This was despite both clients and contractors driving the increase in the use of personal service companies and both benefiting from the resulting tax treatment, the committee stated.
Other findings included that flexible working by contractors was a legitimate and important part of the UK labour market which could be jeopardised by the rule change and that the distinction of separate employment status for tax purposes from employment status under employment law was “unacceptable”.
The committee also concluded the self-employed market had changed with the rise of the ‘gig economy’, and had increased the number of lower paid self-employed workers.
It said the tax system “needs to adapt to these significant labour market changes” but noted the challenges posed by these changes went “well beyond” the tax system.
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