Originally posted by simes
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Employment rights, any tax-free employment benefits, and security are worth something. The employee is given those things without paying tax on them. The contractor is instead given more cash, to compensate him for not having those things. He can use some of the cash to give himself some of the tax-free benefits (things like a relevant life plan) and not be taxed on that. But the cash compensation that he gets in lieu of employment rights/security is taxed. If he is tax-efficient, he'll be taxed at a more favourable rate than the employee, but the tax is on a much higher amount, because he gets cash, not rights.
The result is higher revenue for HMRC.
But it isn't enough for them. They don't want the contractor to be able to be tax efficient, because it isn't "fair." In that case, it isn't "fair" that employees get employment rights without any tax liability on them. Those rights are valuable -- that's why clients are willing to pay a contractor more than an employee. If a contractor who is doing the same work as the employee in the same way has to pay tax at the same rate as the employee on ALL his compensation, why doesn't the employee have to pay tax at the same rate on ALL his compensation? When you set an economic value on employment rights and tax them, then you can talk about using the same tax structure for employees and contractors as being "fair".
They don't care about "fair", though, they just care about more money coming in, especially from people who are doing well.
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