Employment status goes to the heart of employment law and the tax system. Employers and individuals must know which employment status applies to ensure the right protections are administered from holiday pay to the national minimum wage. Employment status also affects the taxes that an individual and their employer pay. It is a highly complex area, however, as detailed in reviews by the Office for Tax Simplification and the Department for Business, Innovation and Skills in 2015. It’s now back on the agenda following the Matthew Taylor review which highlighted the importance of ensuring our employment status system keeps pace with the changing world of work. His observations were in response to the rise of the gig economy and the increased numbers of self-employed individuals in the UK today. This is an important consultation for interim management providers given its relevance to IR35 and other tax issues.
Last month we met with officials from the Treasury and HMRC to discuss the government’s employment status consultation and feed into their review. We debated the nuances of employment law and tax from the pros and cons of codification to the alignment of tax and employment rights. There was consensus on the need for a level playing field but also concern that changes could inadvertently damage the interim management market. It is essential that the government does not rush ahead with changes as there are no ‘quick wins’ in this space. As ever, IR35 was a hot topic. The Check Employment Status for Tax (CEST) tool was highlighted as an example of how difficult it can be to condense years and years of case law into an algorithm.
While IR35 was not within the scope of the consultation under discussion, we highlighted the extent to which the off payroll rules are part and parcel of employment status. It is essential that the lessons of the public sector reforms and the experience of the interim management community are factored into the review.
The consultation on employment status has now closed and we await the government’s response. Our focus shifts back to IR35 following the publication of the government’s consultation on off-payroll working in the private sector. In our response to the government’s consultation we will be highlighting the value of interim management and the potential impact poorly devised reforms would have on the private sector. If you would like to feed into our response to the IR35 consultation, please get in touch.