1. How should different ways of working be taxed?
CIOT and IFS debate
How should different ways of working be taxed?
Mark Groom 20 March 2017

2. What are we trying to address/achieve?
Clear objectives +
Roadmap from
A to B
Decreasing revenues from an increasing self-employed tax base
Compliance &
Boundaries between employment status
Encouraging
Investment entre-preneurialism job creation
Protect vulnerable workers and/or those lacking bargaining power

3. Agency deemed employee
Complex boundaries
Key factors
Self-employed
Worker
Agency deemed employee
Officeholder,
employee,
IR35,
Chapter 10
Carrying on own business undertaking  x
Provision of substantial own equipment
Financial risk
Profit from own sound management
Personal service (no unfettered substitution)
Supervision, direction, control (how only)
Mutuality of obligation ?
Control (how, what, when, where)
Integration/part and parcel of the business
Personal factors
()
Intention of the parties
Length of engagement
Tax and National Insurance
Income tax (Self Assessment)
Withholding taxes (CIS 0%, 20%, 30%
FEU 20%)
Class 2/4 NIC
PAYE
Class 1 NIC
Class 1 NIC (categorisation of earners rules)

4. Employed : self-employed boundary
Class 1 NIC, c. £10K
Total Gross

5. Employment rights boundaries
Entitlements/protections
Self-employed
Worker
Employee
Single Tier State Pension
£ pw
Maternity allowance/SMP – weeks 1 – 6
£ pw
90% of pay
(if >£139.58)
Maternity allowance/SMP – weeks 7 to 39
Jobseekers allowance* – income based < age 25
(income based – means tested) >= 25
£ pw
£ pw
Protection for whistleblowers 
Protection from unlawful deduction from wages
Unlawful discrimination
Working time including holiday pay (£)
Auto-enrolment pension contributions (£)
NMW / NLW (£)
Unfair dismissal
Redundancy payment
Flexible working rights
Protection on the transfer of an undertaking
Statutory notice entitlement
Statutory sick pay – 28 weeks
£ pw
Jobseekers allowance*
(contribution based) – payable for <= 6 months
*Universal Credit

6. The Worker boundary
Byrne Brothers (Formwork) Ltd v Baird & Others [2002] ICR 667
Policy intention to extend the benefits of protection to workers (whatever their formal employment status) who may be required to:
work excessive hours, or
in the case of the ERA or NMWA, to suffer unlawful deductions from their earnings or to be paid to little.
Employees are thought to need such protection because they are in a subordinate and dependent position vis-à-vis their employers…the purpose of the Regulations is to extend protection to workers who are, substantively and economically, in the same position.
Exclusion for those “carrying on a business undertaking” cannot include every person who is self employed. It is necessary to distinguish between:
workers whose degree of dependence is essentially the same as that of employees; and
contractors who have a sufficiently arm’s-length and independent position to be treated as being able to look after themselves in the relevant respects.

7. Sole trader : incorporated self-employed boundary
Class 1 NIC
CT Rate
Total Gross

8. Sole trader : incorporated self-employed
Key comparators
16-17
20-21
Personal Allowance
11,000
12,500
Basic rate band
32,000
37,500
Primary Threshold
8,060
8,411
Secondary Threshold
8,112
8,476
UEL
43,000
50,000
CT rate
20%
17%
Dividend Allowance
5,000
2,000

9. Sole trader : incorporated self-employed
Key comparators
16-17
20-21
Personal Allowance
11,000
12,500
Basic rate band
32,000
37,500
Primary Threshold
8,060
8,411
Secondary Threshold
8,112
8,476
UEL
43,000
50,000
CT rate
20%
17%
Dividend Allowance
5,000
2,000

10. Conclusions What could we consider doing?
Employed :
Self-employed boundary
Sold trader :
Incorporation
boundary
Worker definition
Compliance & boundaries
Consider a new flat rate withholding tax for Workers.
Replace employment status with PAYE Status.
Consider statutory test, could be based on:
new Worker definition
SDC test (like agencies)
IR35 to follow new PAYE Status
Protect revenues
Set PAYE Status at Worker level
Align class 1 primary and class 4 NIC rates to benefits provided.
Review CT and dividend withholding rates to remove tax arbitrage from legal form.
Extend Chapter 10 to the private sector.
Protect vulnerable workers
Codify Byrne Brothers into new Worker definition.
n/a
n/a
Investment, entrepeneurialism, job-creation
Codify Byrne Brothers into new Worker definition.
Broaden exclusions e.g. earnings/dependency based
Ensure those carrying on a business undertaking properly recognised as self employed.
Consider investment incentives.
n/a

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