The UK government has published its response to its own 2018 consultation on employment status and determined that it will not bring forward proposals to align employment status law for rights and tax, despite acknowledging that there could be benefits in doing so.
The government stated in its response: “Whilst such reform could help bring clarity in the long term, it might create cost and uncertainty for businesses in the short term, at a time where they are focusing on recovering from the pandemic.”
Overall, the government said it was not “the right time” to overhaul employment status laws on rights and tax. The decision to not act on the proposals has been met with criticism, with many pointing out that the initial consultation is now outdated having not been addressed since 2018.
The government has also been criticised over a perceived failure to seek to resolve the uncertainties within the current law, with some commentators pointing out that recent IR35 court decisions demonstrate the lack of clarity in employment status law.
Penny Simmons, an employment tax expert at Pinsent Masons, said: “In one recent case, the Court of Appeal appeared to indicate that the test may be overly complex, noting that it would be ‘desirable if there were one clear test or approach to determining whether a person was an employee’.”
IR35 Shield CEO Dave Chaplin said: “Whilst the decision to not legislate soon is right, the Government needs to start a formal process now that leads to a positive outcome. For now, however, as previous Governments have done, this topic is being filed into the “too difficult to deal with” drawer.”
Chaplin also questioned the government’s reasoning that it was not the right time to address employment status law because businesses were still recovering from COVID-19. Chaplin said: “This is a surprising reason, especially against the backdrop of Government introducing the Off-payroll reforms in April 2021, which forced 60,000 businesses to assess the status of some half a million freelancers.”
Looking forward, the government’s response document states that it will “work closely with stakeholders to explore longer-term options to improve the employment status system for tax to ensure it is as clear as possible and usable for all parties”.
