The Office of Tax Simplification (OTS) has launched its employment status project to examine the dividing line between employment and self-employment amid 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 say Harris & Co accountants Northampton, the specialist small business accountants #accountantsnorthampton
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, given changing trends in work patterns and other employment practices.
It is to look at whether current employment status tests result in real uncertainty and if so, for what sections of the workforce and in which areas.
The review will analyse sectors and types of engagements 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, and will consider how well current rules and guidelines fit with situations where individuals have multiple roles, some of which may be as a freelance.
The OTS says it will be weighing up whether the key distinction is between working and not working and will take into account the experience of other countries internationally in managing their approach.
It will also look at existing special cases regulations, primarily as evidence of existing difficulties with the main tax rules, and at whether more use of digitisation would be helpful.
However, the OTS will not be looking at issues around IR35 or the Construction Industry Scheme (CIS), both of which it has covered in earlier reviews, or the expenses rules.
The OTS is tasked with producing a report in time for Budget 2015, which will cover any appropriate ‘quick wins’ that it may be possible to take forward more swiftly.
However, it says that ‘it is likely that if the report points the way to significant reforms, these would be for the next government to consider.’
Details of the terms of reference for the employment status review are available here.
The OTS will publish information about how individuals and firms can contribute to the discussion on its website shortly.
It is also due to start work very soon on the tax penalties project it has agreed with the Treasury, which will examine whether penalties could be simplified, made more consistent and more effective in successfully driving compliant behaviour.