The delayed findings of the ‘Taylor review’ into self-employment and the gig economy has finally been published: (

This review wasn’t meant to be tax focused and instead looked at self-employment in the UK more generally, but Matthew Taylor said as the review was launched, “We are looking at why we have the model of (self-employment) work we have and it is clear that part of what drives this is the tax advantages of self-employed status”.

Given the above comments, it’s not entirely unexpected that some of the key recommendations of the report look to address how the tax system influences self-employment.

For tax purposes, we have only recognised two ways in which an individual can personally (acknowledging the ability to use an intermediary such as a personal service company) provide their services; they are either an employee or self-employed. For employment law, the definitions are not so black and white, with a middle grey area for ‘workers’. Through the development of a body of case law, workers are entitled to more rights than the self-employed, but less than an employee.

This grey area of employment status for workers and their entitlement to various employment rights has been typified in recent years by the emergence of the gig economy. One of the key recommendations to come out of the Taylor review is for a distinct new category of employment status, termed ‘dependent contractors’ by the review.

As well as recommending dependent contractors be entitled to a baseline level of employment rights, it also suggests that the engager should be liable to national insurance contributions on the fees paid to the dependent contractor.

Justifying this recommendation, Mr Taylor said, “We have a big issue about the fact there is a gap between the amount of tax we pay on self-employed labour and employed labour…if you’re an employee or self-employed – if I pay for your labour, I should pay a similar amount of tax associated with the labour”.

This underlines the tax theme adopted by the review which broadly suggests that the government policy should be to reduce tax driven self-employment and what the report terms the ‘employment wedge’. A key recommendation of the report is that the cost associated with taking someone on as an employee is already high and government policy should avoid increasing it further (for example, by the introduction of employment only charges such as the apprenticeship levy).

As well as the above specific recommendations in relation to the tax system, broader recommendations to employment law may feed through to drive government tax policy.

The report argues for more emphasis to be placed on control as a determining factor in an individual’s employment status. Suggesting, “The principle of ‘control’ should be of greater importance when determining dependent contractor status, with the legislation outlining what it means in a modern labour market and not simply in terms of the supervision of day-to-day activities”.

These remarks will be music to HMRC’s ears, whose policy it has been in recent years to place control as central to determining employment status. We’ve seen through the introduction of the new agency legislation, where supervision and control is central to the legislation. More recently we’ve seen HMRC’s Employment Status Service tool, a questionnaire aimed at giving taxpayers certainty on HMRC’s view of their employment status, asking a significant number of questions on control exercised over the worker.

Finally, in a somewhat concealed way, the report appears to be suggesting the introduction of a statutory employment test, it says that, “As a result of (employment status) legislation being minimal for so long, and therefore open to interpretation, the courts have established a range of tests and factors to help them make decisions on employment status…if the Government believes these to be an accurate reflection of what they consider to be the main characteristics of a status, legislation should be updated to reflect this”.

This is not the only reference to updated employment status legislation and the report goes on to argue that, “As a first principle, the Government must make legislation clearer. The employment statuses should also be distinct and not open to as much interpretation as currently, nor be so ambiguous that only a court can fully understand the basic principles”.

Whilst the report’s references to updating employment status legislation may be viewed by some as, ‘a reference to employment status for employment law purposes only’, my personal opinion is that it’s in reference to employment status more broadly and we cannot rule out the government interpreting it as recommending a statutory employment status test for tax purposes.

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