Dr Guy Mulley is an employment taxation specialist and researcher. His 2024 PhD thesis ‘The Concept of Employment in Employment Tax Law’, examined the issue of employment status in UK tax law. He is a Visiting Fellow at the University of Cambridge’s Centre for Tax Law. and is a member of the Employment Status Consultative Committee that is chaired by Justine Riccomini. He can be contacted at: gevm2@cantab.ac.uk

In anticipation of the Employment Rights Bill 2024, the TRN posted a thought-provoking blog post – Can UK Employment Status Be Fixed? – by employment taxes specialist, Justine Riccomini. This article picks up one strand of Justine’s discussion, concerning the relationship between employment taxation law (for simplicity, referred to here as ‘tax law) and labour law (the term ‘employment law’ has not been used, to avoid confusion with the term ‘employment taxation law’).

Dither, Delay And Decade-Long Decision-Making

Anyone with a passing knowledge of tax law is aware that the determination of what is known as – colloquially but confusingly – ‘employment status’ is a mess. There have been endless Government Consultations on the subject, frustratingly often with no outcome.[1] The payroll administrator for a group of football referees is still waiting, almost twelve years on, to hear what the correct payroll process is for transactions that occurred in 2014.[2] The knock-on effect of that delay has been not just to prolong confusion about employment status, but, more significantly, to trigger concerns about the rule of law. In George Mantides Ltd v HMRC [2025] UKUT 124 (TCC) fairness (both procedural and substantive), natural justice and retroactive law-making were all issues that surfaced, as a result of a six-year hiatus in decision-making by an Upper Tribunal.[3] As the Upper Tribunal so clearly put it, at the time of the First Tier Tribunal hearing in 2019 – and, indeed, at the time of the Upper Tribunal in 2021 – none of the authorities upon which the Upper Tribunal’s belated 2025 decision rested had existed![4] Sadly, delay and retroaction have become features of disputes about employment status.[5]

A significant feature in the problem of determining an individual’s employment status has been the tension between tax law and labour law. This is evident both in the discourse about the problem and in the many judicial pronouncements on the subject. The tension is at its most obvious in the different categorisations used by the two regimes. Tax law has two categories: employed and self-employed. Labour law has three: employed, self-employed and ‘worker’. There is also the complication of artificial categorisation. For example, tax law shoe-horns agency workers into the category of ‘employee’, even though, for the most part, they are not ‘employees’ for labour law purposes.[6]  There are other tensions – some of which will be touched upon in this article – but the tension concerning categorisation is used as a clear and simple reason to enquire why tax law and labour law should have any consonance, when it comes to determining employment status.

The Tendency To Conflate Tax Law With Labour Law

Conceptually, tax law and labour law make odd bedfellows. Tax law exists principally to protect the State. Without revenues a State cannot function – indeed it could barely exist.[7] Labour law exists principally to protect individuals. (A small amount of labour law exists to protect employers.[8] However, historically, labour law was seeking to redress the power imbalance between the employer and the employee.[9])

The tendency to conflate tax law with labour law has no doubt been encouraged by the enacting of the Employment Rights Act 2025. The Employment Rights Bill 2024 – which was the background against which Justine’s blog piece was composed – attracted considerable publicity and comment during its fourteen-month passage through Parliament. In general terms, the Act provides new rights to various kinds of working people. Hence, it is important to know into which category of employment status an individual falls. More specifically, during the passage of the Bill there was much promotion by the Government about the creation of ‘single worker status’, whereby the labour law categories of ‘employee’ and ‘worker’ would be merged into one. That has not come to pass in the Act, but the Government says that it remains committed to legislating on the subject.

However, this conflation is not a new phenomenon. There have been examples of it in a wide variety of material over many years. Three representative examples from the 21^st century, in the context of policy formulation, serve to illustrate this variety.  Firstly, the presumption about labour law as a bedfellow for tax law can be found in a 2019 briefing paper for MPs about employment status, where it talks about tax law measures that fail to address the issue of labour law rights.[10] Secondly, a decade earlier another representative body was making a similar conflation. The Low Incomes Tax Reform Group was concerned about a government proposal to create an artificial category of employment, by reclassifying certain types of workers as employees for tax purposes.[11] ‘It will deprive them of the tax advantages of self-employment, but it will not give them the legal rights that the genuinely employed workers have.’[12] Thirdly, although it rather skimmed the subject of employment status in tax law, the influential 2017 Taylor Report recommended greater alignment of labour law and tax law.[13] In such ways has the discourse about employment status too often uncritically assumed that tax law and labour law are appropriate bedfellows.

