Stakeholders from the freelancing and contracting market have welcomed Chancellor Phillip Hammond’s announcement in his autumn budget that the government will publish a discussion paper on Good Work, Matthew Taylor’s review of contemporary working practices.

Taylor’s review examined how British employment law must adjust to new working patterns such as the rise of contracting, employment intermediaries and the gig economy. It did not make tax proposals, which were beyond its remit, but the publication identified a discrepancy between tax law and employment law: the former recognises only two categories or work – employment or self-employment – while the latter allows for a third, “worker,” entitled to basic employment rights.

The review recommended a new category for employment law: “dependent contractor.” These designees would work flexibly under a less formal employment relationship than an employee, receiving a more limited range of statutory rights.

The announcement of additional discussion on Taylor’s work and a new consultation featured in the budget document “Overview of Tax Legislation and Rates”, where the government also committed to working closely with stakeholders to ensure any that any potential changes are cautiously considered.

Julia Kermode, CEO of Umbrella Company trade association the Freelancer and Contractor Services Association (FCSA), welcomed the government’s recognition that employment status is a crucial and intricate issue. She praised commitment to exploring longer-term reform because this would help clarify employment status assessments for both tax and employment rights.

Kermode highlighted that the FCSA, with its extensive expertise in employment status and taxation, opposes HMRC’s seriously flawed online tool “CEST” (Check Employment Status for Tax) because of its stark omission of a vital element of IR35 case law: Mutuality of Obligation (MOO). Since HMRC still insists that the tool yields accurate results despite this “glaring omission”, she said, the FCSA would continue to campaign against it. Hopefully, she said, forthcoming broader consultation will result in an improved and more accurate tool.

She added:

“Work patterns are changing and we are seeing a growth in non-traditional employment that is going to continue as more people choose to shun permanent employment in favour of working for themselves. This structural change to the UK workforce requires a structural change to the regulations not knee-jerk changes driven by tax collection, and for that reason we welcome the opportunity to explore options for longer-term reform.”

Her sentiments were echoed by Qdos Contractor CEO Seb Maley, who welcomed the “long overdue” review of employment and tax status. He added, “The boundaries between what legally constitutes as a contractor, an employee or even gig economy worker must be simplified for everyone involved.”

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