In this time of high unemployment and economic downturn it may be appropriate to look to a new way of dealing with running a small business that reduces the length of time of administration. One way of doing this is to offer a new classification of employment that enables an individual to operate a business free of regulation and possibly tax until their income passes into a higher threshold.
Currently an individual is either unemployed, self employed (sole trader), a partner, an employee of another business/organisation or a director in a company. A new classification of employment that is unregulated, which is referred to as a 'Wurker' someone who 'works' unregulated by the Inland Revenue, meaning they don't have to fill in the annual self assessment form other than by stating they are classified as a 'Wurker' and are exempt from doing so, could reduce the administrative time and costs of running a business.
In the same way it is possible to operate a business account, 'Wurker' accounts could be opened with a limit on the level of deposits before the next employment classification is reached and the treatment by the Inland Revenue changes. In short if the deposits in the 'Wurker' account exceed the amount set by the Inland Revenue, which is allowed to be unregulated or perhaps untaxed, the employment classification will change meaning administrative and taxation costs will rise.
If the 'Wurker' account surpasses the deposit limit the individual who owns the account will have to fill in the annual self assessment form, whereas if the account deposit limit is not surpassed they will not have to fill in the annual self assessment form as they have maintained the 'Wurker' employment classification by remaining within the boundaries set by the Inland Revenue.
For example the limit on the amount that could be deposited in a 'Wurker' account could be set at £20,000, allowing unregulated and possibly tax free earnings to be made up to that amount. After the £20,000 deposit had been exceeded the individual responsible would have to submit an annual self assessment form to the Inland Revenue and pay tax at the relevant threshold.
If the desired outcome of holding 'Wurker' accounts is to reduce taxation liability to increase the number of emerging businesses they could operate as tax free accounts similar to an ISA. All funds deposited by the individual who owns the 'Wurker' account could be tax exempt, allowing them to deposit earnings and make withdrawals (in short earn a living) without paying tax. The time spent administrating their earnings would also become simpler as long as they remain within the 'Wurker' employment classification boundaries.
In addition to individuals who work for themselves being able to operate 'Wurker' accounts employees who work for other organisations could also be allowed to operate a 'Wurker' account on top of their existing employment. This would allow the existing workforce to expand the economy by setting up new businesses with the advantages of the same low regulatory and tax benefits everyone else receives, without having any consequences on their other employment or the way the Inland Revenue classify them (i.e. running a PAYE account with their employer and a 'Wurker' account in tangent).
If the loss of government income from offering tax free 'Wurker' accounts is too high a lower taxation rate for the 'Wurker' classification could be set instead of a complete exemption. Even if the same level of tax is taken from the 'Wurker' account as a Sole Trader the administrative costs and errands involved in running a business would be reduced. However it is recommended a lower rate of taxation should be applied to the 'Wurker' classification, if any at all, to encourage growth in this period of economic downturn.Suggest a correction