Umbrella Company trade body PRISM has secured a huge boost to its campaign for a strategic review of the tax system with backing from Shadow Financial Secretary to the Treasury Rob Marris.

Following a discussion with PRISM CEO Crawford Temple, Marris wrote to the Chancellor to throw his weight behind a review of the tax rules affecting flexible workers. In his letter, he highlighted the confusion that reigns across the employment intermediaries sector concerning employment status, telling the Chancellor that “successive governments have attempted unsuccessfully to refine the legislation.

He added: “I agree with PRISM that it is now time for HM Government to commission a strategic review of this type of work, in the hope that this will lead to clarity and a simpler tax system. The Office of Tax Simplification (OTS) would be one choice to conduct such a review.”

PRISM believes that a strategic review is the only way to create a simplified and fair tax system that properly recognises the unique way in which contracting professionals are engaged. At present, the UK’s tax regime only recognises the two traditional categories of worker: employed and self-employed. Contracting professionals working through an employment intermediary such as an Umbrella Company represent a third (and rapidly growing) category of worker who are totally ignored by the existing tax system.

Mr Temple, who announced PRISM’s campaign to secure a strategic review earlier this month, said “It’s fantastic that Rob Marris supports the idea and we thank him for meeting with us and writing to the Chancellor to that end.

“We hope George Osborne sees the benefits for the whole country of a simplified tax system that gives all types of workers the proper recognition they deserve so they, as well as their clients and employers, know where they stand.”

Mr Marris sets out in his letter why a strategic review is necessary: the lack of legislative clarity over the third category of workers (contracting professionals), he noted, “bedevils attempts to levy the right amount of tax, at the right time, and in the right way.”

The self-employed now numbers 4.6 million in the UK, but a reported 1.6 million fall outside the categories of self-employment and employment.

Mr Temple added “There is a growing army of flexible workers and, as a group, they are now too big for the Government to ignore. They are also incredibly important to our economy and should be recognised for the contribution they make.”

A strategic review, he said, would be a first step on the path to a genuinely level tax playing field for all categories of worker, including contracting professionals.

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