As part of the ongoing mission to create a simpler and fairer tax system the Office of Tax Simplification (OTS) has been tasked with carrying out reviews of employment status and also tax penalties, with a view to producing a report in time for next year’s Budget.
According to the OTS, the boundary between employment and self-employment no longer reflects modern working patterns, particularly in recent years. Many people have multiple jobs and can be classed as employed in one whilst self-employed in another. The rise of the freelancing business model has also caused some to suggest this is a ‘third way’ between employment and self-employment.
It is the significant tax and NIC differences between the two ways of working that drives business behaviour, so the OTS belief. This is exemplified by the large number of PSC’s currently in operation.
The OTS previously highlighted the complexity of distinguishing between employment and self-employment in its review of reliefs and small business back in 2011. The first stage of the ‘small business review’ concentrated specifically on IR35 with recommendations for improving its administration. This latest review however will not consider IR35. Neither will it look at the Construction Industry Scheme or the expenses rules for the employed and self-employed. Instead it will assess:
The review will also have regard to:
Interested parties will be invited to share their thoughts and opinions with the OTS.
Although the final report will contain any appropriate suggestions that could be advanced quickly, it is more likely that if significant reforms are recommended, then these will be carried forward to May of next year for the next government to consider.