goods while being delivered not work with any competing organisation. Maggie's contract may be terminated by either party with 30 days' notice. It may be terminated immediately by IBS if Maggie loses her goods delivery driver's licence, if she seriously breaches her contract, or if she is unavailable to make deliveries (without providing a replacement driver) for more than 3 days. Maggie is paid a flat delivery fee of $50 per day plus $10 per carton of bread delivered (with a minimum of 30 cartons guaranteed), so regardless of workload she earns at least $350 per day. These fees are intended to pay Maggie for her services and cover all her petrol and vehicle expenses. Her fees are totalled and paid monthly upon presentation of her delivery sheets. All drivers are entitled to charge GST in addition to their fees (if GST registered) but must provide a separate invoice when doing so. Maggie must keep her own business records and pay her own taxes. Maggie's contract requires her to work 6 days a week for 50 weeks a year. If she is unable to work (due to illness or holidays) she is required to arrange with another driver to make her deliveries. Advise Maggie whether she is an independent contractor or employee and explain the significance of the distinction.
Law S6 Employment Relations Act: The real nature of the relationship Bryson Three Foot Six TNT Worldwide Express v Cunningham Inland Revenue Guidance: 5 factors Application: Apply the case law and IRD guidance to the facts. Look at both sides of the argument, i.e., in favour of finding that Maggie is an employee, and in favour of finding that Maggie is a contractor (You can use sub-headings if you don't like the table format.) Application: Case: Bryson v Three Foot Six (p 11-4-116 CB) (Look at the worked example if you are struggling with the application of the cases) In Favour of finding that MAGGIE is an "Employee" Contract: Control Risk
In Favour of finding that MAGGIE is a "Contractor" Contract: Control: Risk: Case: Cunningham (p 117 CB) In Favour of finding that MAGGIE is an "Employee" In Favour of finding that MAGGIE is a "Contractor"
IRD Guidance (p 117-119 CB) In Favour of finding that MAGGIE is an "Employee" Control Independence: Integration : Intention : Fundamental test:
In Favour of finding that MAGGIE is a "Contractor" Control: Independence: Integration : Intention Fundamental test:
Conclusion: You should explain whether Maggie is a contractor or an employee, and the tax consequences for Maggie. 2-3 sentences on the tax consequences will suffice for now.
In Favour of finding that maggie is an Employee
INTENTION TEST : no points in favour of this.
CONTROL VS INDEPENDENCE TEST :
| Control over their availability :- | Italian Bread Shop has control over maggie. As she is not entitled for any holiday. |
| Set hours :- | Maggie required to work 6 days a week and 50 weeks a year. |
| Control over work, time, location :- | Italian Bread Shop has control over the order and delivery. |
INTEGRATION TEST :
| Uniform that has the logo of the company :- | Maggie need to wear uniform provided by IBS dring delivery. |
FUNDAMENTAL TEST : No points in favor of this.
In Favour of finding that maggie is a Contractor :
INTENTION TEST :
| Entitlements for public holidays :- | Maggie is not entitled for Holiday period. As per the contract she needs to arrange with another driver to make her delivery if she want to take holiday. |
| Holiday pay :- | Maggie is not allowed for Holiday pay |
CONTROL VS INDEPENDENCE TEST : No points in favor of this.
INTEGRATION TEST :
| Works with own equipment :- | Maggie needs to prchase her own VAN, mobile phone, goods delivery licence and insurance for loss and damaged of goods. |
| Paid by results :- | Maggie is paid on the basis of delivery. |
| Reimbursed for work related expenses :- | Maggie is not entitled to reimbrsed any expenses. Fees cover the all expenses. |
FUNDAMENTAL TEST :
| Fees :- | Maggie is paid $50 a days plus $10 per carton of bread delivered (with a minimum 30 carton guaranteed) |
| Pays tax directly to IRD :- | Maggie pays her own tax |
| GST registration :- | Maggie is entitled to take GST registration. |
| Profit :- | Maggie needs to maintains her own bsiness record. |
| Financial risk :- | Maggie needs to take insurance for loss and damaged of goods. |
| Mainly working for one entity :- | Maggie is not entitled to work with competing organization |
| Invoices :- | Maggie needs to provide Invoice. |
So, It can be said from the aboce analysis Maggie is Independent contractor.
Tax Conseqences for Maggie:
Maggie must report all their income and expenses on Schedule C of Form 1040 or Schedule E if she has profits or losses from rental properties. Further, she must submit self-employment taxes to the IRS, usually
