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Shout99 - Freelancers, FO35, Section 660
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Shout99.com interviews Self-employment Rights Bill architect
by Richard Powell at 11:21 07/02/02 (Political News)
Mark Prisk MP, architect of 'The Right to be Self-Employed' Bill, recently told Parliament that defining self-employed status is: 'confusing, wasteful, adversarial and unfair.' In an MPs' debate last year, he outlined the 'crippling effect of excessive regulation and IR35 on entrepreneurs across the UK.' Shout99.com interviewed him on the fight he has taken to the heart of Government...
Related articles:
  • Self-employment rights Bill supported across all parties
  • 'Iniquity of IR35's tax burden' discussed in Westminster
  • S99- The manner in which highly-skilled people work is shifting towards a flexible, self-employed basis, yet tests facing knowledge-based workers still date from the 19th century. How will the UK be able to compete on the international stage whilst this attitude towards them remains in place?

    Mr Prisk- "I'd question the role of contractors' 'employment' in the current age with this different way of doing business. I recognise the term is appropriate for half of the UK's workforce. In 20 years' time, at least half the workforce will want to provide work via service contracts- they will need maximum flexibility.

    "There is frequent confirmation from within Government itself that the UK's legal framework is seriously negligent of this need for flexibility."


    Mark Prisk MP: "Ministers have little or no experience of the real world of the self-employed or of their businesses"

    S99- What would you suggest in its place?

    Mr Prisk- "I am pushing for a move towards a system where people can choose their own status via a process of registration. This would eliminate the need to prove their status to the Inland Revenue via ever-changing case law. A worker's use of the registration system would also signify a positive decision by them to accept responsibility for the status they have chosen. It would be much less adversarial between the Government and the worker."

    S99- Many people misconstrue IR35 as being a political move, but in reality the Revenue had been trying to get it passed for years under the Conservatives- why do you think Labour passed it?

    Mr Prisk- "Ministers have fully accepted the Revenue's view. They have little or no experience of the real world of the self-employed or of their businesses. The Conservatives said we'd repeal IR35 if we got in during the last election- and at the moment we're at the point where we're reviewing all of our policies. I continue to campaign for robust support for entrepreneurs and freelancers- but I think we need to do more than just defend self-employment. We need to positively promote it as the way forward.

    "Ministers still confuse small businesses with freelancers. When you're a freelancer, you're reliant upon your own knowledge and time- but bureaucracy robs you of this time and small businesses lose about 31 hours per month to this. I estimate most self-employed workers lose a couple of days a month to this bureaucracy and the burden is only growing.

    "To give you an idea of the amount of time wasted: If half of the UK's four million self-employed workers lose two hours per month dealing with this bureaucracy, that's three million working days lost to the economy every year- a figure significantly greater than the total amount of time lost to strikes in a year.

    "It's also a loss maker for the Revenue, which in turn is not given enough resources to deal with the situation as it is. I have some sympathies with the Revenue being under-funded. Ministers don't understand the wider situation... seven out of eight DTi Ministers have no small business experience.

    "Last minute amendments to the Employment Bill are also adding more costs to the existing regulatory problems and it affects the taxpayer as well. The cost to business of the new right to request flexible working could be as much as 210 million per annum."

    S99- What similarities do you draw between people who should register as 'self-employed' under your scheme and the 14,000 small independent, businesses who are members of the PCG?

    Mr Prisk- "PCG members would fit with the definition if they were self-employed and many million others besides. Freelancers are significantly different from the conventional self-employed shopkeeper and should be given the freedom to choose their own status. But this comes with responsibilities too, such as having the right insurance cover."

    S99- Why do you think the people IR35 seeks to 'catch' are not 'disguised employees'?

    Mr Prisk- "I think the key issue is whether someone has a choice of incomes from different sources; that they acknowledge responsibility for their work; and are also responsible for their work and responsible for generating their own income."

    "Regulation follows a particluar market sector and uses high profile situations to frighten people... the Revenue are using this tactic with IR35 because they haven't got the resources to pursue it properly and fairly"
    Mr Prisk on the Revenue's application of IR35
    S99- What do you see as the main differences between employees and the self-employed?

    Mr Prisk- "An employee handles work for a person who employs them. A freelancer provides their expertise and time, and shares the responsibility for the end result.

    "The Government has decided it needs to review what constitutes the status of workers, e.g. part time, full time, fixed term contracts, etc... and will announce this around March this year. PCG should make sure the self-employed are included in this review.

    "The Revenue wants to herd self-employed people into PAYE- Whitehall thinks we are different and wants everyone on the PAYE system. The self-employed are simply an inconvenience standing in the way of the whole country being on this system.

    "In terms of action, we must deal with IR35, but also we must deal with this wider situation self-employment throws up and should raise the battle on different fronts...

    "We must change the status of the self-employed. Just look at the way banks treat these businesses for mortgage purposes. We need to radically simplify the taxation and welfare systems. We should increase the freedom to choose your status from a number of different categories and we must significantly increase the experience of those in Government of what it is like to run a small business.

    "There are many, many more different things that must be done on top of this, but I think these are the most urgent. I want to tap into more organisations like the PCG to create a 'shaping list' of these things we can change."

    S99- Have you spoken to Dawn Primarolo or Nigel Griffiths about your concerns?

    Mr Prisk- "I have spoken to Nigel Griffiths briefly. I haven't spoken to Dawn Primarolo because access to that area tends to be through the Chancellor.

    S99- "What do you think of IR35 in terms of the way the Revenue introduced and applied it?"

    Mr Prisk- "My understanding of IR35 is that it was driven to combat a small group of senior people who would otherwise have been employees calling themselves self-employed. The legislation catches people by default, rather than through malevolence.

    "Regulation follows a particular market sector and uses high profile situations where the regulation applies, to frighten people. This approach, in this particular case, stems from the Revenue not being given the necessary resources to pursue the idea of IR35 properly and fairly. By using this tactic it hopes to deter people by sector.

    "IR35 is very much a crude blunderbuss. All the evidence points to the fact that it's gone far too wide. However, the Revenue will pursue it to the end. We should pick the challenge up, not only on this, but also the wider fight for the self-employed in the UK in general.

    "It should be made clear that the Government, lead by the Revenue, is determined to pursue IR35 regardless of representation by organisations like the PCG. It's a dirty tactic, but the Revenue will wait until they've spent as much money fighting them as possible, then pounce when they're at their most vulnerable. That's why the PCG is suffering because the Government is digging its heels in."

    --
    Richard Powell, Shout99

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