Running to over 180 pages it will take some time to analyse the report fully, but a review of the introductory pages indicates that the OTS has concluded that the main issue currently is a lack of certainty. There is also recognition that any solutions would have to work with both tax tests and employment tests and the introduction of a simple test may not be useable for both. The review does look at how these issues are addressed in other international jurisdictions and sets out some ideas for Ministers to consider.
The ARC has long called for clarification of an agency worker’s rights against a hirer to be set out in law; namely that an individual who is entitled to rights under the Agency Workers Regulations may not at the same time claim to be an employee of the hirer to whom they are being supplied.
The OTS recommends various improvements including:
* Better employment status guidance, in one place with more real-life examples;
* Help for individuals and small businesses on what action a business should take, and the documentation it should have, when engaging a self-employed individual, to preclude or reduce the burden of HMRC enquiries;
* Setting up a HMRC employment status helpline and allocating more resources to this area.
The OTS believes that HMRC’s Employment Status Indicator (ESI) tool is a valuable resource, but it needs to be expanded and protocols developed so it can be relied upon.
The OTS’s longer-term ideas for further work include:
* Considering a ‘safe harbour’ approach where an employer relied on HMRC advice and was open about its arrangements;
* A possible ‘de minimis’ period of time or level of payment before employment status needs to be considered;
* The government conducting a full study into aligning tax and NIC rates as well as the benefits available for the employed and self-employed;
* Carrying out a feasibility study into a statutory employment test; Explore a withholding tax for payments to the non-employed whose tax status is unclear.
ARC members can access the employment status report here.
