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Clarifying status for employment rights and tax obligations 

Qdos Consulting

By Qdos

One very significant, but perhaps overlooked development in the Budget was the news that the Government plans to review complex employment status rules which have plagued IR35 determinations since the arrival of the legislation back in 2000.

It was revealed in the ‘Overview of Tax Legislation and Rates’, a document published as a detailed follow-on from The Chancellor’s Budget speech.

“As announced at Autumn Budget 2017, the government will publish a consultation as part of its response to Matthew Taylor’s review of modern working practices, considering options for reform to make the employment status tests for both employment rights and tax clearer.

“The government recognises that this is an important and complex issue, and so will work with stakeholders to ensure that any potential changes are considered carefully.”

A review into confusing employment status rules has been a long time coming. The gig economy and the rapid and continuous rise of individuals working through their own personal service companies has led to increasing pressure on the Government to simplify employment status legislation.

It is something RSA’s Matthew Taylor highlighted in his review of modern working practices earlier this year. He argued that the growth of the gig economy calls for a closer inspection into employment status rules, as increasing numbers of workers sit precariously and confusingly somewhere between employment and self-employment.

From recent Uber and Deliveroo employment tribunals, to BBC actor Robert Glenister’s case in which it was decided he must pay £147,547 in missing National Insurance Contributions to HMRC, a very public light has been shone on the complexity and failings of employment status rules, which impacts decision making with regards to IR35 status.

The boundaries between what constitutes as a contractor, an employee or even a gig economy worker must be simplified for everyone involved. Following IR35 reform in the public sector, end engagers must make employment status decisions which carry thousands in IR35 liability. If employment status rules remain confusing, these end engagers risk making inaccurate employment status decisions which impact IR35 status. Should reform reach the private sector in time, private sector companies will face similar problems.

Whether a review into employment status rules is yet another indication that the Government plans to press on with further IR35 reform remains to be seen. While we hope it isn’t, we should at least welcome the fact they are prepared to address the legislation’s obvious flaws.

With a diverse self-employed workforce of 4.8m and growing, the changing nature of work in the UK makes a thorough review increasingly urgent.