I would like to get some clarity about PSI and PSB. I’m not quite sure if my business is PSI or PSB.
I am a permanent full-time employee at multinational corporation. I work in Finance Department as Finance/Accounting Manager. I manage the accounting and taxation for my employer during weekdays in the daytime. I obviously earn salary from this employer. So this has to be reported as income from gross wages in the tax return.
I also run a side business after hours during weekdays and on weekends. My side business is completely separate from full-time job with company. The side business is bookkeeping and accounting service for small businesses (unrelated to my daytime job at the multinational corporation). I chose bookkeeping and accounting as my side business because I already have the necessary skills and experience to run the business. I am also certified/qualified accountant. So it is easier to manage the side business. The reason why I run side business, in addition to my full-time employment, is because I would like to build my personal business that can support me and my family if the worst should happen like layoffs (It has been happening more often in the last decade). Currently I only have 2 clients and I’m not employing any staff. Due to my full-time employment in the daytime, the growth of my business has been very slow. It is hard to juggle between daytime work, personal life, and personal business. But we are aiming to add more clients into our book at least 1 client every 2 years.
I earn the income based on invoice that I charge to my clients. As this is not wage, it is not reported as gross wages in the tax return. Nevertheless, it is still need to be reported in the tax return as income as either PSI or PSB. This is where I get confused.
I use my accounting and taxation skills when running my own business. This is the same skills that I use when I work for the multinational corporation as permanent full-time Finance / Accounting Manager. So it is easy to see that the income I earn from my side business is PSI. On the other hand, there are other factors to indicate that I am running a business (hence income is PSB):
1. I run the side business after work hours in my own time. I am not employed by my clients as their employees. I’m not required to follow their company policies or to attend work on site at a particular time. I can work on side business wherever and whenever I choose.
2. All working relationships with my clients (currently just 2 clients but is expected to grow in coming years) starts with an engagement letter that must be signed between myself and my client. The engagement letter stipulates: work to be delivered (example financial reports), amount of payment, responsibility of myself and my clients, my responsibility to fix mistakes at my own expense, and additional payment required if there are additional deliverables to be produced outside the agreed scope of work.
3. I supply my own equipment. I use my own laptop to work on the side business. The clients only provide me with connection to their server and data. If I have to attend their office for a meeting, then I drive my own car and incur expenses (such as petrol and toll) myself. None of this is reimbursed by my clients.
4. I also incur various software/subscription costs such as monthly fees for accounting package and anti-virus. None of the costs is reimbursed by my clients (spending by employees that is reimbursed by employer). I have to price the job carefully to cover these expenses. If I price the job incorrectly and incur the loss, that will be on me. I cannot ask for a ‘top-up’ from my clients
Could you or anyone advise me if the income from my side business is PSI or PSB considering the factors above?
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