Review of modern working practices

Last updated: 14/02/2025

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 Spring/Summer 2025. The proposed changes could have wide-ranging consequences for the flexible labour market following the reform of off-payroll working (IR35).
On 22 April 2024, HMRC issued a warning for employment agencies using umbrella companies in ‘Spotlight 64’, warning of non-compliance risks.
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 Upper Tribunal, including in PD & MJ Ltd.
Prior to the UK election on 4 July 2024, the Labour party published their ‘Plan to make work pay.’ Amongst wide-ranging reforms to employment rights, the proposals also 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.