OXFORD LAW CIOT and IFS Debate: How should different ways of working be taxed? 20.3.2017 Judith Freedman, Pinsent Masons Professor of Tax Law, Oxford University and Oxford Centre for Business Taxation

Integrating tax, employment law and social security Holistic review necessary But answer may not be the same? Now Single definition of employed/self-employed in case law (though heavily fact dependent, so in practice variations) Statutory variations eg NICs exceptions Special tax cases eg IR35 and construction industry scheme Labour law – worker category in addition

Aims and objectives – labour law Protection of those in unequal bargaining position State imposes obligations on employers/engagers through statute Efficient organisation of protection provision (e.g. insurance arrangements). Relationship is between engager and engaged – mediated by state.

Aims and objectives – tax law Income tax-using efficient administrative mechanism to reduce costs, evasion and avoidance (PAYE) Income tax- providing incentives to work in a particular way Does the market provide the incentive? If not how should it be targeted? Eg R&D Targeting to legal form does not relate to any particular market failure. Relationship is between taxpayer and state-but with engager as tax collector VAT – transaction tax. Legal form relevant mainly because of threshold.

Aims and objectives- social security law Relationship between individual and state Partially same regardless of status eg state pension (now) Some differences in relationship with state eg maternity/paternity leave and Jobseekers Allowance, redundancy payments (now being examined- reduce differences as in other countries) Workers have slightly different rights but NICs may often be same as employees Other issues raised in debate eg sick pay- responsibility of employer; inability to get mortgages- market issue not for tax or social security to solve.

Workers (from UK.Gov website) Workers usually entitled to the National Minimum Wage protection against unlawful deductions from wages the statutory minimum level of paid holiday the statutory minimum length of rest breaks to not work more than 48 hours on average per week or to opt out of this right if they choose protection against unlawful discrimination protection for ‘whistleblowing’ - reporting wrongdoing in the workplace to not be treated less favourably if they work part-time They may also be entitled to: Statutory Sick Pay Statutory Maternity Pay Statutory Paternity Pay Statutory Adoption Pay Shared Parental Pay Workers usually aren’t entitled to: minimum notice periods if their employment will be ending, for example if an employer is dismissing them protection against unfair dismissal the right to request flexible working time off for emergencies Statutory Redundancy Pay Workers usually aren’t entitled to: minimum notice periods if their employment will be ending, for example if an employer is dismissing them protection against unfair dismissal the right to request flexible working time off for emergencies Statutory Redundancy Pay Someone is likely to be a worker if most of these apply: they occasionally do work for a specific business the business doesn’t have to offer them work and they don’t have to accept it - they only work when they want to their contract with the business uses terms like ‘casual’, ‘freelance’, ‘zero hours’, ‘as required’ or something similar they had to agree with the business’s terms and conditions to get work - either verbally or in writing they are under the supervision or control of a manager or director they can’t send someone else to do their work the business deducts tax and National Insurance contributions from their wages the business provides materials, tools or equipment they need to do the work

Comment on previous slide above- Not simple- note words in blue (my blue). Much uncertainty Payment of tax and National Insurance is described as an indicator of classification rather than a consequence- confusing. How does this help engager or engaged to know rights?

Thoughts for discussion Gig economy presents no new issues but highlights problems. Detach withholding obligation from employment definition. Use technology to achieve the aims of tax law by providing a platform for withholding so that income tax no longer distorts employment law so greatly Align social security rights further Reduce VAT threshold (perhaps made easier by Making Tax Digital programme and technology).