Bill Watkins is a chartered accountant. He carried on a professional business as a tax consultant for 12 years. By the end of 20X0, the practice had grown very large. Watkins was overworked and under pressure to hire additional staff or take a partner. Watkins was interested in education and several years earlier had contracted with a publisher to write a book on taxation for university students. Because of the pressures of his practice, this project made little progress.
To optimize his work life, Watkins decided to close his professional practice and enter into an arrangement with Anthony and Anthony, a national firm of chartered accountants. According to the agreement, he would work a minimum of 600 hours per year for the firm; he would also be free to pursue his writing and other interests. He would provide the 600 hours mainly during the winter months and would not be expected at the office every day of the week.
Anthony and Anthony made a formal announcement in the newspaper that Watkins was now associated with their firm and provided him with business cards stating both his name and the firm’s. The firm did not give him a specific title, though most of its employees had one, whatever their level. The firm did provide him with an office (of the same size as was given to partners) and a secretary at no cost to him.
As a tax consultant, Watkins met with the clients of the firm and corresponded with them under the firm’s letterhead. Jobs were assigned to him by any partner who required his services. Usually, he charged any time spent on a client directly to the particular partner’s account; that partner, in turn, billed the client and collected the fees.
Anthony and Anthony charged clients for Watkins’s time at $150 per hour. The agreement stated that he was to be paid $100 for each hour charged to a client whether the client paid the fee or not. At the end of each month, Watkins prepared an invoice requesting that the firm pay $100 for each hour charged that month.
Throughout the year, Watkins paid for his own parking and for his own subscriptions to several tax services, the latter being necessary for him to carry out his duties. Whenever the firm held a social function, Watkins was invited. In 20X1, he gave three speeches to various business groups and was always introduced as “Bill Watkins, a tax consultant with Anthony and Anthony.”
In 20X1, Watkins worked 820 hours for the firm. He spent the balance of his working time writing his book and giving tax seminars to various professional groups.
Required:
Was Watkins employed or self-employed in 20X1? Give reasons to support your conclusions and reasons to support the opposing view.