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New HMRC measures against false-self-employment won’t target genuine contractors

Genuine contractors are not the target of HMRC’s new anti-false self-employment measures announced by Chancellor George Osborne in his 2013 Autumn Statement. This is despite the ambiguity of the measures detailed on page 72 of the supporting documentation. These were written in such a way that they could have included limited companies and umbrella companies as “employment intermediaries” being targeted.

Clarification by HMRC obtained by PCG and analysis by professional employment solutions provider Parasol, have stressed that legitimate umbrella and limited company contractors have nothing to worry about.

An HMRC spokesperson told PCG:

“We wanted to clarify that the measures are targeting mass-marketed schemes, where workers can be moved en-masse into self-employment, even though they should be employed. Often the workers are low-paid and unaware that they are being engaged on a self-employed basis until they try to claim employment rights. The measure is designed to stop this from happening.”

Derek Kelly, managing director at Optionis – home to professional employment provider Parasol and contractor accountant ClearSky – told ContractorCalculator: “Professional umbrella contractors who use compliant, legitimate employment providers will not be affected by measures announced by the Chancellor. Nor will limited company contractors or those who are genuinely and legitimately self-employed.”

PCG’s director of policy and public affairs Simon McVicker welcomed the response from HMRC: “It’s comforting to hear that the measures will be confined to a specific problem area and will not affect legitimately self-employed contractors and freelancers.

“It is also very encouraging to see HMRC engaging in clear and open dialogue with the bodies that represent freelancers and small businesses in order to clarify the situation so quickly.”

However, Kelly warns that the Finance Bill will require careful scrutiny to ensure that legitimate contractors are not inadvertently affected by the new measures: “We look forward to discovering the contents of the draft legislation on 10th December. It is vital that policymakers tread carefully to avoid any unintended consequences, such as an increase in red tape for skilled, professional contractors.

“As always, the devil will be in the detail. But we are hopeful that the government will demonstrate an understanding of the workings and complexities of the flexible labour market by making a distinction between low-paid workers and highly skilled professionals.”

Kelly concludes: “We welcome all efforts to raise standards and address any abuses in the sector, particularly with regard to low-paid, vulnerable workers and operators of unethical schemes that seek to exploit such workers.”

Published: 06 December 2013

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