Experts flag new NIC and benefits challenges facing the self-employed

In the recent controversy over false self-employment, and the disparity in rates of national insurance contributions between employees and the self-employed, two forthcoming changes have received little attention.

The transition to universal credit will have an adverse impact on many self-employed people, particularly those with fluctuating incomes, and changes to the structure of class 4 NICs will make preserving entitlement to state pension much more expensive for self-employed earners on very low profits, as the Low Incomes Tax Reform Group (LITRG) highlighted on 20 March.

Yesterday in Parliament, the work and pensions committee heard evidence from experts from LITRG, the Institute for Fiscal Studies, the RSA, the Social Market Foundation and others on “self-employment and the gig economy”. Continue reading

UK should consider reduced VAT rate for Northern Ireland tourism, MPs say

The UK government should consider setting a reduced rate of VAT for Northern Ireland’s tourism sector when the UK leaves the European Union and has the power to make its own VAT rules, according to a House of Commons select committee.

“The tourism industry in Northern Ireland has undoubtedly had some great successes in recent years, and we are optimistic for the future, notwithstanding the current political situation,” said Laurence Robertson, a Conservative member of Parliament and chair of the cross-party Northern Ireland Affairs Committee, in a March 20 statement.

Northern Ireland’s tourism sector is subject to a VAT rate that is more than twice that in the Republic of Ireland, the committee noted. Read more:

My news story for Tax Analysts, March 23(paywall)

Parliament: “Treasury must investigate if post-Brexit tax powers can boost tourism

Uber faces VAT challenge as tax barrister demands receipt

A tax barrister is set to begin legal proceedings that could, according to his own estimates, result in Uber Technologies Inc. being held liable for VAT of almost £20 million based on its smartphone-app-based operations in London alone. Uber maintains that it is not liable because it is not providing transportation services.

“Drivers who use the Uber app are subject to the same VAT laws as any other transportation provider in the U.K.,” an Uber spokesperson said in an emailed statement on March 21. Most drivers are likely to have an annual turnover well below the current VAT threshold of £83,000, so that they do not need to charge VAT …

Read more: My news story for Tax Analysts, 22 March (paywall)

Thoughts on the partial NIC ‘lock’ law

The Conservative manifesto for the May 2015 election committed a Conservative government not to increase “the rates of VAT, income tax, or national insurance” in the next Parliament (ie. this one).

But the NIC lock, enacted in the National Insurance Contributions (Rate Ceilings) Act 2015, applied only to the class 1 NICs paid by employers and employees.

Writing in The Sun on March 16, chancellor Philip Hammond said he and the prime minister had decided, a week after announcing a proposal to increase the class 4 NICs paid by the self-employed, that it was “not enough simply to stay within the letter of our tax lock law”. Continue reading