Any promises to extend rights of self-employed might win an election, hint Brit freelancer orgs

Political parties should extend the rights of the self-employed ahead of the country's general election on 12 December, including scrapping IR35 off-payroll working rules and addressing late payments. This is the rallying cry from IPSE (the Association of Independent Professionals and the Self-Employed), which today launched a …

[Doctor Syntax]

"Build a modern tax system: a full review of small business tax (including scrapping IR35 and ending the confusion over the Loan Charge) to unleash the UK's entrepreneurial spirit."

No chance of that. The tax system is designed by permanent salaried employees on PAYE at HMRC based on the nature of work as they know it, i.e. permanent salaried employment. They just don't understand that alternatives exist.

[Anonymous Coward]

"HMRC based on the nature of work as they know it, i.e. permanent salaried employment. "

Add to that.... "arriving at 9am, going home at 5pm, forgetting all about work in the evenings and weekend, and having a pension and holiday rights to look forward too."

None of which is applicable to the self employed and small businesses.

[DontFeedTheTrolls]

"The tax system is designed by permanent salaried employees on PAYE at HMRC based on the nature of work as they know it"

Which is exactly the point of the statement "Build a modern tax system" - Government controls HMRC (OK, don't laugh) so government can engage (employ, outsource, or whatever) knowledgeable people in the real world to create a tax system that reflects the true nature of work and remuneration. The current system is >100 years old without major overhall and is no longer fit for purpose.

Note, I don't include PWC, EY, Capita, or any of the other self-interested Consultancy majors as suitable for the job.

[Jimmy2Cows]

Current tax system appears by design to be full of loopholes which those wealthy/knowledgable enough can use to game the system.

Modernising it risks closing those loopholes and making it harder to avoid tax. Which is exactly why it needs to be modernised. And exactly why, as you say, that'll never happen.

[Daedalus]

Parental rights?

Wait,the self-employed want their employers to give them time off for family matters?

Well, that should be easy....

Seriously if you're on a one- or two- year contract you need to plan your life better. If you want the freedom to work where and when you want, there's some personal responsibility involved. Unless, of course, it really is just a tax dodge.

[Doctor Syntax]

Re: Parental rights?

That was my first thought. Then I realised what they were actually getting at. It's aimed at clients who are, or will be, putting or declaring their contractors as being inside IR35. Providing maternity/paternity benefits is one of the expenses of being an employer. You can duck that by taking on self-employed staff. The self-employed, if they're running their businesses correctly, make provision for such things.

For a regular employer the costs of providing this will affect profits but that in turn will reduce corporation tax liability because corporation tax is paid on profit, not turnover.

The same thing applies to the self-employed working outside IR35; the business can build up a reserve and continue to pay a salary during leave. This will result in a refund of previous corporation tax although, of course, income tax and NI will continue to be paid. In effect the offset against corporation tax is time shifted between the years when the reserve is being built and those when it's being used.

If, however, the client takes on a freelancer and dumps them into IR35 the payments are taxed as income tax and there's no corporation tax to refund. In short the IR35 victim is in a worse position than an employee (no income during leave) and in a worse position than an employer or outside-IR35 contractor (no corporation tax offset). The advantage to the engager is that the costs of providing such leave is shifted entirely to the freelancer.

And, if you look closely, HMRC also profits - they don't have to make any allowances against corporation tax.

The proposition negates this advantage to the employer and HMRC.

If you're an existing employee should you care? Well, what if your employer is sufficiently unscrupulous, especially if post-Brexit changes to employment law allow it, to tell you you're redundant but if you want you can come back at the same rates as a freelancer in IR35?

[Daedalus]

Re: Parental rights?

Sounds like "regulated freelancing", a concept worthy of Douglas Adams ("We demand rigidly defined areas of doubt and uncertainty!").

To anyone doing business in the US, this is a head-scratcher. I've seen contractors getting the runaround - one got paid 90 days after his agency got paid, and they got paid 90 days post-invoice by the client! But that's the risk you take. If you can't stand the heat....

Over here freelancers pay both halves of the SocSec/Medicare and the client isn't on the hook for any of it. Claiming that clients should be responsible for paid leave sounds ridiculous. All this left-hand/right-hand/hands-off jiggery-pokery makes the whole thing seem like a hustle around a hustle.

[Anonymous Coward]

Re: Parental rights?

Have a downvote for the brexit scaremongering.

The rest of the post was decent so it's a shame you ruined it.

[veti]

Re: Parental rights?

