Posted on:Consultation, Employment, Employment Status, HMRC, Individual, Matthew Taylor Review, National Insurance Contributions, NIC, Reform, Straight to the Point, U.K. Tax
On 7 February, the Government released its response to Matthew Taylor’s Review of Modern Working Practices, which was published in July 2017. Entitled “Good Work: A Response to the Taylor Review of Modern Working Practices”, the document was accompanied by four consultations on key areas covered by the review.
Six months after Matthew Taylor published his Review of Modern Working Practices, we now have the Government’s response, in the form of a paper entitled “Good Work. A Response to the Taylor Review of Modern Working Practices”, and the launch of no less than four consultations, covering:
- Employment status
- Increasing transparency in the labour market
- Agency workers
- Enforcement of employment rights
Unlike the other consultations, “employment status” was prepared by HMRC (together with the Treasury and BEIS). The overlap is not surprising; although tax was not included in the scope of Matthew Taylor’s review, an individual’s employment status directly informs how he or she (and his or her employer) is charged to tax and National Insurance contributions. In most cases, employment status is obvious: an individual is either employed or self-employed, and the tax will simply follow. However, the tests relevant to employment rights on the one hand, and the tax treatment of the individual on the other do not always align. While there is a third category relevant to an individual’s rights (the worker status), this is not currently true in a tax context, which operates a binary system where an individual is simply either employed or not.
The “overarching ambition” of the process is that “all work in the UK economy should be fair and decent with realistic scope of development and fulfilment”, and the Government has promised that the consultation will, among other things, explore the best way to “improve clarity for those on the boundary between employment and self-employment”. Without a change in the tax code specifically to address the mis-match between three sets of employment rights and two tax regimes, it is difficult to see how we can hope to achieve that clarity. One solution might be simply to treat all workers as employees (and collect more NICs from them and their employers) but, whichever route is chosen, if the Government is to be true to its word, any legislative reform must achieve clarity other than at the expense of fairness and decency!