Employment status for tax purposes and employment rights won’t be aligned, Government confirms

Aug 3, 2022

The Government has published its response to an earlier consultation on employment status and employment status for tax purposes and has released new guidance on determining employment status, and the rights and protections that come with it.

The response concludes that there is no consensus on what action should be taken, and that the Government has decided now is not the right time to bring forward proposals for alignment between employment status for tax purposes and employment law purposes.


The Taylor Review, commissioned by the Government in 2017 considered the implications of alternative models of working, such as those typically seen in the gig economy, as well as the implications on employer freedoms and obligations. The review made various recommendations to clarify employment status, including a recommendation that employment status for tax purposes and employment status for employment rights should be aligned.

In February 2018, the Government published the Good Work Plan in response to the Taylor Review which accepted a lack of clarity and certainty surrounding the tests for employment status. A consultation process followed which sought views on a number of proposals, including the proposal to align employment status for tax purposes and employment law purposes.

Government response

Following consideration of the responses received to the consultation, the Government has accepted that the non-alignment of the status frameworks for tax and employment rights can cause uncertainty, meaning that an individual can hold the status of self-employed for tax, but not for employment rights.

However, noting the lack of consensus around alignment, the ongoing economic recovery from the pandemic, and the wider economic context, the Government has decided that now is not the right time to bring forward proposals for alignment between the two frameworks.

This means that the current frameworks will continue for the foreseeable future. As a result, businesses who engage self-employed contractors should continue to consider the employment status for both tax purposes and employment rights of any contractors they engage.

Most employers are unlikely to treat an individual deemed an employee for employment rights as self-employed for tax purposes. However, this remains a troublesome area in the context of limited company contractors, where it is technically possible for a contractor to be treated as employed for tax purposes, but not be granted employment rights such as holiday pay and pension contributions. Given the overlap of the relevant tests within each framework, however, business should tread carefully when making such determinations.

For further information or assistance in relation to employment status, please contact our Employment Group on 0118 977 4045 or employment@herrington-carmichael.com.


This reflects the law at the date of publication and is written as a general guide. It does not contain definitive legal advice, which should be sought as appropriate in relation to a particular matter.

Tom Hyatt

Tom Hyatt

Solicitor, Employment Law

t: 0118 989 8153
e: tom.hyatt@herrington-carmichael.com

Contact us

    The information you submit will be handled in accordance with our privacy policy.

    Latest News & Insights


    The Legal Room UK Podcast features a diverse range of specialists offering expertise on a variety of topics.
    Subscribe on whatever podcast platform you use.

    Top Legal Insights


    Contract Law

    Material Breach of Contract

    What is a ‘material’ breach of contract by a party to a commercial contract? This is a critical issue regularly considered by the courts. What constitutes a material breach and what are the remedies?

    Property Law

    Commercial Lease: The Financial impact on Landlord and Tenant

    Coronavirus (COVID-19) and the restrictions now in place to control its spread, are having a significant effect on many business sectors.

    Divorce and Family Law

    Divorce in Lockdown: Can I get some discreet legal advice?

    We have spoken to clients who are unfortunately experiencing some family issues, and would like to obtain expert legal advice, yet don’t know how...

    Land & Property Dispute

    Restrictive Covenants – The Price of Modification

    Having identified that your land is burdened by a restrictive covenant and for the purposes of this article the covenant in question will be that only one residential building can be erected on the land. What do you do next?

    Wills, Trusts and Probate

    Why is having a will so important?

    It is entirely up to you if and when you want to create a Will, but it is important to be aware of the consequences of not having a Will.

    Award winning legal advice

    Herrington Carmichael offers legal advice to UK and International businesses as well as individuals and families. Rated as a ‘Leading Firm 2023’ by the legal directory Legal 500 and listed in The Times ‘Best Law Firms 2023’. Herrington Carmichael has offices in London, Farnborough, Reading, and Ascot.

    +44 (0)1276 686 222

    Email: info@herrington-carmichael.com

    Brennan House, Farnborough Aerospace Centre Business Park, Farnborough, GU14 6XR

    Reading (Appointment only)
    The Abbey, Abbey Gardens, Abbey Street, Reading RG1 3BA

    Ascot (Appointment only)
    102, Berkshire House, 39-51 High Street, Ascot, Berkshire SL5 7HY

    London (Appointment only)
    60 St Martins Lane, Covent Garden, London WC2N 4JS

    Privacy Policy   |   Legal Notices, T&Cs, Complaints Resolution   |   Cookies  |   Client Feedback   |  Diversity Data



    Our Services

    Corporate Lawyers
    Commercial Lawyers
    Commercial Property Lawyers
    Conveyancing Solicitors
    Dispute Resolution Lawyers
    Divorce & Family Lawyers
    Employment Lawyers
    Immigration Law Services
    Private Wealth & Inheritance Lawyers
    Startups & New Business Lawyers

    Pay Online >

    Please be aware that we have no plans to change our bank details. If you receive any indication that any of our bank details have changed please contact us before sending us any funds. We take no responsibility for monies you transfer into the wrong bank account.

    © 2023 Herrington Carmichael LLP. Registered in England and Wales company number OC322293.

    Herrington Carmichael LLP is authorised and regulated by the Solicitors Regulation Authority with registration number 446245.