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Employment Status consultation - government response & guidance

You would be forgiven if you had forgotten all about the consultation on Employment Status; after all we’ve gone through a change of government (nearly two!) and a global pandemic since it was released in 2018.  The consultation invited views on the 2017 Taylor review of Modern Working Practices and the government's subsequent Good Work Plan On July 26th 2022 the government published its response along with new guidance to assist with employment status determination. It’s fair to say, there aren’t big changes or plans for change when it comes to the framework for employment status and how it is determined.  If you feel inclined to read the response document in its entirety, there’s a link at the bottom of this page), but here’s a summary of the key points:
  • 162 responses to the consultation were submitted, mostly from representative bodies and trade unions
  • Most were supportive of employment status reform but there was no consensus on how this could be achieved
  • The government thinks that the current employment status framework works for the majority but boundaries between statuses can be unclear for some individuals and businesses. The benefits of creating a new framework are currently outweighed by the associated disruption and costs as businesses focus to recover from the pandemic
  • The government thinks the 3-tiered employment status (employee, worker, self-employed) is still the best approach
  • It was agreed that increased transparency for individuals was needed, resulting in accompanying guidance (links below)
  • “Calculating Minimum Wage” guidance has been updated to clarify working time for casual and gig workers 
  • The government is addressing delays in the tribunal system
  • The government agrees there could be some benefit in further aligning tax and employment status - but there are no plans at the moment to do anything on this.

Further reading on this

HM Government response to Employment Status consultation New government guidance on employment status and employment rights HMRC’s “Tax Avoidance - Don’t Get Caught Out” tools

Tax avoidance scheme promoter hit with £1 million fine

A tax avoidance promoter has been named and shamed as well being hit with a £1 million fine after a legal challenge by HMRC. Hyrax Resourcing Ltd. was given the almost-maximum allowed penalty by the First Tier Tribunal for failing to disclose an avoidance scheme to HMRC. Hyrax promoted a disguised remuneration scheme that involved routing money to an off-shore trust in Jersey. This latest ruling follows a previous HMRC tribunal win in 2019 where Hyrax was ordered to provide the details of the avoidance scheme they promoted and its users. Mary Aiston, HMRC’s Director of Counter-Avoidance, said: “This £1 million fine should serve as a stark warning to tax avoidance promoters. Those who ignore their legal duty will face serious consequences. “We actively tackle promoters of tax avoidance schemes and are determined to drive them out of business. We continue to use the full force of the law to challenge tax avoidance scheme promoters.” Hyrax failed to disclose a disguised remuneration scheme that paid users the National Minimum Wage, with the remainder of their earnings paid as loans which were transferred to an offshore trust in Jersey. These loans were not declared as income on the scheme users’ tax returns, meaning they didn’t pay tax on all of their earnings. This recent win supports HMRC’s wider work to drive tax avoidance schemes and their promoters out of business, including its Tax Avoidance: Don’t Get Caught Out campaign. Earlier this year, HMRC used new powers to publicly name tax avoidance schemes and their promoters. To date, seven tax avoidance schemes and promoters have now been named and exposed by HMRC, two of which have since gone into liquidation. For compliant umbrella businesses, the ruling comes as welcome validation that HMRC will catch up with and use the force of law against peddlers of tax avoidance schemes. At Liquid Friday we will continue to do our best to inform and educate the supply chain on what such schemes typically look like, in an effort to prevent contractors and agencies getting unknowingly caught up in them. 

Further reading on this

Terms that scream “dodgy umbrella company” The good umbrella company checklist