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The 'Good Work Plan' vs IR35 Reform

Is the ‘Good Work plan’ the reform contractors fearing IR35 really want?

With the publishing of December’s IR35 forum minutes and the Government response to the Taylor review into modern working practices, last week was an interesting one for anyone with a mere fleeting interest in the IR35 legislation.

But with a thorough analysis of the forum minutes already published here, perhaps we should explore the newly unveiled ‘Good Work plan’ – the Government initiative designed to protect millions of vulnerable UK workers, which was released after a careful analysis of the Taylor review.

The ‘Good Work plan’ will introduce rights for every worker in the UK, giving Britain the accolade of being ‘one of the first countries to address the challenges of the changing world of work in the modern economy.’

On the face of it this is a promising step in the right direction. After all, the some 883,000 zero hour contract workers in the UK, including the growing contingent of gig economy workers need protection. It’s no secret that many gig economy workers – unlike contractors in this respect – sit somewhere between self-employment and employment but to this day operate without any employment rights.

The plan sits central to the Government’s Industrial Strategy and will hand millions of UK workers sick and holiday pay for the first time. But for highly skilled freelancers and contractors, is the ‘Good Work plan’ the reform they want, particularly to those fearing further IR35 reform? Arguably not.

Firstly, there are fundamental differences between independent contractors and gig economy workers. And while the two might fall under the umbrella of self-employment, their roles, earnings, and needs are typically quite different. For example, an Uber driver or a Deliveroo rider might need employment rights. But in many cases, skilled contractors working through their own limited companies (PSCs) are able to command much higher day rates and perhaps do not want nor need such benefits.

By and large, the UK’s independent workforce isn’t making the case that it deserves employment rights either – not at this moment in time anyway. Ongoing speculation and uncertainty surrounding further IR35 reform suggest that it is the tax system which deserves more focus.

But should further changes be made to the IR35 legislation, who’s to say contractors wouldn’t expect employment rights?

The threat of being placed inside IR35 will increase should widely tipped reform reach the private sector. So it would be entirely justified for contractors to expect benefits, even more so if they find themselves working under IR35 and paying the same tax as an employee earning a similar amount.

Although, that isn’t to say the ‘Good Work plan’ completely fails to acknowledge the issues surrounding the future of IR35. The Government’s statement did allude to the ongoing confusion hindering employment status legislation and the taxation of contractors.

"The UK's employment law and tax law can fail to provide the clarity that employers and individuals need. The Government is also launching a detailed consultation examining options, including new legislation, to make it easier for both the workforce and businesses to understand whether someone is an employee, worker or self-employed - determining which rights and tax obligations apply to them."

The recently published employment status consultation document, here, details the problems with the existing legislation which has a large say on whether a contractor should sit inside or outside IR35. That said, the foreword doesn’t shed a huge amount of light on the shape the consultation might take, stating:

“We therefore wholeheartedly agree with the review’s conclusion that there is a compelling case for greater clarity in this area.”

The document does however call for the input of contractors and businesses impacted in the consultation – which is definitely worth noting and acting upon.

“We therefore encourage businesses, employers, trade unions, experts, and individuals to all engage openly and constructively in this consultation so that we can ensure that any changes support our goal of delivering an economy that works for everyone.”

With 2million independent workers in the UK, the need to simplify employment status legislation has never been greater. Recent IR35 reform and the prospect of further changes make it vital that end engagers are able to accurately define the differences between a contractor’s and an employee’s working arrangement – otherwise who’s to say they will be in a position to make well-informed IR35 decisions that can carry a six figure tax liability?

So on reflection, is the ‘Good Work plan’ entirely relevant to skilled contractors? Given the ongoing uncertainty surrounding IR35 reform, one could argue that right now, perhaps not. But should further IR35 changes go ahead this year, it would be surprising if the independent workforce weren’t calling for similar rights to employees.

By:Benedict Smith

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