Reply to: False self employment

[TheCyclingProgrammer]

Pretty sure this has been covered already, but here is HMRCs clarification on the subject in case anybody missed it:

https://www.gov.uk/government/upload...ITEPA_2003.pdf

Seems mostly clear cut, and the PCG seem happy, for now, although there is an interesting footnote tucked away at the bottom there.

[TheCyclingProgrammer]

Probably they won't pull us into the net, but it leaves an easy get-out-of-jail card for the people who are already exploiting the existing approach. Tell your worker to incorporate and then take everything as dividends and not pay any "taxes" on it, job done... Which rather blows the whole idea, AIUI.

I can see where you're coming from, but for the sort of low-paid workers this is supposed to target, I think it might be a bit of a hard sell getting them to incorporate. Getting workers to be "self-employed" is easy, having them form a company and all that entails is a bit more work.

[LisaContractorUmbrella]

Probably they won't pull us into the net, but it leaves an easy get-out-of-jail card for the people who are already exploiting the existing approach. Tell your worker to incorporate and then take everything as dividends and not pay any "taxes" on it, job done... Which rather blows the whole idea, AIUI.

Oh ok see what you mean - there would still be the option for tax avoidance - it would just mean workers incorporating rather than registering as sole traders - yep possibly. We have our lawyers working on this at the moment - will update when they have read and inwardly digested

[malvolio]

What do you mean Mal? They've said that dividends won't be considered as remuneration for the purposes of the legislation so any PSC drawing divs won't be affected. Don't blame you for your skepticism but not sure what you mean by 'boundary'

Probably they won't pull us into the net, but it leaves an easy get-out-of-jail card for the people who are already exploiting the existing approach. Tell your worker to incorporate and then take everything as dividends and not pay any "taxes" on it, job done... Which rather blows the whole idea, AIUI.

[LisaContractorUmbrella]

Like I said, the intent is fine, but it's how the boundary is define that will cause the problems.

I remain resolutely pessimistic that HMRC can define a pencil unambiguously, much less a taxation rule.

What do you mean Mal? They've said that dividends won't be considered as remuneration for the purposes of the legislation so any PSC drawing divs won't be affected. Don't blame you for your skepticism but not sure what you mean by 'boundary'

[malvolio]

Limited company contractors are definitely outside the scope of the proposed False Self-Employment legislation proposals, confirmed law firm Lawspeed to recruiters at a seminar on the potential impact of the new rules.

Like I said, the intent is fine, but it's how the boundary is define that will cause the problems.

I remain resolutely pessimistic that HMRC can define a pencil unambiguously, much less a taxation rule.

[Clare@InTouch]

More on this subject today ......
http://www.contractoruk.com/news/001..._pscs_out.html

Limited company contractors are definitely outside the scope of the proposed False Self-Employment legislation proposals, confirmed law firm Lawspeed to recruiters at a seminar on the potential impact of the new rules.

[MyUserName]

Oh ok I see what you mean - I still don't think that there would have been an impact as I don't believe that recruitment agencies would want to take on the responsibilities of an employer when there is the option to work with an umbrella company. The costs of employment do not stop with Employer's NI - there are Statutory payments to consider as well as the risk of litigation - the fact they might have to do some work would IMHO make them loathe to pick up the additional responsibilities.

FTFY

[LisaContractorUmbrella]

Sorry - what I meant is stymie the flow of contractors (fresh blood) into umbrellas, if the agencies were to pick up this role instead. But it's a non-issue now.

Oh ok I see what you mean - I still don't think that there would have been an impact as I don't believe that recruitment agencies would want to take on the responsibilities of an employer when there is the option to work with an umbrella company. The costs of employment do not stop with Employer's NI - there are Statutory payments to consider as well as the risk of litigation - the increase in costs to recruitment agencies would IMHO make them loathe to pick up the additional responsibilities.

[Zero Liability]

It shouldn't really have had an impact on umbrellas as the legislation stated that the obligation for PAYE would only pass to the agencies if the worker wasn't already being paid through PAYE which of course they are when they're employed by a brolly

Sorry - what I meant is stymie the flow of contractors (fresh blood) into umbrellas, if the agencies were to pick up this role instead. But it's a non-issue now.

[Andy Hallett]

Thanks for taking the time to post Lisa, your view is consistent with our reading of the regulations and guidelines. Good news for the professional contracting industry in general.

[LisaContractorUmbrella]

Wouldn't it have adversely impacted umbrellas as well, though? There would be no need for them if large portions of the contracting market had agencies who had to run PAYE (assuming the legislation did apply as widely as some people hypothesised it would), although I suppose the agency could always outsource it to them/engage in a preferred supplier relationship.

It shouldn't really have had an impact on umbrellas as the legislation stated that the obligation for PAYE would only pass to the agencies if the worker wasn't already being paid through PAYE which of course they are when they're employed by a brolly

[Zero Liability]

Don't pretend you're happy.

But thanks for the update.

Wouldn't it have adversely impacted umbrellas as well, though? There would be no need for them if large portions of the contracting market had agencies who had to run PAYE (assuming the legislation did apply as widely as some people hypothesised it would), although I suppose the agency could always outsource it to them/engage in a preferred supplier relationship.

[LisaContractorUmbrella]

That was the excuse, it's always been about national insurance, if it was really about protecting workers why do the deemed employers never get hit financially ?

With these changes the agency could be hit as HMRC are using debt transfer

[MicrosoftBob]

Yeah, I got that - but the objective AIUI was to prevent employers driving their workers - especially lower paid ones like fruit pickers and social workers - to incorporate to save the employers' various overheads and liabilities.

That was the excuse, it's always been about national insurance, if it was really about protecting workers why do the deemed employers never get hit financially ?