Employment tax for a modern and flexible workforce

Employment tax for a modern and flexible workforce

The UK workforce is transforming. Employment tax isn’t keeping up.

As the way people work is changing – becoming more flexible, digital and international – the sources of tax revenues from work are changing too. In response to this shift, the government is tinkering with the ‘edges’ of employment tax without addressing the system as a whole. And this siloed strategy lumbers business with significant cost and disruption.

The change we’re calling for

We’re asking the government to instead look at employment tax holistically, and to address the core issues for business that crop up as a result of rapid change. The government must support an employment tax system that adequately reflects the modern working world – and avoids placing significant additional cost burdens on business.

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    Engage in a holistic review of employment taxes, considering the recommendations made in the Taylor Review

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    Use the expertise of business to find solutions to emerging employment tax issues such as IR35

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    Create a clear roadmap for implementing employment tax reform to enable sound policy development

Why it's needed

Employment is rapidly moving away from the traditional model – with more people working internationally, the emergence of the gig economy, and more digital and flexible working arrangements.

Income tax and National Insurance contributed 25% and 19% respectively to the total UK tax revenues in 2018. As employment changes, the government is focusing on maintaining this tax base.

But in doing so, the government are making uncoordinated tweaks like reforming the IR35 off-payroll working rules; implementing unclear regulations around National Living Wage compliance; and removing the Employment Allowance for larger businesses. Supposedly small changes with significant impact on business.

Tax is critical in funding the public services the UK relies on. But the government must look sustainably and holistically at where that tax is coming from, without contributing to business’ burden, and provide firms with enough time to implement changes.

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"The vast majority of our members understand and support the rationale behind reforming the employment tax system. But business needs certainty, and any reform must be developed holistically – not in siloes – and should utilise the invaluable first-hand experience of UK firms. We welcome a clear and considered reform that champions the needs of a flexible workforce without placing unreasonable burden on business."

Annie Gascoyne, Director of Economic Policy

The true cost of IR35 reform

Consultation is key

When addressing employment taxes, clear and considered reform that provides certainty to business holds great importance.

  • 77% of CBI members surveyed worry that deeming contractors as ‘employed for tax purposes’ could cause employment rights challenges

  • 1 in 5 businesses are considering cutting the use of contractors completely

  • 87% of businesses believe that HMRC is not doing enough to support the transition

Our progress and impact

The CBI campaigns tirelessly on behalf of our members so that business creates prosperity for all.  Learn more about the work we do and the impact we are making on this issue.

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Support the change

  1. Are you a business leader?

    Join the CBI

    Our members are our mandate, and the reason we’re the most influential business organisation in the UK. Join the voice of business, and help us campaign to create an employment tax system that suits a modern, flexible world of work.

    Become a member
  2. Are you a CBI member?

    Have your say

    Want to have your voice heard on employment tax issues? Join the CBI’s employment taxes working group, and help monitor and influence employment tax in the UK. Drive real change on the issues that matter to your business.

    Get Involved
  3. Are you a policymaker?

    Make a difference

    This campaign is led by the CBI’s Tax and Regulation team. Contact Annie Gascoyne, Director of Economic Policy, to find out about the change UK business urgently needs and how you can support it.

    Contact Us