ATT calls for overhaul of UK's employment status rules

In a representation submitted ahead of next month’s Budget, the ATT says businesses and workers can currently face different outcomes for the same circumstances under tax law and employment law, creating unnecessary complexity and compliance burdens. Where businesses reach the wrong conclusion on employment status, they risk financial penalties, causing uncertainty and discouraging employees from certain arrangements.

In some cases, individuals may be treated as employees for Income Tax and National Insurance purposes while not receiving the employment rights and protections associated with employee status, including rights relating to the National Minimum Wage and National Living Wage.

The ATT adds that it is unhelpful and unfair for the same working arrangement to produce different conclusions depending on whether the issue is being considered by HMRC, an employment tribunal or another body. It is calling for consultation on a single statutory framework for employment status, similar to the Statutory Residence Test, that would provide greater certainty for workers and businesses.

Jon Stride, chair of the ATT’s Technical Steering Group, said:

“No one should face a situation where they are taxed like an employee but treated like a contractor. The UK's employment status rules have become increasingly complicated and inconsistent, creating uncertainty for workers and employers alike.

“The vast majority of taxpayers want to ensure that their tax is being correctly calculated, but the current complexity of the system does not make this clear and straightforward.

"A clear statutory framework would help end that confusion, bring tax and employment rights into closer alignment and give people confidence that similar working arrangements will be treated in a similar way."

Notes for editors:

1. ATT Budget Representation – Employment Status.