Opinion Former Article

CIOT calls for debate on the uneven tax burden imposed on employed and self-employed labour

Responding to today’s publication of Good Work plan,1 the Government’s response to the Taylor Review, John Cullinane, CIOT Tax Policy Director, said:

“It is to be welcomed that the Government are taking Taylor’s recommendations seriously. However, by ruling out changes to the rates of National Insurance Contributions (NICs) in relation to employment and self-employment , the Government are denying themselves many of the tools they need to tackle the issues Taylor identified around employment status. In addition, they risk ignoring the vulnerability of the tax base to changing patterns of work.

“The imbalance between the tax burdens on employment and self-employment remains unsustainably large. No solution will be painless or immediately popular. This does not mean the problem can be ignored. It means there is a need for full public debate in which the problem can be clearly explained and we can, as a society, identify the most promising options and build support among the public.

“As we said in the Better Budgets report,2 there needs to be improved consultation, in particular ensuring that consultations happen before key decisions have been made by the Government, if we are to have better tax policy.

“We hope that government departments, especially the Treasury and BEIS but also HMRC and DWP, work together to achieve a solution that leads to a more efficient and less complex tax system for working people.”

Taylor stated that ‘treating different forms of employment more equally in the tax system would be fairer, more economically efficient and support better quality work’.3 We agree. It is not clear whether the Government do.

John Cullinane said:

“The big differential between the NICs burden on employment as compared to self-employment, particularly as regards employer’s NIC at 13.8 per cent, creates a perverse incentive for employers to try to engage with people ‘off-payroll’. This persists despite efforts to deal with the situation by successive waves of anti-avoidance legislation.”

The Government also said that they want to make it easier for both the workforce and businesses to understand whether someone is an employee, worker or self-employed - determining which rights and tax obligations apply to them.

John Cullinane said:

“This is welcome but risks missing the wider point that different statuses apply for employment rights and tax purposes. We have a mismatch between having three different categories of workers (employed, worker or ‘dependent contractor’ and self-employed) for employment law but just two for tax (employed and self-employed). As long as the borderlines between different tax statuses can be fuzzy and open to interpretation, we are likely to continue to see confusion and inconsistency among taxpayers and their employers, and exploitation of workers in too weak an economic position to resist entering into work arrangements that HMRC might be expected to challenge.”

Notes for editors

1.       Government response to the Taylor review of modern working practices

2.       Published by the Chartered Institute of Taxation (CIOT), Institute for Fiscal Studies (IFS) and Institute for Government (IfG), the Better Budgets report outlines ten steps toward making better tax policy. Link here.

3.       Good work: the Taylor review of modern working practices, p66

4.       The Chartered Institute of Taxation (CIOT)

The CIOT is the leading professional body in the United Kingdom concerned solely with taxation. The CIOT is an educational charity, promoting education and study of the administration and practice of taxation. One of our key aims is to work for a better, more efficient, tax system for all affected by it – taxpayers, their advisers and the authorities. The CIOT’s work covers all aspects of taxation, including direct and indirect taxes and duties. Through our Low Incomes Tax Reform Group (LITRG), the CIOT has a particular focus on improving the tax system, including tax credits and benefits, for the unrepresented taxpayer.

The CIOT draws on our members’ experience in private practice, commerce and industry, government and academia to improve tax administration and propose and explain how tax policy objectives can most effectively be achieved. We also link to, and draw on, similar leading professional tax bodies in other countries. The CIOT’s comments and recommendations on tax issues are made in line with our charitable objectives: we are politically neutral in our work.

The CIOT’s 18,000 members have the practising title of ‘Chartered Tax Adviser’ and the designatory letters ‘CTA’, to represent the leading tax qualification.

Contact: Hamant Verma, External Relations Officer, 0207 340 2702 HVerma@ciot.org.uk (Out of hours contact: George Crozier, 07740 477 374)

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