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AS2013 (5): Government consults on 'false self employment'
by Susie Hughes at 15:43 11/12/13 (Political News)
Following the announcement in the Autumn Statement that the Government intended to act on what it described as 'false self-employment', it has now emerged that there will be a two month consultation exercise.
The initial announcement led to concerns that this was a further IR35-style clampdown on contractors.

So much so, that HM Revenue and Customs (HMRC) had to step in to clarify the situation by explaining that their target was actually 'mass-marketed schemes, where workers can be moved en masse into self-employment, even though they should be employed', usually lower-paid, unskilled workers, who may be unaware of the arrangements surrounding their engagement.

In a sentence, HMRC is concerned about a substantial and growing number of people who are falsely self-employed and much of this growth in this particular brand, now known as 'false self-employment' can be attributed to employment intermediaries who are facilitating, organising and promoting these schemes.

It is this organised, mass exodus into what is seen as sham self-employment status which HMRC wants to stop.

However, the first tranche of reassurances that it was not aimed at the limited company contractors quietened rather than silenced the alarm bells, as everyone in the sector waited for the next steps. (See: AS2013 (2): 'False self-employment' and the fear of unintended consequences ).

And the next steps have now arrived in the form of a consultation document, Onshore Employment Intermediaries: False Self-Employment.

The details and scope are still somewhat sketchy and open to a variety of interpretations, but HMRC was still at pains to point out that they are not planning to attack the genuine businesses or stopping the legitimate self-employed working through intermediaries.

Although the personal service companies (PSCs) are not per se in the firing line, there are still some concerns that they could be caught in the cross fire.

It would appears from early indications of HMRC's proposals are that they are using supervision, direction and control as the key criteria for judging self-employment, and where none of these are present the new proposals will not apply.

However, in situations where the worker does meet the conditions of the new proposals they will have to be treated as an employee of the intermediary engaging them.

Not apply
The consultation document does admit that, as it will sit with the agencies legislation, it will apply to PSCs, but then, in the next sentence, says that PSCs would fall into the exemption category, as they currently do.

The consultation document also specifically refers to IR35 and how the various pieces of legislation would work together.

It said: "The Government does not intend that the proposed strengthened legislation applies to personal service companies (PSCs) differently to the way it does currently. The interaction between, and the order in which, the agency legislation, managed service company legislation and intermediaries legislation (IR35) apply will remain as it is currently."

"The proposed new legislation will apply as the current agency legislation does, that is where a worker is supplied by or through an intermediary, which would cover personal service companies. However, for the new legislation to apply to a PSC the worker would need all of the following criteria would to be met:

  • to be subject to (or to the right of) control, supervision or direction as to the
    manner in which the duties are carried out;
  • to provide their services personally;
  • for all remuneration to be in consequence of providing services; and
  • for the remuneration not to constitute employment income apart from this
    under the agency legislation."

The consultation document further explains: "This means that, as is currently the case, the Agency Legislation will not generally apply to PSCs as they will not meet all of these criteria."

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