Contractors deserve ‘fairness, clarity and recognition’ from government for their vital contribution to the economic revival of UK PLC, says the Professional Contractors Group (PCG) as it publishes its first Manifesto for Freelancing.
PCG is unveiling its plan for the future of freelancing and contracting at the House of Commons today to an audience of politicians from all main parties, together with other key contracting stakeholders. The launch is part of a special Westminster reception to celebrate National Freelancers Day.
According to John Brazier, managing director of PCG: “Freelancers bring a degree of flexibility and a skill set to the economy which is a real asset for UK PLC. This Manifesto clearly outlines the key messages the major parties need to adopt in order to allow this vital part of the economic landscape to flourish.”
‘Fairness, clarity and recognition’
The ten-page manifesto for contractors and freelancers calls on a future government to show ‘fairness, clarity and recognition in five key areas’:
- Recognition of contracting and freelancing as a valid way of working
- Fairer taxation
- Better regulation
- Easier access to the market
- Future of freelancing.
PCG includes a request to define employment in statute as a first step towards recognising contracting as a valid way of working. With a clear and unambiguous definition of who is employed, and who is not, the effectiveness of IR35 is swept away by default, explains Dave Chaplin, CEO of ContractorCalculator.co.uk.
Freelancers bring a degree of flexibility and a skill set to the economy which is a real asset for UK PLC
John Brazier, PCG
“If the doubt over employment status is removed then IR35 is abolished by default, because every contractor will know whether they fit the definition of being employed or not,” Chaplin says. “However, getting rid of IR35 is unlikely to be appealing to any future government, because the tax indirectly generates significant income for the Treasury. I can see the abolition of IR35 if there I something to replace it, but we should be careful what we wish for as a replacement could be worse!”
A nano-business is still a business
Contractor limited companies are the ‘smallest of small businesses’, or ‘nano-businesses’, says the manifesto, arguing that the regulatory burden should therefore be clarified and reduced to enable contractors in business on their own account to flourish.
“We know that freelancing is helping business cope with the worst recession we have seen for 60 years,” continues Brazier, “but this must be a fair deal. Freelancing must be recognised as a legitimate business model.” Easier access to the market should mean 10% of public sector procurement should be awarded to contractors and freelancers, says PCG.
But Chaplin, a former City IT contractor, urges caution: “We need contractors to help rebuild the economy and a high burden of regulation and taxes won’t incentivise the entrepreneurs we need. But government could define a nano-business as a one director-shareholder-and-fee-earner limited company and sneak in an income shifting tax by stealth.”
We need contractors to help rebuild the economy and a high burden of regulation and taxes won't incentivise the entrepreneurs we need
Dave Chaplin, ContractorCalculator
He continues: “Contractors are just like any other business supplier: they do take on business and financial risk; they have to fix what goes wrong at their own expense; they don’t have rights; and they can be dropped from their clients’ supply chains at any time. So, contractors should be allowed the financial rewards for taking these risks without unfair penalties. And awarding 10% of public expenditure to contractors by default would do contractors no favours in the long term, as it would damage the benefits of a free market economy.”
Tax simplification – a broader agenda
“Measures such as IR35 continue to place an unfair burden on nano-businesses,” says Brazier. “If we’re serious about growing an enterprise-friendly economy, we need to address these faults in our tax system urgently. We will be continuing in the run-up to the election to take this message far and wide.”
The manifesto expresses PCG’s support for an ‘office of tax simplification’ to examine proposed tax legislation before it becomes law, believing that ‘government must never see hard work and enterprise as a soft target for tax investigations’. The manifesto also calls for HMRC to ‘adopt a new and improved attitude’.
Dave Chaplin is a former IT contractor in the City of London, and is founder and CEO of ContractorCalculator, and author of the Contractors' Handbook.
Started in 1999, ContractorCalculator (this site) is the leading independent website for the UK contracting industry – most of whom are highly skilled knowledge workers.
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“PCG’s Manifesto for Freelancing draws together the key issues that, if taken on board by the next government, will secure and improve the future of contracting,” says Chaplin. He concludes: “Together with all the events planned for National Freelancers Day, PCG’s manifesto will provide the winner of next year’s election with a robust framework with which to leverage the huge asset that contractors represent in support of an economic turnaround.”
Published: Monday, November 23, 2009
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