OTS begins employment status review

Contractors and other interested parties will soon be able to have their say to the Office of Tax Simplification on its new review into employment status.

Approved by the Treasury last week, the review is of the dividing line between employment and self-employment and “whether it is drawn in the right place and in the right way.”

Despite seeming central to such an examination, IR35 will not be considered, on the basis that the OTS has already scrutinised the legislation and made recommendations on it in 2011.

“The recent report of the House of Lords Economic Affairs sub-committee has also examined the area,” the office said, adding that expenses rules will, for similar reasons, not feature in this review.  

What OTS will consider is whether the UK’s current employment status tests result in “real uncertainty” and, if so, for what sections of the workforce and in which areas.

The sectors and types of engagement with the labour market where difficulties in administering tax rules are common, not just for workers but all parties, will also be explored.

The OTS will therefore need to examine how well existing rules and guidelines “fit” with situations in the labour market where individuals have multiple roles.

This stems from the office’s assertion that because the boundary between employed and self-employed “has not kept pace with changing work patterns”, some people can be both.

In particular, the OTS believes that in “many” instances, people are working for more than one business and can be classed as employed for one job but self-employed for other work.

“There are significant tax and NIC differences between employed and self employed status. Getting the status wrong in a working arrangement can be very costly”, the office said.

“Potential tax and NIC benefits and risks drive business behaviour, exemplified by many of the personal service companies that are in use (though many are simply sensible vehicles for the taxpayer’s operations).”

The review will also take into account trends in employment law, including international comparisons to the UK, and the scope for simplification through increased use of digitisation.

Although the employment status review is already underway, OTS is yet to provide details of how interested parties can contribute, but plans to do so by updating its website “shortly”.

Its final recommendations on the topic will be produced in a report in time for Budget 2015, when it says some ‘quick wins’ from its review may be possible to take forward.

However, in the “likely” event that the OTS’s soon-to-be formed consultative committee recommends “significant reforms,” these would be for the next government to consider.

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Written by Simon Moore

Simon writes impartial news and engaging features for the contractor industry, covering, IR35, the loan charge and general tax and legislation.
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