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Massage therapists regularly enter into working relationships with other practitioners. The reasons for these relationships are many and varied. It is crucial however to ensure that the bases of these arrangements are well documented, especially in relation to the potential tax liabilities for either party. But what does this mean? Simplistically if you don't understand the rules and structure of a subcontractor agreement you may find yourself deemed to be an employer and be liable therefore for tax and ACC payments. In order to minimise the risk in this area you will need to do the following:
The IRD have a very helpful leaflet called "Self-employed or employee?" (IR 336). You should use this as starting a point for identifying the key issues as the IRD sees them. For example; Does your subcontractor decide or control how they do their work? Can they take their holidays when they want? Do they provide their own training? Are they free to work for other people? Do they choose their own hours of work? These are some of the questions that need to be carefully considered before you enter into an agreement.
Contact a lawyer and get a draft Contracting Agreement drawn up. This agreement should include, as a minimum, the following important points:
As you can see there are many issues to consider when engaging a subcontractor, it is vital therefore that you seek professional advice.
David Callis owns a massage therapy business, tutors Business Studies at the Canterbury College of Natural Medicine and is a partner in 2iC which offers practical business advice to small businesses.
Please note this article covers the basic concepts only and is not meant to replace professional advice.
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