The Association of Taxation Technicians (ATT) welcomes the release today of a consultation on simplifying employment status and highlights the many complications when it comes to tax reforms in this area.
As part of its response to Good Work: The Taylor Review of Modern Working Practices the Government has today published a consultation on employment status.1 The consultation seeks views on how to make the employment status rules for both employment rights and tax clearer for individuals and businesses.
Michael Steed, Co-Chair of ATT’s Technical Steering Group, said:
“The ATT welcomes the fact that in its response to the Taylor Review the Government is focusing not just on employment rights, but also employment status for tax purposes. In particular, it is pleasing to see that the current difficulties of having two classifications for tax law (employed or self-employed), but three in employment law (which also includes ‘worker’) are considered in this consultation.
“While having the same classifications for both tax and employment law purposes would greatly simplify matters and provide clarity, it could also cause problems. For example, if ‘gig economy’ workers who are currently classed as self-employed were to be treated as employees this would increase National Insurance contribution costs both for the workers and the businesses they work for.
“We note with interest that the consultation also raises the possibility of developing a new test for tax purposes which is not based on employment. While the possibility of ripping everything up and starting from scratch may sound tempting, care would have to be taken that this did not result in an even more complicated test, higher tax burdens for the low paid, or a greater divergence between employment and tax law.
“There are inevitably tensions and complications surrounding any change to the employment status rules. It is therefore encouraging to see that almost four months has been allowed for responding to the consultation,2 reflecting the complexity of the issues involved and the many differing interests which will need to be considered.
“Regardless of which path is taken for tax, we would urge the Government to bear in mind the implications of Making Tax Digital (MTD) for income tax,3 which could be introduced as early as April 2020 for the self-employed. Changes which could alter whether or not somebody is classed as self-employed should not be made to coincide with the major changes involved in the introduction of MTD.
“We look forward to playing a constructive part in this consultation.”
Notes for editors
- The consultation can be found here.
- The deadline for responding to the consultation is 1 June 2018.
- Under Making Tax Digital (MTD) many businesses will be required to keep digital records and make quarterly reports to HMRC. MTD will be introduced initially for VAT purposes from April 2019. It is currently proposed that businesses will not have to keep digital records or report quarterly for income tax until April 2020 at the earliest. More information on MTD can be found here.