Payroll insight
are predicting that traditional employment will decline. It will be interesting to see how these two apparently conflicting trends develop in the future. Ian Hodson: I think we have to remember the problem we are trying to solve here which is ensuring that where individuals have earnings from self-employment correct statutory deductions are being applied. I can see this process heading in the same direction as the construction industry scheme but with a greater catchment. I don’t really think we have the infrastructure in place to expect everybody to be an employer and carry out the operational processing. We know as payroll professionals that it really isn’t that simple to get everything right all the time and the environment is so fast moving I struggle to see how smaller employers could cope with the understanding or the overheads around carrying out the processing. I think all this would do would create lots of opportunities for bureaus to take away the headache for business. I totally support the principles behind what the legislation is trying to achieve; however, the application thus far in the public sector does not fill me with too much confidence for wider success and it may need more thinking through by the government. It is, though, early days and I will be keen to see some success metrics at a later date from the government as to how well this is being delivered. Ian Holloway: Undoubtedly, employment patterns have evolved and government is reacting to this. A critic would say that they have been slow to react and this has produced reforms that could be seen as ‘knee-jerk’. However, this is a very difficult area for government to address and I am glad that I am not tasked with attempting to even try and resolve it. Things will change and employers are receptive to change – or, even if they are not receptive, they are resigned to the fact that change happens. However, this is a huge task for the UK government, as we are looking at some alignment and equality in employment, tax, social security and pension law. Not all of these are under the control of the UK government so, maybe, the approach is to work collaboratively with employers, software developers and the devolved administrations. Jas Jhooty: There has been a growing number of tax avoiders incorporating to
avoid employment taxes. This problem required addressing and hopefully these new measures once extended to all employers will go some way to levelling the playing field. There still remains a significant number of workers (particularly those working in the so-called gig economy) who are forced to classify themselves as being self-employed by unscrupulous employers. New measures are still required that will also provide employment rights to this significant (and growing) percentage of the workforce. There is no question of removing the self-employed status of genuinely self- employed businesses or those limited companies that are genuinely trading in their own right. How could this suggestion even work in practice? Would every householder have to register for a PAYE scheme so that they can deduct PAYE and report via RTI for all tradespeople who provide services to them? Or would there be a new tax introduced that will automatically take a percentage for all electronic payments taken from individuals’ bank accounts? Where would you draw the line under this brave new world and which political party will have the courage to even contemplate such a radical new form of taxation? For these reasons, we envisage no time when all service providers are to be treated as employees. David Paul: The number of self-employed people in the UK has grown over the years and currently stands at 4.78 million which is 15% of all people in work. It is an important aspect of the UK economy and to a great extent is the effect of ‘disruptive’
Neil Tonks, legislation team at MHR
businesses where new ways of working and technology create new products and services to meet consumer demand. This is certainly an area that the government has its eye on. The Taylor Review into the impact that modern employment practices have on workers is underway and will be presented in the summer. Whilst this isn’t a tax led review, it will look at whether tax is a key feature in deciding to be self-employed. The Department for Business, Energy and Industrial Strategy is also to launch a research project into the scale of the gig economy and the motivations of people engaging in ‘gig’ work. The Office of Tax Simplification also presented a report in 2015 and one of the suggestions was aligning the NICs rate between employed and self-employed – and although the Chancellor did a u-turn on this at the last budget there is still a chance that it will happen. One of the key areas of difficulty is that different rules apply to determine a worker for employment rights purposes than for an employee for tax purposes. The widening of withholding to the likes of a self-employed window cleaner seems a long way off but advances in digitalisation could conceivably mean that digital reporting could well be on the cards. n
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| Professional in Payroll, Pensions and Reward |
Issue 32 | July/August 2017
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