Why OTS's employment status review isn't ideal
Another review around independent workers is what we have but unfortunately it's not ideal, writes Martin Hesketh, managing director of contractor accoutancy firm Brookson.
It's not ideal because such members of the flexible workforce would benefit from a period of stability in terms of their legislative environment, rather than further uncertainty and potential change.
The flexible workforce has played a critical part in helping to drive the economic recovery that the UK is now experiencing. It's also clear that this UK ‘competitive advantage’ needs to be appropriately supported moving forward. Appropriate support, in my view, would include a period of legislative stability.
It's also my belief that the existing case law basis for determining self-employment status is fit for purpose and doesn’t require major overhaul. These are the reasons why we do not think the review of employment status, being carred out by the Office of Tax Simplification (OTS), is the right thing.
But there are some positives. The OTS document, and various recent communications from government and policy makers, is continuing to evidence that the importance of the flexible workforce in general, and self-employed workers in particular, is becoming much more recognised and that these workers are increasingly valued.
The government is acknowledging that working patterns and ways of working have changed and will continue to develop as we move forward – that is positive too. And the OTS's aim to ensure the legislative environment recognises this and supports the flexible workforce and self employment appropriately, is the right one.
So this consultation is another opportunity to educate and inform further in this extremely important part of UK economic activity. Our firm will engage fully with the OTS team on this consultation on behalf of our customers, and contractors and freelancers more generally, to ensure the consultation produces a fully informed output. I am optimistic that the output will further evidence the government’s understanding of -- and commitment to -- this critical resource pool.
Recently however there have been a number of questions from the industry about how IR35 can be excluded from a consultation on self-employment status. While I understand this concern, I can also see why the OTS has said it won’t consider the legislation, in light of the recent House of Lords review into the rule. Ultimately, all the IR35 legislation does is apply the existing employment status case law to those situations where an individual is working through an intermediary. This legislative requirement will remain unaffected by any changes to the way self-employment is determined post-consultation. So any new legislation or approach will simply need to be applied via IR35 in the same way the current law is.
Overall, another review in this area is not ideal, given all of the recent review and consultation activity, which seems to render this latest project unnecessary. That said, there are always positives in any review like this, particularly if the right people are involved in the consultation.
The author, Martin Hesketh, was an expert witness at the recent House of Lords Economic Affairs sub-committee, the Personal Service Companies Committee.