Proposals to simplify the position on employment vs self-employment
The Office of Tax Simplification (OTS) has completed a project on employment status and published a report looking at how to simplify determining whether someone is employed or self-employed for tax purposes.
The recommendations try to address the complexity of the current system with different tests used for tax, employment law and pensions auto-enrolment. The consequences in terms of costs (tax and NIC) to employers of getting things wrong mean that many employers hire contractors only through intermediaries. Everyone, including HMRC, finds the rules difficult.
The OTS recommends several improvements including:
better guidance, in one place with real-life examples;
- help on what action a business should take, and what documentation is required, when engaging a self-employed individual, to preclude or reduce the burden of HMRC enquiries;
- developing rules for an evidenced ‘audit trail’ to give certainty and protection; and
- setting up an HMRC employment status helpline.
HMRC’s Employment Status Indicator tool is useful, but it needs to be expanded and developed so it can be relied upon.
I have to agree this area needs certainty – but would be concerned if certainty means more people being regarded as employees.
Date: 13th April, 2015
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