The Office of Tax Simplification (OTS) has launched its employment status project to examine the dividing line between employment and self-employment. This follows concerns that the significant tax and NIC differences between the two regimes are driving changes in business behaviour, such as the increasing use of personal service companies.
Remit of the project
Given changing trends in work patters, the OTS says its aim is to determine whether the division between employment and self-employment is drawn in the right place and in the right way.
The review will analyse sectors and types of engagements with the labour market where difficulties in administering the tax rules are relatively common.
It will also consider how well current rules and guidelines fit with situations where individuals have multiple roles, some of which may be as a freelance.
No IR35 implications
This review will not however consider the implementation of IR35 nor the workings of the Construction Industry Scheme:CIS as part of its findings.
Specific areas of interest
In carrying out their work the OTS will consider:
- 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.
- Sectors and types of engagement with the labour market where difficulties in Administering the tax rules are relatively common for any or all of those involved with the tax system
- How well current rules and guidelines fit with situations where individuals have multiple roles; whether the key distinction is between working and not working.Trends in employment law
- HMRC guidance and advice
- The special cases regulations, primarily as evidence of existing difficulties with the main tax rules
- The scope for simplification through the increased use of digitisation
- International comparisons to the UK approach to dealing with employment status and the experience of other countries in managing their approach
Timescales for implementation
The OTS notes that it is likely that if the final report points the way to significant reforms, these would be for the next government to consider.