Tax after Covid: Treasury Committee calls for the 'three person problem' to end - be aware
Taxes are believed by many to be what Rishi Sunak will target in the coming months to recoup coronavirus spending. This could arrive from many angles such as pension tax reform, the introduction of a wealth tax or simply the raising of existing tax rates.
The report called for reforms of a number of tax obligations such as stamp duty and pensions relief but they also urged the state to address a specific problem affecting the self-employed.
The Committee singled out the problem of addressing different forms of work which can lead to multiple taxation, as they detailed: “We strongly believe that a major reform of the tax treatment of the self-employed and employees is long overdue. The current system is confused, unfair and unsustainable.
“The review should incorporate the benefits which accrue upon payment of NICs and other taxes as well as the level, the incentives and the interaction of such taxes. It should look as far as is possible to eliminate the so-called ‘three person problem’ altogether.”
To briefly summarize, the three person problem means it’s possible to work for the same employer and be taxed in different ways depending on if the person is employed, self-employed or is operating through a limited company.