Why is that "scaremongering"? Isn't that exactly the kind of EU over-regulation that approximately half of the Tory party - specifically, the half that's now running the asylum - has been fulminating against since the Single Market began?

[Anonymous Coward]

Re: Parental rights?

Workers rights are stronger in Britain than they are in many EU countries. Therefore it's got nothing to do with the EU.

However that isn't my problem, my problem is that he shoehorned a brexit reference into an unrelated post because he is, like many other people, suffering from Brexit Derangement Syndrome.

[veti]

Re: Parental rights?

Don't think about the Alistair Dabbses of the world, think about the Uber drivers. It's not just taxes, and it's not always the worker who is doing the dodging.

[Oh Matron!]

Re: Parental rights?

Quite: With Uber's (etc) classification of drivers as contractors, it dodges Employer NICs

[Anonymous Coward]

IR35

Maybe IR 35 needs an overhaul and to be simplified on how it applies but I don't agree that it should be abolished. Not when you see contractors working for HMG that have been there for nearly 17 years, Ok the poor S.O.B. doesn't get holiday pay / pension etc. What he does get is close on £1000 per DAY! (I don't know the exact figure). They are using every trick they can think of to stay out of IR35 grasp but you and I are paying his wages. Personally I think this individual hould pay their way.

[Cederic]

Re: IR35

Yeah, I agree with you on this. An overhaul and sensible rules, including a reasonable salary level rather than 100% dividend income, but allow contractors to be employed by their own company.

Too many chancers intent on lining their pockets instead of paying a fair amount of tax to scrap it completely. I do think that most IT contractors would accept reasonable treatment by HMRC that leaves them a sensible balance between risk and the financial rewards it provides.

I'm also struggling to see this is a major election issue. Nobody earning a six figure salary is going to vote Labour just for this, and I can't see it switching people between the Lib Dems or Conservatives either; they'll be more interested in EU membership, the party leaders and broader policies.

[Doctor Syntax]

Re: IR35

"What he does get is close on £1000 per DAY! (I don't know the exact figure)."

Have you considered going into politics? You seem to have the knack of arguing from ignorance of the real figures. All you have to do is get out the the habit of issuing disclaimers.

[d3vy]

Re: IR35

"What he does get is close on £1000 per DAY!"

Bollocks - There are very few contractors in IT on anything near that - unless they are filling C*O Roles.

[BebopWeBop]

Re: IR35

Quite. I have been, relatively frequently, but these are extremely short term (1 day - 14 days) and by no means regular (I wish)

[DontFeedTheTrolls]

Re: IR35

You are assuming they would be paid £1,000 a day as an employee, something I doubt for any but the highest Directors in the Civil Service.

If they are being paid £1,000 a day to their Limited Company then I can almost guarantee they are paying way more into HMRC than they would as a permanent employee on a normal salary.

[devTrail]

Rats

They pretend to be on the side of the freelancers just to screw them. What should they ask? Can they start from:

1) Scrap the daily rate and pay overtime.

2) Early termination terms must always be equal for both parties.

3) Payroll companies are only in charge for payroll, not to act as a legal screen between the contractor and the client, if the client misbehaves the contractor can sue directly the client, not an empty shell company.

...

More and more can be added.

Edit:

I was forgetting the most important thing: Agencies that wait the very last minute to send the contract and ask the contractors to sign it in a very short time without giving them time to read the contract can be prosecuted for fraud.

The same should happen when the 3 months rolling contract expires and the agent asks to sign again a full contract claiming that it is equal to the expired one, but they sneaked in some changes.

[Steve K]

IPSE

Whilst I am a contractor, if the IPSE think that a single, fairly esoteric taxation issue will swing seats then they are sadly pistaken....

Dave Chaplin is more representative of contractors now - the IPSE is - sadly - not the organisation it once was.

[RancidRodent]

Tories?

Any proof you want that the Tories are another bunch of bed-wetting SJW virtue-signalling career-politicians is IR-35 - Labour's spiteful green-eyed attack on industry - pursued by "the Tories"...

A contractor doing the equivalent role to a £40K permie will raise more tax for HMRC than the permie (VAT + corp tax, + divvies + NI and income tax), will be cheaper and more flexable for the hiring company (encouraging commerce within our borders) and will deliver more disposable income into the worker's pocket - as well as employ the services of a usually UK-based accountant - everyone's a winner.

