U-turn on NIC rise does not alter the need for a fundamental review of the way we tax work, says KPMG

Posted On: 
15th March 2017

Michael Lavan, Tax Director at KPMG in the UK has commented on the Government’s decision to reverse the proposal to raise National Insurance contributions (NICs) on self-employed workers.

While Philip Hammond’s announcement today will no doubt attract headlines, it does not alter the underlying need for a root-and-branch review of the way in which the UK taxes work in the 21st Century.  The current tax system has not kept up with modern working practices.

In today’s letter to Conservative MPs, the Chancellor has again highlighted the importance being placed on the findings of the Taylor Review which will be published in the Summer.  It is hoped that this review will provide a springboard for proposals in the Autumn Budget, and lead to a more fundamental narrowing of the current fiscal differences between employment and self-employment.  Only then will we see a move away from the confusing and ineffective sticking-plaster approach to tax policy when seeking to address the challenges around the taxation of labour.

It should also be noted that today’s announcement leaves the Government with a £2bn hole to fill over the next five years, based on the policy costings which were published last week.  Many will be asking whether this will lead to an extension of the new IR35 rules, from the public sector and into the private sector, as a means by which to close the tax gap.