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.
Engage in a holistic review of employment taxes, considering the recommendations made in the Taylor Review
Use the expertise of business to find solutions to emerging employment tax issues such as IR35
Create a clear roadmap for implementing employment tax reform to enable sound policy development
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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 PolicyWhy it's needed
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.
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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- May 2018
Engagement —
CBI invited to join the HMRC IR35 Forum
- Aug 2018
Engagement —
CBI responds to consultation on off-payroll working in the private sector
- Nov 2018
Impact —
HMRC delay IR35 reform in the private sector
- May 2019
Engagement —
HMRC engages with the CBI to develop CEST tool for the private sector
- Jun 2019
Engagement —
IR35 reform to hit private sector from April 2020
- Oct 2019
Engagement —
HMRC attends CBI working group to preview the CEST tool
- Nov 2019
Progress —
Draft HMRC guidance detail shared with CBI for comments
- Feb 2020
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IR35 update: where are we now?
- Feb 2020
Engagement —
CBI gives evidence at House of Lords Review of IR35
- Feb 2020
Impact —
HMRC announce changes to IR35 commencement criteria
- Apr 2020
Progress —
House of Lords publish result of IR35 review
Support the change
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.
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.
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.