Treasury secretary David Gauke has confirmed that the government has decided to act on the Office of Tax Simplification’s call for a task force to come up with a universal definition of employment status.
This is a subject that I have argued for and highlighted on a number of occasions, most recently in my Blog, “Employed or Self-employed: That is the question” on 27th April 2015.
David Gauke announcement in a departmental letter will be welcomed by freelance contractors, accountants and anyone else who has ever been caught up in the Kafkaesque labyrinth of UK employment law. A simpler definition would replace the seven different factors that are taken into account by the tribunals and courts to determine employment status.
The question now, is how long the review is going to take. “If you talk to anybody who has worked in the Treasury, trying to get different departments to talk to each other is extremely difficult,” said Rebecca Cave, AccountingWEB’s tax policy editor. “The silo mentality of the people who work in those departments is amazing.”
The OTS, which will soon to be on a permanent, statutory basis, according to Gauke’s letter, acknowledged its self-employment proposals won’t be a quick fix. As their spokesman said recently, “Some of the suggested solutions would require hard choices to be made, and the change from the current position to the simpler future envisaged will involve a long and difficult journey.”
The increased co-operation between HMRC, the Treasury, and the pensions and business departments is welcome, but which department is likely to take the lead and have the casting vote on any concrete legislative proposals? “That’s a big question for David Gauke to consider,” admitted John Whiting, tax director of the OTS. “Hopefully the OTS will be given a chance to partake in the process, but the big thing is that it’s moving forward.”
HMRC New web portal
Alongside the joint review, the government will begin work on a comprehensive employment status web portal on gov.uk, covering both tax and employment rights, as suggested by the OTS. The tax simplification review suggested HMRC set up an employment status helpline alongside the portal, “where businesses are able to discuss specific queries with an HMRC officer with specialist knowledge of the subject”. The government also accepted this proposal.
Income Tax and NIC to merge?
As well as pushing for a statutory employment test, the OTS has been punting a merger of National Insurance and Income Tax since 2011. This suggestion, however, received a more middling response from the minister. He admitted that both ideas were being “considered”, but without adding any meat to the bone.
In its report, the OTS accepted that both proposals came saddled with immense practical implications, especially the merger of NI and income tax. The OTS stressed that what it was proposing was “integration – of definitions, calculations and administration – rather than a full blown merger of the two levies into one”.
For the employment status test, the OTS said the main challenge would be “developing something that would operate in tandem with employment rights. It seems worth opening up a debate to test whether that is possible”.
But the Autumn Statement wasn’t a clean sweep of successes for the OTS. They had suggested a number of areas where government could be more transparent, which drew a distinctly lukewarm response especially their suggestion that employers’ NIC should be shown on payslips. However Mr Gauke offered the crumb that The Department for Business, Innovation and Skills will be undertaking a consultation on transparency, including employer’s NICs.
The task is a big one, said Whiting, but he is optimistic that progress has come at just the right time. “The government is now starting to listen, especially on the confusion of employment status, which has got worse, and to a lesser extent on departmental transparency. The timing of his letter is good, it may not be possible to progress, but it’s certainly the right time to try.”
If you would like more detailed information on some aspect of UK Tax, send me an e-mail and I’ll be pleased to advise further.