The government released its Good Work Plan in December 2018 following the Taylor review of modern working practices. Currently, the UK has three categories of employment status:
1. Employees. An employee is someone who works under an employment contract. Employees have the most rights, responsibilities and protection of the three categories.
2. Workers (Dependent contractors). All employees are workers, but an employee has extra employment rights and responsibilities that don’t apply to workers who are not employees. Where there is no employment contract, individuals are generally recognised as workers where a contract exists, where the individual undertakes to perform the work personally and where the other party is not a client or customer of any business undertaking or profession carried out by the individual.
The Good Work plan is looking to rename workers as ‘dependent contractors’ and to give a greater emphasis on the amount of control with a lower emphasis on the requirement to perform work personally.
3. Self- Employed. The self-employed provide their own services on their own account. Self-employed individuals are responsible for their own tax calculations/contributions and have less protection than employees or workers.
The current framework for determining employment status is out of touch with the tax framework, which has produced differing results in the courts, tribunals and in tax assessments.
Check Employment Status for Tax (“CEST”)
HMRC’s online CEST tool has been introduced across the public sector by the IR35 reforms which have resulted in issues for many public bodies as the tool – which is intended to help identify whether you should be classed as employed or self-employed for tax purposes – does not always function effectively.
CEST was given as a root cause for retrospective tax bills facing many freelancers at a Public Accounts Committee meeting by BBC heads. BBC Director General Lord Hall commented:
“From 2017 onwards, we were surprised by the way the outcomes of the tests that we had been applying perfectly legitimately and properly before were suddenly changed by CEST”
The IR35 reforms introduced CEST to the public sector and reforms introducing CEST are set to be extended to the private sector by April 2020. The issues with CEST have not been addressed, but the Good Work plan is a positive sign of the government’s intention to simplify the assessment of employment status for employers.
Once the government sets out their proposals for implementing a unified revised framework, we will look to provide a further update on the practical implications for employers.