Review of modern working practices

Last updated: 07/05/2025

Umbrella companies: On 30 October 2024, the government published a policy paper titled Tackling tax non-compliance: umbrella company market, outlining its intention to introduce legislation which will change who has responsibility to account for PAYE where an umbrella company is used in a labour supply chain to engage a worker. A technical consultation with draft legislation is expected in Summer 2025. The proposed changes could have wide-ranging consequences for the flexible labour market following the reform of off-payroll working (IR35).
The case law surrounding employment status and worker rights continues to evolve at pace, with several lead case decisions expected to have a significant impact on how employment status is to be determined. Important decisions are currently awaited from the First-tier Tribunal, including Basic Broadcasting and PGMOL. HMRC implemented an update to their employment status tool Check Employment Status for Tax (CEST) on 30 April 2025, including an update to the guidance on how to complete the questions in the tool.
Wide-ranging reforms to employment rights planned by the government include a plan to move to a two-tier system of employment status, comprising of the self-employed and a single worker status.
The Employment Rights Bill, containing the basis for many of the employment law reforms, is currently progressing through its parliamentary stages. The move to a two-tier system of employment status is, however, not included in this legislation and is more likely to be a longer-term aim.
Timing: Changes to umbrella company rules are expected to take effect from April 2026.