But no, this ridiculous attack on our industry will force what's left of IT jobs off-shore - the big corporations won't suddenly start hiring more UK staff - they'll just shut UK technical centres - The "Tories" are putting their core voters on the dole - or should I say ex-core-voters - just to appeal to a bunch of student union types who will never vote Tory regardless of their policies.

[veti]

Re: Tories?

Hang on... If the employer saves money, and the worker gets to keep more money, and the Treasury gets more money... how does that work exactly? Is this the secret planting spot of the Magic Money Tree, or are you just making unfounded assumptions about higher productivity?

[DontFeedTheTrolls]

Re: Tories?

If the "employer" takes on a permanent employee they have to account for things like Pension, Sick Pay, Holiday Pay, Critical Illness , Training, equipment, line management (appraisals don't do themselves) and a myriad of other costs that add up to the Total Cost of Ownership of an worker. In other words Employers need to pay for the a lot of unproductive time of the employee that they don't need to pay for directly from a contractor, the contractor is accountable for all of that themselves.

So it is possible that the "employer" pays out less total cash to a contractor than the TCO of a permanent employee, worker contractor gets more take home, and HMRC gets more tax.

[veti]

Re: Tories?

That would come under "unfounded assumptions of higher productivity", then.

If the worker isn't getting sick pay (etc.), then they're not really getting more money because they have to accrue against all those eventualities (which is more efficiently managed at aggregate level by a business, rather than individual level). It may feel like more, but that's a dangerous illusion.

Training and equipment? If the worker needs those to do the job, then they need it regardless. If they don't, then we're not talking about the same worker.

As for line management - that's another way of saying that self-employed people have to do a bunch of unpaid overhead work for themselves. So, basically it's shifting time costs from the employer to the employee. Again, the "more" money to the employee is an illusion. It also assumes that all managers (including both line managers and accountants) spend more time on managing their direct reports than they do dealing with contractors - that may be true, but it's far from self-evident. Someone has to check all those invoices and timesheets...

[Wilseus]

Re: Tories?

"The "Tories" are putting their core voters on the dole - or should I say ex-core-voters - just to appeal to a bunch of student union types who will never vote Tory regardless of their policies."

This.

I've said similar myself before, about Guardian readers rather than student union types, but it's the same argument. It doesn't make any sense to me either.

[martinusher]

Surely there's a tad more at stake than a narrow self-interest issue?

This upcoming General Election has the potential to alter the course of the UK for a generation or more. Trying to boil it down to a narrow special interest to attract the attention of a voting bloc seems at best a bit disingenuous.

FWIW -- Being an individual sub-contractor has always been a pact with the Devil. You get to pick how much you work, where you work and effectively how much you're paid with the rate sounding incredibly attractive to normal working stiffs. But it is not real money, any more than the amount taken per day in the cash register of a corner store is representative of the income of that store. So its the trade off -- freedom and flexibility comes with the extra hassles of tax, having to make provision for unemployment, sick leave, vacation and the like. Like the corner store when you run the real numbers you might find that the actual hourly rate is quite miserable. Also like the corner store, if you don't run the place like a business you're going to eventually be eaten alive by the taxman.

The fact that modern employers have extended contract work to what are regular employees being paid regular wages is a scandal, its a way of pocketing the excess cost of employment by shifting those costs to people who either don't know any better or have little to no choice, its either that or starve (a choice that we thought we'd seen the back of after WW2). So -- look at the big picture and choose your representatives accordingly. You may not get another chance.

[ForthIsNotDead]

Waste of time

The priorities of all the political parties is light years from IR35 and the self employed. They couldn't really care less.

This last week I have been watching past political debates from the 1970s. Michael Foot, Edward Heath, Thatcher, Skinner etc. It is suicidally depressing to note that, whilst their level of intellect was clearly far higher than the mongrels we have in parliament today, the 'message' hasn't changed. It's all about "Improving our NHS, our schools, more bobbies on the beat, jobs".

We've been fed the same shit election after election for at least 40 years, and nothing has changed. I do believe the standard of living in this country is higher. Far higher. But that has nothing whatsoever to do with politicians. In fact, I would argue that it took place *despite* the politicians.

Which is why I'm not voting in the next election. Fuck the lot of them. I'm done.

[Adrian 4]

Re: Waste of time

And their promises are worthless. Look how they stitched up the last two parties to get into bed with them - the lib dems and the DUP. No way would I support that bunch on the basis of a vague suggestion that they might make HMRC obey the law.

[Phil O'Sophical]

Re: Waste of time

> We've been fed the same shit election after election for at least 40 years, and nothing has changed....Which is why I'm not voting in the next election.

