Employment seems to be in the news on a fairly regular basis. For many years, the percentage of people in work (and out of work) has been watched closely by political pundits of all natures and persuasions. Over recent years, however, employment-related matters have become much more complicated as the nature of the job market has changed dramatically since the days when Dolly Parton sang about “Working 9 to 5” and successive governments have struggled to get to grips with what this means for employment law and employment-related taxation.
From Gordon Brown to Philip Hammond
While the year 2000 is probably best remembered for the Millennium Bug which (thankfully) never was, it was also the year when former chancellor Gordon Brown introduced the ‘Intermediaries Legislation’, probably better known as IR35. This was intended to address the issue of public-sector contractors being treated as “off payroll” staff when they were, to all intents and purposes, acting as employees and therefore should have been treated as such in all matters, including those of tax and national insurance. Even though it was intended to introduce clarity into a complex area, the legislation caused more than a few headaches and was updated in 2012 and again 2017. In spite of its widespread unpopularity, current chancellor Philip Hammond looks set to press ahead with introducing it to the private sector.
Insuring against “disguised employment”
It’s probably fair to say that wherever a tax exists, people will try to find a legal loophole to avoid paying it and, whatever the theory might say, in the eyes of many people, National Insurance is simply a tax by another name. In the eyes of the government, people finding creative ways to justify paying the lower rates charged to the self employed rather than the higher ones charged to the employed, was losing them money. Philip Hammond took his first steps to addressing the issue of national insurance for the self employed back in the spring 2017 budget, but was forced to do a u-turn after immense political pressure. Fast forward past a General Election to the autumn 2017 budget and the plans to increase national insurance for the self employed have been postponed for another year (and if a week is a long time in politics, then a year is much longer). At the same time, however, it’s likely that few people were surprised by the announcement that the government has commissioned research into extending IR35 into the private sector.
Acting against unrecognized employment
These days, self-employed people probably fall into one of two categories, those who are self-employed by choice and those who are using the gig economy to make ends meet. Recent court cases have shown that the latter do not necessarily want to be self employed but may find that accepting work on that basis is the only way to pay their bills. Last month, the government produced draft legislation, which proposes that firms gig economy should automatically class their casual staff as “workers” unless there are clear reasons to class them as self-employed. While it is likely that many of those workers would be very happy with this change, it is something of a legal “no man’s land” in terms of tax and national insurance, so it is to be hoped that if the bill is accepted, it is accompanied by clarification in this area.