Of course, case law has played its part in encouraging the conflation between tax law and labour law. This is evident in labour law’s approval of and use of Ready Mixed Concrete (South East) Ltd v Minister of Pensions and National Insurance [1968] 2 QB 497, a seminal tax case about employment status that has become foundational to the labour law about employment status. (Whether itshould still be a seminal case for tax law purposes is a major question for another day.)

An Inappropriate Conflation

There is judicial support for not conflating tax law and labour law, for at least two reasons. Firstly, this is crystal clear from the Court of Appeal’s approach in a case concerning the employment status of an individual in the context of the tax law about personal service companies (the so-called ‘IR 35’ legislation).  Sir (as he then was) David Richards explained that judicial principles concerning labour law are not applicable to tax law.[14] Secondly, labour law offers no coherent guidance about the determination of employment status, because various parts of labour law use differing definitions. As the Supreme Court, in a labour law case about employment status, observed: ‘It is regrettable that in this branch of the law the same word can have different meanings in different contexts. But it gets worse. For, as I will explain, different words can have the same meaning.’[15] Thus it is that, for example, in the context of labour law the boundary between ‘worker’ and ‘self-employed’ varies according to the particular statutory context in which it is being considered and that there is no universal dividing line.[16] If the various components of labour law do not have a coherent approach to employment status, how can one expect tax law and labour law to have a coherent approach?

The Supreme Court has gone further than just tax law and labour law. Its current view about employment status is that a unified concept does not exist. In the words of Lady Hale, ‘it was largely assumed that a person would be an employee for all purposes – employment law, tax, social security and vicarious liability. Recent developments have broken that link.’[17] On that basis, there is no point in trying to conflate or align tax law with labour law.

Certainly too, there has been political support for a different approach. Amongst the seemingly endless consultations in the 21^st century on employment status, the Government responded to one in 2010: ‘continuing with the status quo or legislating the current case law are not viable options.’[18] In other words, continuing with the conflation of tax law and labour law is not the way to tackle the difficulties of defining employment status for tax law purposes. In 2018 the Government went further, recognising that tax law and labour law are trying to achieve different objectives.[19]  In its report on employment status, the Office of Tax Simplification saw the interplay between tax law and labour law as one of the three key points that needed addressing.[20] However, the OTS rationale for this was not conceptual; it was merely their impression that a lot of people wanted alignment between tax law and labour law.[21] The Government-commissioned Taylor Report ploughed a similar furrow, urging effort ‘to align the employment status framework with the tax status framework’.[22] The clumsiness of the phrase is evidence of the widely held criticism that the Taylor Review had not properly looked at the tax law issues concerning employment status. Again, the proposition is of doubtful conceptual foundation. The Report referred to the wider public’s confusion caused by the lack of alignment and recommended that the differences between the two regimes be reduced to an absolute minimum. Yet, rather contradictorily, the Report recommended that the three existing categories of working individual be retained for labour law, while tax law would continue to have only two categories.[23]

However, all of this is to assume that ploughing on with trying to align tax law with labour law could actually improve, rather than worsen, matters.

Administratively, labour law and tax law, which already have separate Tribunal systems, are about to move further apart. On 7 April 2026 the Fair Work Agency will come into being, under the aegis of the Department for Business and Trade.[24] The Fair Work Agency will oversee the enforcement of rights contained in the Act and also take on the functions of, inter alia, the Gangmaster & Labour Abuse Authority and HM Revenue & Customs’ National Minimum Wage Unit.[25]

The creation of the Fair Work Agency also risks creating friction and duplication between HM Revenue & Customs and the Fair Work Agency. The area of Statutory Sick Pay is one example where there will be overlap. Not only will this create additional work for employers, but there is the risk of a ‘turf war’ between HM Revenue & Customs and the Department for Business and Trade.

Conclusion

None of the above discussion is intended to be dismissive of or disrespectful to those who have, thoughtfully and carefully, considered the issue of employment status in the joint context of tax law and labour law. It is just that so much of the discourse, the consultations and the case law revolve around this conflation. This article has sought to challenge that conflation.

There is widespread consensus that the tax law concerning employment status is problematic. Policy makers should move away from regarding the alignment of tax law with labour law as the solution.

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