Employment status is at the core of both employment law and the tax system. Employment status determines the rights that an individual gets, and the taxes that they and the business they work for, or with, must pay. There are two tax statuses – self-employed and employed – and three statuses for rights: self-employed, limb (b) worker and employee.

In its response, the government said: “Now is not the right time to overhaul the employment status frameworks for rights and for tax but we are delivering greater clarity around the frameworks for individuals and employers by publishing guidance for status and working time for minimum wage purposes.”

Among other points, the government stuck to its reliance on HM Revenue & Customs’ much-maligned Check Employment Status for Tax (CEST) tool to support status determinations. “For tax, the majority of status cases are simple and clear,” the response said.

The only caveat was its acceptance that there will “inevitably be borderline cases, where the facts of the employment relationship make status determinations complex”. 

“It’s disappointing that after many years of discussion the government has decided now is not the right time to bring forward proposals for alignment between the two frameworks,” said Susan Ball, RSM UK employment taxes partner and current president of the Chartered Institute of Taxation. “Instead, it states it ‘will work closely with stakeholders to explore longer-term options to improve the employment status system for tax to ensure it is as clear as possible and usable for all parties’. We must hope this does mean active discussion now and not further delays.”

Also commenting, Dave Chaplin, CEO of tax compliance firm IR35 Shield, said the report made for “very disappointing reading”. He continued: “After spending over four years since the consultation closed on 1 June 2018, the government has carefully considered all 162 responses and published a 32-page document which effectively says, ‘We have decided to do nothing’.

“Employment status is complex, and as previous governments have done, this topic is being filed into the ‘too difficult to deal with’ drawer,” he said.

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