The Government have promised us a review of small business tax including a review of the employment status test this Autumn. This is one of the areas which causes most anguish which has not been resolved in recent years.
The big difficulty is in deciding into which camp people fall when clearly many thousands fall into a big grey area in the middle and are neither obviously one nor the other.
So my suggestion would be – why not create a third category in the middle?
Employees – people with permanent employment lasting a minimum of 1 month who must turn up for specified hours and are then directed to do whatever their job description requires
Casual/freelancers – people who are paid for their time but on a much more casual basis, they can turn up or not, work short contracts, possibly send someone else, decide where to work, agree a fee ignoring holidays, sick pay and other employee benefits.
Businesses – sell either goods and/or services. If only services then the employers NIC bill must be a minimum of £5000 per tax year otherwise it becomes a casual/freelance situation.
Businesses should be taxed most lightly – after all they are already contributing over £5000 on tax as employers NIC. They are also the entrepreneurs who are taking most risk. We need them to continue growing and prospering for all our sakes.
Freelancers should pay the same rates as employees but get more expenses allowed as the cost of swapping from job to job and being flexible. We need these people to continue to be flexible.
Employees. Taxed as currently. They take no risks. They are guaranteed a payslip at the end of each month.
Probably not perfect but better than the mess we have at present.
What do you think?