The proposal, which follow the ‘onshore intermediaries’ legislation that was introduced earlier this year, require company directors to divulge personal information to agencies, including age, gender and National Insurance number, and agencies to report this and other information to HMRC on a quarterly basis.
Most concerning of all is the impact this requirement will have on subcontracting, according the trade body for freelancers and the self employed.
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“The modern economy is built on flexibility, with entrepreneurial freelancers working collaboratively among themselves, often on short term projects lasting a matter of weeks, or even days. These new measures threaten to stifle this vital component of Britain’s economic growth just as it begins to gain momentum.”
Threat
The group believes that the reporting requirements of the new legislation not only threaten to bind self-employed people in costly and time-consuming red tape, but also present a real threat when it comes to data security.
Mr McVicker said: “The information being collected, stored and reported is very sensitive. Unless this is done securely, it will place thousands of independent professionals at risk of data theft. Ironically, the risk is so serious that the Government’s own advice is to avoid sharing this information with anyone.
“With this in mind, it is shocking to learn that independent professionals will not only be forced to share this information with agencies, but that it will quite possibly then be shared again without their consent or knowledge."
False self-employment
The Government has stated that the regulations will help them combat ‘false self-employment’ in the construction sector and other industries.
However the measures risk dragging in thousands of compliant small businesses, freelancers, consultants and contractors working across every sector of the economy, significantly increasing the red tape and administrative cost associated with flexible working. According to Simon McVicker, when the original proposals were made by HMRC, there were assurances given that independent professionals would not be in scope.
He said: “Throughout the consultation process, we have been repeatedly assured that our members would not be the target of these new rules. There was even a guidance note published by HMRC setting out why they would not be caught by this legislation. It is therefore all the more ridiculous to find that thousands of contractors, consultants and freelancers will be forced to conform to the onerous reporting requirements now outlined in the draft statutory instrument.”
IPSE are calling on the Government to review these proposals as a matter of urgency, with a view to removing completely the need for agencies to report the personal details of limited company directors.
Julie Stewart, Chairman of IPSE, said: “The IPSE Board of Directors are deeply concerned about the potential harm these new reporting regulations would have should they come into effect. There must be an immediate and real commitment to change from HMRC, and IPSE will be seeking advice from a leading QC on the legitimacy of these new proposals.”
“We will also be writing to Matthew Hancock MP and Vince Cable MP at the Department for Business, Innovation and Skills to draw their attention to the potential harm such regulations could do to Britain’s flexible workforce should they come into force.”
Background
The 'Onshore Employment Intermediaries' legislation (known as the false self-employment rules) was introduced by HMRC in April to tackle what it saw as the exploiting of self-employment for tax purposes when workers are not genuinely self-employed. It aimed to target the mass marketed schemes where the workers are sometimes unaware that they are operating as self-employed, usually to mitigate the employer/client's financial responsibilities.
Under the rules any workers supplied through an intermediary that are under someone’s 'supervision, direction or control' will be treated as employed for tax purposes by HMRC. It is the intermediary that is responsible for deducting tax and National Insurance as if the worker is an employee. HMRC has repeated said that 'genuine' businesses should not be affected by this.
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Susie Hughes © Shout99 2014
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