The Office of Tax Simplification (OTS) are calling for better guidelines when it comes to determining employment status, according to their latest report. At current there a number of different tests that determine whether you are self-employed or not for tax purposes, which this reports addresses.

There isn’t a definition of self-employment in law, meaning businesses, individuals and HMRC have to spend hours sifting through other related documents to try and determine employment statuses.

If employers were to categorise incorrectly, then this would lead to huge bills, both in tax and National Insurance (NI), and in turn leading employers to hire contractors through intermediaries.

The current system has been criticised as being stuck in the 1960’s, and with the huge growth in contracting and freelancing more recently, people don’t fit in to the ‘traditional’ employment groups anymore. This had led the OTS to recommend a range of simplification methods for categorising employment moving forward.

John Whiting, Tax Director of the OTS has said “This is a difficult area with no simple solutions. We identify both direct ways of simplifying things – such as streamlining definitions – and indirect ones, which would take the heat out of the issue. Some should be acted on in the short to medium term, others are promising routes to reform that warrant further work but which would mean major changes”.

All the proposed changes can be found in the full report, here.

If you have thoughts on how the current system could be improved then you are encouraged to comment on the conclusions, as this is currently an ongoing issue that is open for debate.

We understand that life as a contractor can be difficult without all the changes that are taking place at the moment, that’s why it’s important you have an accountancy company that you can rely on! Here at Gorilla Accounting we offer a wide range of contractor accounting services, we have listened to feedback from contractors to understand our clients’ needs and create a service specifically designed to assist our clients’ where they need it most.

We still a fantastic introductory offer available for new clients, find out more here.