The Office of Tax Simplification has commenced a newest review into employment status. The review seeks to examine the dividing line between employment and self-employment, and determine ‘whether it is drawn in the right place and in the right way’.
The review will consider whether the UK’s current employment status tests cause uncertainty, and in which sectors this uncertainty creates difficulty in administering tax rules. To do so, the OTS will review how existing rules surrounding employment work with where individuals have multiple jobs.
The OTS asserts that as work patterns have evolved in the last decade, the boundaries for employment have not kept pace, and in many instances people who work for more than one business can be classed as employed by one, but self-employed for another. Commenting on the review, the OTS said: “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….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).”
It is noteworthy that IR35 will not be covered by the review, as this has been reported specifically in a previous small business review. The subject has also been examined in the recent report of the House of Lords.
Ben Dunn, Finance Director at JSA Services, comments: “This review could be really helpful for those contractors who straddle the line between employed and self-employed. It is good to see that the OTS acknowledges how much the work of a contractor has changed, but is important that the OTS take the long term view rather than seek any quick wins.”