Are changes to tax and NICs for ‘workers’ not entirely ruled out?
The ‘good work plan’, which was announced on 7 February, represented the government’s long-awaited response to Matthew Taylor’s review of modern working practices and the associated joint select committee report, A framework for modern employment.
The response includes four consultation documents that propose a series of changes:
enforcement of employment rights and recommendations;
agency workers recommendations;
measures to increase transparency in the UK labour market; and
employment status.
Ultimately, the outcome of these changes is intended to enable more workers to access worker entitlements and is likely to impact the way in which businesses and individuals engage with each other, something which has evolved dramatically over recent years with the advent of the gig economy.
Broadly, this will lead to potentially more expense for businesses adopting certain models with a by-product being additional income and therefore income tax and NICs take for government.
We await the detail within the consultations but anticipate the implementation of these changes is not going to be simple, especially given the current position has been left to evolve through test cases and market forces with many layers of complexity. Employers are going to need to take careful note of the changes that are afoot to ensure they remain compliant and do not fall foul of penalties and naming and shaming.
Interestingly, from a tax and NICs perspective, the government has been clear that it does not intend to revisit the difference between NICs of employees and self-employed. However, a first read of the employment status consultation raises one big question: does it rule out changes to tax rates or NICs for ‘workers’ who are not ‘self-employed’ or not? Or will changes be funded by defining many of the current ‘workers’ as ‘employees?
In the UK most people provide work as either ‘employees’ or ‘self-employed’. ‘Worker’ is an intermediate category whereby under current law, benefits such as minimum wage and holiday apply but certain employment benefits are not available. Many of the recent ‘gig economy’ cases were arguing that individuals treated as self-employed should be treated as workers.
As we move into a world where it is more likely an individual is deemed to be a worker by default rather than needing to assert those rights through a tribunal, could it be that we are now on a path where for tax and NICs purposes we read worker to mean ‘employed’.
Almost all of the other recommendations within the Taylor report and Joint Select Committee draft bill are being addressed.
We are now likely to see a requirement for all employers to provide a summary of rights and entitlements on day one of employment in order to ensure workers are aware of their entitlement to claim and receive rights such as holiday pay and sick pay.
There is likely to be a requirement for employers to provide a payslip to all workers (not just employees), something which will give rise to more administration for businesses engaging with off-payroll workers.
Interns is another area which will have additional focus with the government taking the opportunity to address concerns that businesses are using unpaid or low paid interns with few entitlements to perform work which should otherwise attract higher pay and worker rights.
It’s clear that the government’s response to the Taylor review is a catalyst for change in the way on and off-payroll individuals engage to perform work and we’re likely to see an increase in compliance audits, penalties and naming and shaming in the coming years: it looks like HMRC will become the enforcer in many cases. As we have seen with minimum wage, HMRC has extensive powers to deal with issues and can be expected to be very active in ensuring workers and employees are treated correctly going forward.
Are changes to tax and NICs for ‘workers’ not entirely ruled out?
The ‘good work plan’, which was announced on 7 February, represented the government’s long-awaited response to Matthew Taylor’s review of modern working practices and the associated joint select committee report, A framework for modern employment.
The response includes four consultation documents that propose a series of changes:
enforcement of employment rights and recommendations;
agency workers recommendations;
measures to increase transparency in the UK labour market; and
employment status.
Ultimately, the outcome of these changes is intended to enable more workers to access worker entitlements and is likely to impact the way in which businesses and individuals engage with each other, something which has evolved dramatically over recent years with the advent of the gig economy.
Broadly, this will lead to potentially more expense for businesses adopting certain models with a by-product being additional income and therefore income tax and NICs take for government.
We await the detail within the consultations but anticipate the implementation of these changes is not going to be simple, especially given the current position has been left to evolve through test cases and market forces with many layers of complexity. Employers are going to need to take careful note of the changes that are afoot to ensure they remain compliant and do not fall foul of penalties and naming and shaming.
Interestingly, from a tax and NICs perspective, the government has been clear that it does not intend to revisit the difference between NICs of employees and self-employed. However, a first read of the employment status consultation raises one big question: does it rule out changes to tax rates or NICs for ‘workers’ who are not ‘self-employed’ or not? Or will changes be funded by defining many of the current ‘workers’ as ‘employees?
In the UK most people provide work as either ‘employees’ or ‘self-employed’. ‘Worker’ is an intermediate category whereby under current law, benefits such as minimum wage and holiday apply but certain employment benefits are not available. Many of the recent ‘gig economy’ cases were arguing that individuals treated as self-employed should be treated as workers.
As we move into a world where it is more likely an individual is deemed to be a worker by default rather than needing to assert those rights through a tribunal, could it be that we are now on a path where for tax and NICs purposes we read worker to mean ‘employed’.
Almost all of the other recommendations within the Taylor report and Joint Select Committee draft bill are being addressed.
We are now likely to see a requirement for all employers to provide a summary of rights and entitlements on day one of employment in order to ensure workers are aware of their entitlement to claim and receive rights such as holiday pay and sick pay.
There is likely to be a requirement for employers to provide a payslip to all workers (not just employees), something which will give rise to more administration for businesses engaging with off-payroll workers.
Interns is another area which will have additional focus with the government taking the opportunity to address concerns that businesses are using unpaid or low paid interns with few entitlements to perform work which should otherwise attract higher pay and worker rights.
It’s clear that the government’s response to the Taylor review is a catalyst for change in the way on and off-payroll individuals engage to perform work and we’re likely to see an increase in compliance audits, penalties and naming and shaming in the coming years: it looks like HMRC will become the enforcer in many cases. As we have seen with minimum wage, HMRC has extensive powers to deal with issues and can be expected to be very active in ensuring workers and employees are treated correctly going forward.
