Tax Faculty recommends restricting or removing fiscal incentives to arbitrage employment status.
The main lesson that should be drawn from difficulties in implementing the IR35 off-payroll working (OPW) reforms in 2017 and 2021 is that the fundamental problems underlying the taxation of work remain, according to ICAEW’s Tax Faculty.
The OPW problem will only be resolved permanently if the incentives to arbitrage employed or self-employed tax and national insurance contributions (NIC) are reduced.
This could be achieved if the total amount of tax and NIC payable by individuals and the engagers of workers was the same, or more closely aligned, across all sources of income. They should not vary depending on employment status or the type of engagement.
ICAEW’s Tax Faculty made this point in its written evidence submitted on 11 February 2022 (now published as ICAEW REP 38/22) to the Lessons from implementing IR35 reforms inquiry launched by the Public Accounts Committee on 12 January 2022.
Solving this requires an informed national debate, including on whether the genuinely self-employed should have a reduced tax/NIC bill, and what the reduction should be if so.
It is now nearly five years since Matthew Taylor, in his welcome July 2017 Good Work report, recommended that the level of NIC paid by employees and self-employed people should be moved closer to parity. Since then, the government responded to the Taylor report in February 2018 and published its Good Work Plan in...
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