Contracting and freelancing is enduring a tough year, seemingly under attack from all quarters. Against a backdrop of increasing membership, PCG is working hard on the defence of contractors and to secure recognition for their value, writes John Brazier, managing director of PCG, in this article for ContractorCalculator. He highlights the ongoing work in the IR35 Forum and consultations on the new IR35 framework, plus ‘off-payroll’ and ‘controlling persons’ rules. In addition, he details the progress made to compile a body of solid research about the sector, and describes advances at a European level.
Contractors and freelancers contribute an estimated £100bn to the UK economy and help deliver desperately needed growth by supporting entrepreneurship. In recent months however, the sector has come under increasing pressure from politicians mistakenly targeting independent professionals as part of their reaction to the media storm around the tax affairs of a small number of high-earning individuals.
This knee-jerk reaction has compounded the problems caused by an unfair scoring system for the business tests associated with IR35, creating a clear policy dichotomy in Whitehall. The Government is slowly strangling access to talent with red tape, while simultaneously proclaiming how crucial this entrepreneurial spirit is to growing the economy out if its debt crisis.
With so many growth-generating activities underpinned by the highly skilled, knowledge-based, flexible workforce available on a contingent basis, they now represent one of UK plc’s competitive advantages in the global economy. Yes, the same flexible workforce that is being further regulated while its very mechanism of trading is being targeted!
The IR35 Forum and HMRC’s new risk-based approach
PCG maintains the position that the scoring system attached to HMRC’s recently introduced business entity tests (BETS) are both unfair and inappropriate in their current form. We will continue to work within the system as members of the IR35 Forum, alongside other stakeholders, to secure change once HMRC’s twelve-month ‘test and learn’ phase is over.
In the meantime, HMRC’s new risk-based approach is with us for at least 12 months and the tests are not going to change during that time. So, we will support contractors with the best possible guidance to navigate the existing framework and to ensure HMRC fulfils its commitments and does not overstep its boundaries.
And when the time comes to secure change, we understand that evidence is required, not just anecdotes. We would urge all contractors and freelancers who have experience of the Business Entity Test (BETS) and HMRC’s application of the risk-based approach to share it with us.
Tackling unnecessary and damaging legislation
The unfortunate by-product of the media and government witchhunt of Limited company contractors and freelancers working in the public sector has been the ‘off-payroll’ rules and controlling persons legislation proposals. Both sets of rules will cause untold damage, not only to the livelihoods of individual contractors and freelancers, but also to the public sector itself.
Our response has been swift and comprehensive, with PCG engagement reaching the highest levels of government. And because we have forged high-level links at Westminster and in government via the All Party Parliamentary Group (APPG) on the Freelance Sector, the case for continued use of contractors and freelancers is being heard.
With so many key organisations represented, the IR35 Forum is providing us with an additional medium in which to challenge the requirement for the new rules. Legislation in the form of IR35 already exists to tackle false self-employment in the public sector, and for that matter in the private sector as well. Why do we require more?
We secured space on the agenda of the July 2012 IR35 Forum meeting to tackle the issue, and to present a coordinated front PCG is engaging with key interim management stakeholders – the Recruitment and Employment Confederation (REC), the Interim Management Association (IMA) and the Institute of Interim Management (IIM).
Expanding the knowledge base of UK contracting and freelancing
July 2012 saw the launch of the latest PCG-commissioned Kingston University report, Exploring the UK Freelance Workforce 2011, in which the researchers have identified 12% growth in the sector since 2008. Freelancer and contractor numbers have now reached 1.56m.
Professor Andrew Burke, founding Director of the Bettany Centre for Entrepreneurial Performance and Economics at the Cranfield School of Management, is continuing his work to build an economic model that will demonstrate the value of the contracting and freelance sectors to the UK economy. The results will be published on this year’s National Freelancers Day, 21st November 2012.
A new research project, Working as an independent professional (IPro) in the EU: Seeking the success factors, supported by the European Forum of Independent Professionals (EFIP), will examine the factors that promote and inhibit freelancing and contracting across nine European nations, including the UK.
PCG will apply this expanding body of evidence to demonstrate the growing importance of contractors and freelancers as part of the policy debate, and to emphasise the potentially negative impact that unnecessary legislation will have on the sector.
Securing and exploiting influence on the national and European stage
Our work to challenge and influence the policy debate on issues such as security clearance and intercompany transfers is entering a mature phase. A Home Office committee, on which PCG has representation, has been created to monitor security clearance.
The work of the All Party Parliamentary Group is ramping up. In addition to the tactical support provided by members during the ‘off-payroll rules’ debate, the group has an agenda of activity to make colleagues in Parliament aware of contracting and freelancing, including future round-table events.
Representation and acceptance of contracting and freelancing as a viable alternative to employment at the European level is gaining pace. The message to Brussels is further strengthened by PCG’s relationships with the European Small Business Alliance (ESBA) and the European Forum of Independent Professionals, plus collaboration with the Lisbon Council.
Removing the taxation issue from future debate
Ensuring that the voices of freelancers and contractors are heard when the government is formulating new tax legislation remains a vital and core element of our work. We will always remain vigilant for unfair and unnecessary taxation and regulation that will impact negatively on the freelancing and contracting sector.
The Government is slowly strangling access to talent with red tape
John Brazier, PCG
However, the key to future policy success is for PCG to move the emphasis of the debate away from taxation and on to the wider issues around contracting and freelancing, while continuing to focus on defending the right of skilled independent professionals to work in this way.
We have a cohesive strategy of developing a credible research base, policy and lobbying work in Westminster and Brussels, and ongoing and expanding support and service delivery to our members. This full agenda will support the freelancing and contracting sector through its current tough times and is designed to advance the cause of freelancing and contracting into 2013 and beyond.