Uber ruling to have knock on effect for tax and pensions

The ruling about cab company Uber and employment rights will have important consequences for tax and pensions, professionals say. In the wake of the employment tribunal judgment last week – seen by many as a landmark case – the ramifications for auto-enrolment and on businesses that depend on a self-employed workforce have started to be examined.Uber drivers were successful in their bid to be awarded employee rights such as holiday pay, paid rest breaks and the National Minimum Wage.Kate Smith, head of pensions at Aegon, said it set an “important precedent” for the ‘gig economy’ - characterised by short-term temporary contracts with workers who are classed as self-employed and have none of the rights and protections such as, minimum wage, sick pay, holidays and pensions.She said: “In the UK pension provision is largely delivered through the workplace, and the self-employed are excluded from the government’s flagship auto enrolment policy which aims to plug the pension savings gap.“One of the main benefits of workplace pensions is that employers often match, or make a contribution towards individual’s pensions but the self-employed lack such benefits and have to fend for themselves.“If the trend towards self-employment continues to grow, the schism between the pensioned and unpensioned will continue to widen and the government will have to look seriously at how it ensures these people reach retirement age with sufficient savings. Today’s judgement is the first step in closing the gap.”Tom McPhail, head of retirement policy at Hargreaves Lansdown, said: “This is great news for anyone working in the gig economy as it means they are more likely to be eligible for a workplace pension, with all the attendant benefits and in particular the highly valuable employer contribution.“It is also going to be a challenge for Uber and employers like them, in deciding what specific pension terms they want to offer their employees. They have some latitude on earnings definitions and deferral periods but however they deal with this, it is going to cost them time and money.”HMRC could go after businesses that depend on a self-employed workforce and those failing to comply may be faced with interest and penalties of up to 100% of the outstanding tax liabilities, according to London Chartered Accountants Blick Rothenberg LLP.Gary Gardner, tax dispute specialist partner at Blick Rothenberg, said: “This landmark ruling has very much put the gig economy into the spotlight and strengthened HMRC’s hand in terms of challenging the employment status of those currently considered to be self-employed.”He added: “Businesses that depend on a self-employed workforce should review their arrangements to ensure they can withstand scrutiny from HMRC. Incorrect classification can result in the employer or contractor being held accountable for any tax and/or NIC not deducted. This could include interest and penalties of up to 100% of the outstanding liabilities.”

Uber ruling to have knock on effect for tax and pensions

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