LONDON: The UK’s Office of Tax Simplification (OTS) has published a new report on employment status, in which it warns that the tax system is “stuck in an out-of-date mindset.”
The OTS was asked to examine the dividing line between employed and self-employed status and report on its findings in time for Budget 2015. According to the report, significant reforms are needed but will be for the next government to consider.
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In his foreword to the report, OTS Tax Director John Whiting pointed out that the tax system continues to categorize workers as either employees or self-employed. He argues that the tax system “needs to recognize a ‘third way’ of working.”
The OTS recommended the introduction of better employment guidance, which it said should be available in one place and with more “real-life” examples. It suggested that HM Revenue and Customs (HMRC) should set up an employment status helpline and allocate more resources to this area. More help should be provided to individuals and small businesses on the action and documentation required, it said, to reduce the number of inquiries received by HMRC. HMRC’s Employment Status Indicator (ESI) tool should be developed and expanded, it said.
