Tax Simplification, Portfolio Careers and IR35

Last week, the Office of Tax Simplification published its interim report on Small Business Tax Simplification.

The report includes an analysis of the problems caused by an over-complex and inefficient tax system which is well worth a read.  It highlights a complexity, and attendant uncertainty, arising from regulations which have a different concept of employment (vs self-employment) not only between tax and employment legislation but within the tax code itself (income tax vs. NIC vs VAT etc).

Amongst other observations, the report recognises the degree to which work patterns have changed…

“3.16  The employment and self-employment boundary has always been difficult and confused. Arguably, it has not kept pace with changes in work patterns, with people having multiple employments, or with the nature of modern commercial relationships and their need for flexibility.”

and how the burden of legislation constrains economic growth…

“3.19  The current lack of clarity poses a barrier to self-employment and is at odds with the Government’s ambitions for creating growth.”

As an interim (and advisory) report, it does not contain solutions but makes a number of proposals including the merging of income tax and NIC which would offer massive simplification to small businesses.  The report offers a number of options to address the ineffective and unloved IR35 regulations, of which the first is suspension with a view to abolition.

I haven’t digested the report fully yet but if its recommendations are taken up, it appears that there is a real chance of moving towards a much less burdensome tax code which will actually contribute to enabling a competitive and agile economy.

A welcome, further initiative would be to have a similar review of over-complex, unnecessary, out-dated and perverse employment laws; but obviously no-one is talking about that.