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The Government began a consultation on countering the practice where senior public sector workers were paid via limited companies rather than being on the payroll. It suggested that people who freelance should have tax and NI deducted at source if they are a 'controlling person' in an organisation.
This led to criticism that rather than just tackling what was seen as a tax avoidance measure by some, it would catch genuine freelancers such as interim mangers.
Now, the Freelancer and Contractor Services Association (FCSA) has responded to consultation by arguing that the proposals undermine the value being delivered by the flexible workforce in the UK. In particular it notes about the proposals:
- IR35 already covers the problem but is not being enforced adequately
- It will create extra complexity and confusion in tax and employment terms
- It will create further inequality and unfairness due to the inconsistency of the treatment of employment status between tax law and employment law
- It will go well beyond the problem identified by failing to define the ‘worker’ narrowly enough which may result in roles which are not senior line manager roles being included, and by extending any new measures to the private as well as the public sector.
Insult
Stuart Davis, Chairman of the FCSA, said: 'Frankly these proposals are an insult to contractors and freelancers. Just because they are 'off payroll' that does not mean that they are any less committed to the success of the organisation as the 'on payroll' workforce.
These proposals will also likely result in some organisations refusing to engage with self employed individuals which is contrary to the Government’s stated aim to help small businesses and will damage the UK’s flexible workforce which is critical to helping us get out of our current financial mess."
The FCSA has argued that if the Government is determined to implement this misguided solution then there should be a narrowing of the definition of ‘controlling person’. In particular it shou
- Limited to public sector clients only
- Limited to project based assignments
- Limited to individuals paid the equivalent of £150,000 per annum or more
- Any role/assignment of less than 12 months in duration should be excluded.
Details of the consultation can be found here. The consultation closes on August 16 2012.
For general coverage of IR35 policy and cases, see Shout99's News on IR35 section.
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Susie Hughes © Shout99 2012
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