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News - 27 February 2015

When is a person Employed or self-employed?

The fuzzy boundary between employed and self-employed worker (aka “employment status”) causes enormous problems for engagers of workers, who need to decide how to treat each person for tax, national insurance, employment law, and pension purposes.

However, the problem is difficult as the answer for income tax won’t necessary also fit for all other regulations and employment rights. The result is a confusing mess. The worker can end-up with the worst of all worlds, perhaps taxed under PAYE but with no employment rights. That’s a problem for the worker, and for wider society.

The Office of Tax Simplification (OTS) have been asked to resolve this problem since it was was formed back in 2010.

At last the OTS has produced its Employment Status Report.

However, John Whiting, tax director of the OTS, acknowledges that seeking one solution to the employment status conundrum is the tax equivalent of the philosopher’s stone. There is no one answer that will transmute all the factors of the problem into shining clarity.

Lavinia Newman, founder of ABDS comments:
“The OTS recommends that the idea of a statutory employment test should be taken further, but that any such statutory test should apply to both tax and employment rights. This is going to be very difficult to achieve, as is would require cooperation and agreement between the separate government departments that write employment law and tax law.”

The OTS is strongly in favour of integrating income tax and national insurance in the longer term, nevertheless, this recommendation has been made before and rejected or ignored by government.

Stuart Coleman, Manager of the Tax Department of ABDS comments:
“The problem is employers’ NIC, because once income tax and employees NI are combined the employers’ NIC will be exposed as the pure tax on employment which it is.”

This OTS report intended to set the agenda for long term simplification of the tax system in this area.

The government is expected to respond at the Budget on 18 March, but as Parliament dissolves for the general election on 12 days later, nothing is realistically going to change until a new government takes power in May 2015.

We at ABDS will keep you informed of any developments in this matter and of other such conundrums and vagaries of the tax system.

If you need any help and advice with your PAYE, RTI or CIS, or looking to outsource your Payroll Department, contact ABDS NOW to discuss how we can help.

ABDS Chartered Certified Accountants of Southampton.
Tel: 023 8083 6900  E-mail: abds@netaccountants.net

Brilliant with numbers   
Great with people  
Clear and precise with advice
Timely and cost effective 
In touch with issues that face our clients and
mindful of their long term strategic goals

Helping Your Business is Our Business

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