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OTS seeks views on employment status issues

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17th Nov 2014
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The Office of Tax Simplification is seeking views on where the complexities lie in determining someone’s employment status for tax purposes. It has posed a series of questions and invited replies by 31 December. A statutory employment test is among the possibilities that interested parties are invited to consider.

The government commissioned the OTS in July to examine the dividing line between employment and self-employment and “whether it is drawn in the right place and in the right way”. The OTS aims to publish its report at the end of February 2015, in time for Budget 2015.

The OTS said it would consider issues such as whether the current status tests result in “real uncertainty”. Most of the AccountingWEB members responding to our IR35 survey have said that determining employment status creates extra costs and is the aspect of IR35 that causes the most trouble for their clients.

The OTS said in July that its earlier reviews of small business taxation and tax reliefs had highlighted the distinction between employment and self-employment as “a major fault line and source of complexity” in the tax system.

However, the current review will not consider IR35. “Previous OTS work has made recommendations in this area and the government decided how to take the issues forward”, the OTS said, noting that a House of Lords committee had also examined IR35.

Who drives the decisions?

The OTS has asked interested parties for observations on current law and HMRC practice, and how working arrangements have changed over the last few decades. Questions include:

  • “Who drives employment status decisions? The engaging business, the individual or a third party such as an adviser or intermediary? Or is it a mutual agreement?”
  • “Is tax the main driver in how a business chooses to engage people?”
  • “What are your views on a possible statutory employment test?”

Last month the government launched a review of employment rights to determine whether the employment status of up to a million workers could be strengthened.

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