Employment Status Tax Simplification

Office of Tax Simplification issued Employment Status Report

4 March 2015

On 3rd March 2015 the Office of Tax Simplification (OTS) issued its report headed “Employment Status Report”. The aim of the report was to tackle the complexities in deciding whether a person was employed or self-employed for tax purposes and the issues on employment rights particularly for the low paid.

The report is 188 pages long but does conclude that there is a problem and perhaps a 3rd type of worker exists that falls between an employed workers and a traditional self-employed i.e. a plumber.  The report looks at what other countries do and whether a definition or test is possible to determine employment status. Consideration was given to a reduction in the differences between the treatment of employed and self-employed and whether more tax could be deducted at source for those deemed self-employed.

It goes on to make a number of long term recommendations but there is no clear solution. It is seeking thoughts on which solutions are best and these will be presumably be researched by the next Government. No “quick wins” were identified for Budget 2015.

The main issues are the difference in Tax/NI costs between employed and self-employed, differing employment rights and the opportunity for people to then “game the rules”.

Although it specifically says it was not reviewing IR35 a search of the document flags that IR35 gets a mention 63 times!

The full report is available at:

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/408608/OTS_Employment_Status_report.pdf

Additional Detail:

https://www.gov.uk/government/publications/employment-status-review