Employment status for tax purposes: essentials for employment lawyers
Employment status for tax purposes: essentials for employment lawyers

The following Employment guidance note provides comprehensive and up to date legal information covering:

  • Employment status for tax purposes: essentials for employment lawyers
  • Employment status for tax purposes: why it matters
  • Establishing employment status for tax purposes
  • Employment status tests for tax purposes
  • HMRC's check employment status for tax (CEST) tool
  • Recategorisation by HMRC
  • Proposals for change: the Taylor Review, the 2018 Employment Status Consultation and the Good Work Plan

FORTHCOMING CHANGE: Proposed new National Insurance contribution (NIC) rates, limits and thresholds, to take effect from 6 April 2020, have been published in draft form by the government. The proposed rates for weekly earnings limits and thresholds for determining liability to Class 1 NICs and entitlement to associated state benefits are: lower earnings limit £120 (from £118); upper earnings limit remains at £962; primary threshold £183 (from £166); secondary threshold increases £169 (from £166); and the upper secondary threshold for the Under 21 age group and for apprentices both remain at £962. Class 2, 3 and 4 NIC rate changes are: Class 2 from £3.00 to £3.05 per week; the small profits threshold from £6,365 to £6,475 per year; voluntary Class 3 from £15.00 to £15.30; and the lower profits limits for Class 4 from £8,632 to £9,500 per year (with the upper limit unchanged at £50,000). For more information, see: LNB News 31/01/2020 51.

This Practice Note provides a general overview, aimed at employment lawyers, of the approach taken by HM Revenue and Customs (HMRC) to employment status for tax purposes, ie who is an employee and how employee tax status is assessed.

It is important to appreciate that, although HM Revenue and Customs (HMRC) takes a similar approach to the