On simplifying employment status:
Andy Vessey, Head of Tax at Qdos Contractor, commented:
“Given recent, controversial changes to IR35 in the public sector, it’s now imperative that public sector organisations and agencies understand the difference between a genuine employee and a genuine freelancer or contractor.
“HMRC’s ESS Tool, built to determine whether a contractor sits ‘inside’ or ‘outside’ IR35 might well provide an answer, but not necessarily always an accurate one - many cases because of imposing conditions not supported by case law in some of the status tests. Simplifying legislation would begin to clear muddy waters somewhat, but may not be entirely straightforward to design, as history suggests.”
On updating employment legislation, to reflect what is considered to be an accurate reflection of the main characteristics of status, such as personal service, control and mutuality of obligation:
Andy Vessey, commented:
“We welcome The Taylor Review’s arguments that legislation should be updated to reflect that of the courts. For accurate, fairer decisions around employment status, joined-up thinking and a legislation which takes into account changes in the sector is needed. However, status tests should be more distinct and not open to wide interpretation, so as to give certainty to both worker and engager.”
The review also highlights a number of other points affecting the UK’s freelancer and contractor workforce:
On giving employment rights to ‘dependent contractors’:
Andy Vessey explained:
“The Taylor review rightly recognises the rise of the ‘gig economy’, and the changing forces at work in the labour market. While the review touches on the need to differentiate between dependent contractors and genuinely self-employed workers, it could perhaps elaborate. A fundamental difference exists between workers such as Uber drivers and Deliveroo riders - who might well need protection - compared to the vast majority of the UK’s professional freelancer and contractor workforce.
“Professional freelancers and contractors typically command higher rates of pay, enjoy more control in the way they work and in the vast majority of cases, are genuinely self-employed. Interestingly, the review suggests a move away from personal service and towards control for determining what constitutes a 'dependent contractor'. This is a move alluded to in much of the IR35 consultation over the past couple of years.”
On contractors ‘inside IR35’ receiving status and protection of employment:
Andy Vessey commented:
“If a contractor is caught by IR35 and made to pay taxes similar to employees, then it is absolutely correct that they should be given the similar privileges to employed workers. Currently, contractors working inside IR35 are in limbo, unable to fully enjoy the financial benefits of working self-employed, and without any of the privileges employees receive.
“For too long now, end-users have been happy to engage contractors so as to avoid employer’s NIC and bestow other employment rights. However, in the contractor’s hour of need in an IR35 enquiry, many of them are unwilling to support the freelancer, leaving them to the mercy of HMRC and safe in the knowledge that there will be no repercussions for themselves.”
On the need for a new employment status tool:
Andy Vessey commented:
“Given that HMRC’s existing ESS Tool has delivered unreliable and in many cases contradictory results for public sector contractors since its release, we’re sceptical of another tool being discussed so soon. A combination of technology and expert advice is required to accurately set employment status, with input from contractors too. The suggested alignment of employment status and tax status would however hopefully provide some clarity between the two, to avoid a surplus of tools being used."
On moving towards the equal tax treatment of self-employed and employees:
Seb Maley, Qdos Contractor CEO commented:
“The Taylor Review has made the case that over time there should be equal tax treatment of the self-employed and employed. It argues companies should contribute to National Insurance Contributions for their contractor workforce, as they would their employees, given that the Government ‘loses out’ on £5.1bn a year from lower rates of NICs paid by the self-employed.
“The self-employed do not enjoy the same benefits as employees, so to call for a balanced taxation system, seems shortsighted. And while the review suggests companies engaging with self-employed workers could perhaps make these NIC contributions, many contractors would feel as though an element of their independence was being taken away. The beauty of the flexible workforce is that both contractors and companies benefit from a completely flexible working relationship.”
On the need for more support for self-employed from Government:
Seb Maley commented:
“As Qdos Contractor has previously stated, the new-look Government has an opportunity to rethink the support they offer to the UK’s 2million freelancers and contractors, who make up a large proportion of the UK’s 4.8million self-employed people. This should start with a change in attitudes towards the self-employed, some of whom - particularly contractors - have been unfairly tarnished as tax-avoiders.
“The majority of independent professionals choose to work for themselves to enjoy more freedom and a better worklife balance, not to unfairly exploit the current tax system. Furthermore, in the case of contractors, the majority have been forced to incorporate because of the demands of big business.”