Well, that will help, I'm sure. Bet it won't stop you complaining that "somebody" should do "something" about it, though. Not you, of course, it's always somebody else's fault.

[Wilseus]

Re: Waste of time

If people really don't want to vote, then they should spoil their paper. If a significant number of people did that then maybe they would have to take notice.

[SimonC]

> and can take out income protection insurance if they wish to further minimise risk

No, no they can't. You can get sickness cover but it's very expensive unless you choose the 'terminal illness' cover. And you can get jury service cover, which will do about 2 weeks. But that policy and many others rely on you actually being in a contract for them to work. If your income is 0 because you don't have a contract, no insurance is gonna cover that other than your own savings. And as you can get walked at any time with no notice, there is a definite risk.

[llaryllama]

Purely anecdotal

I struggled as a youngun in the UK to get a business off the ground. It was in theory a good business but something like half my earnings were going out in various taxes and I wasn't even making that much to start with. I didn't dare hire any staff because of all the extra tax complications and legal risks. It felt like every small win was immediately knocked down by HMRC or someone else. So it just stagnated, I got sick of it all and left the UK.

I now live in a regime that has a single page income tax return, no CGT and minimal tax on overseas income. It's not just that I pay less tax - it's so much less stressful when everything is simple, you don't have to mess around with 100 different deductions and the tax office doesn't call you a "customer". It's no coincidence that SMEs flourish here, we weathered some nasty economic hiccups just fine, unemployment rates are extremely low and government runs very efficiently. It's tempting for governments to kiss the arse of big business because it's a quick easy win. But in the long term SMEs are the sturdy oaks in a forest of shit (excuse the analogies). So yes, more should be done to encourage and support them.

[Nolveys]

Re: Purely anecdotal

Where is this Shangri-la of which you speak?

[llaryllama]

Re: Purely anecdotal

Slightly late reply.. but Taiwan.

[Andys1342]

5 Million Votes

I agree, I will vote for the party that says it will scrap bringing in the changes to IR35 at the least and preferably replace IR35 with something that does not treat limited companies differently depending on their size or the fact they may have contract staff.

What makes me laugh is I have been offered a full time role from April. While it would mean 37% less take home pay, it would also mean I pay 29% LESS tax than I do today. The muppets at HMRC seem to have failed to take corporation tax (or VAT) into account while thinking this will net them more tax. IT will also mean I have to lay off two staff that do odd contract work for me. These changes are an absolute failure to understand the contract market, how important it is to the economy and the fact I am not voting tory or labour unless one of them scraps IR35.

Andy

[Anonymous Coward]

Workplace antics and the tax man

Nice to see that freelance positioning and taxing is a thing in the UK as well. In the Netherlands we've recently had a new law introduced describing who is and is not a freelancer and how the tax man is to rule on those issues. Immediately followed by cancelling not just the new law but also the old situation. Everyone is now discussing everything including forcing freelancers to take out mandatory disability insurance and pension schemes.

Mandatory disability and pension basically turns the freelancer into an employee with no security in employment. Day laborers in the 20th century were better of!. Imagine the profile for a mandatory disability insurance; 30K yearly max while you'd need to be brain dead to get to that level, paying premium money for the policy. Same for pension scheme; forcing a freelancer to pay into a pension scheme, whilst having a larger deviation in income than the water level in the Thames. All for the best right, let's introduce all these ideas yesterday and gather votes from the sheep.

So on one end employees are cast on the street by Adam Smith's supporters. Having found another way to stay alive the same people are now judged being immoral b*stardos for making a bundle. Thing most people overlook is the (un)certainty of a freelance life where today may bring them 1K but the next two months might only bring them a quick receding hairline.

It's time for the public to take a stand and shove the politicians and lawmakers that come up with these ideas into the sea. Less government as we know it will not be 1:1 with less governance. I'm convinced we can do as good (or bad) a job as the lot we ridicule on a daily basis, whatever party they supposedly belong to today.

[EGeee]

My wishlist

Reduce maximum invoice payment times from 30 to 14 or even 10 days, at least for payments under a certain amount (e.g. £1,000). If you don't have the money to pay me, don't hire me.

Compulsory use of either escrow or an up front deposit for jobs over £50 in value.

Government backed holiday pay, even if we have to pay a couple of percent extra tax (with 100% of it being returned once or twice a year as holiday pay).

School children to be taught how to be self employed.

The moon on a stick.