Rules on false self-employment go too far
The Government's latest attempt to tackle abuse of the rules around false self-employment is justified, but loose definitions could mean it catches some of the genuinely self-employed too, the Chartered Institute of Taxation (CIOT) has warned.
The CIOT has become the latest group to set out its concerns in response to a consultation document from HMRC on the use of 'onshore employment intermediaries' by employers intending to disguise the employment of their workers as self-employed, primarily to avoid employer's National Insurance contributions, but also to reduce costs associated with workers' employment rights.
Although HMRC has repeatedly claimed that this is aimed at protecting lower-paid workers using mass-marketed schemes, there is concern that it could reach wider. This view is supported by the CIOT.
Colin Ben-Nathan, Chairman of the CIOT Sub-committee for Employment Taxes, said: "False self-employment is a genuine concern and the Institute fully understands the Government's desire to tighten up the rules in this area. However, we are concerned that HMRC's proposal may overstep the mark and risk penalising genuinely self-employed workers.
"As it currently stands the proposal is very widely drawn. It states that to fall outside of the new rules then it will be necessary to show that an individual is not "subject to, or the right of, supervision, direction or control as to the manner in which the duties are carried out by any person". But proving a negative can be very difficult.
"Consider an example of a genuinely self-employed electrician engaged, via a panel of approved suppliers, to carry out some work for a contractor on a building site for a few days. She needs to complete wiring in designated areas of the new building, add various power sockets, earth pipes, etc. However, when she is on site she is subject to the oversight of the site foreman who has overall responsibility for health and safety. It would clearly not be the right result for 'supervision' to extend to her situation…but does it?
"We think that more clarity is needed in order to ensure that the legislation distinguishes between the genuinely self-employed tradesman and those in false self-employment."