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self employed
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Self employed

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19th Oct 2016
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The world of economics, that shadowy reign that bears occasional relationships to reality, has many myths, and among the greater ones are the stories told of self-employment.

The FSB (no, not KGB-lite) staunchly demands the right of everyone to choose to be self-employed (though largely for tax purposes) even though this means lining up with the very many large companies who tell their workers they are self-employed, must pay their own tax and NIC, and so on, while working on terms that give them the worst of all worlds, tied down to working by not being allowed to work elsewhere but actually working only at the employer’s beck and call on zero hours contracts. The employing companies are happy to big up the notion of self-employment as well because it offers them a chance to save money and to forget about workers’ rights.

There have always been a number of tradesmen; plumbers, carpenters, window cleaners who were self-employed because they worked directly for the public and who did well because they might be more reliable and show more initiative than those who worked for their larger competitors. These will continue to form the bulk of the (genuinely) self-employed because the work they do has not gone away and it cannot yet be automated. Others suffer because the advance of mechanisation has done for them. It is much more difficult to be a self-employed motor mechanic these days because modern cars contain all kinds of electronics that it needs expensive equipment to deal with.

Now for tax purposes it is usually fairly clear whether someone is employed or self-employed, but that involves looking at the evidence. With a million more “self-employed” on the books, there is no chance that HMRC can look at these (look at the problems it has trying to police the minimum wage) and so the employers can get away with classifying as self-employed people who are working entirely under their control. Because it is slightly complicated the media, who will home in on those paid below minimum wage, does not attempt to look at the question of self-employment.

The number of people classified as self-employed has risen greatly in recent years. Is this a revival of the entrepreneurial spirit, as the FSB would insist?

So have you as an agent been flooded with new self-employed clients, or have most of those newly classified as self-employed actually given up already, discovering that a town only needs so many self-styled landscape gardeners or window cleaners and the main impact of a successful newcomer is to take work away from somebody else, affecting the viability of their business too.

This sort of thing used to be called casual labour, and the trade unions (remember them?) fought against it on the docks among other places. The noise made by the contracting community (which has genuine problems) perhaps drowns out the voices of the powerless.

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By johnjenkins
20th Oct 2016 12:54

Simon, you're missing the point.
It is not up to HMRC to decide employment status it is something that is decided between the work giver and the worker.
There are no "disguised" self-employed. There is no law, just guidelines which have been interpreted one way or another over the years by tribunal. The only reason tribunal got involved was because HMRC wanted more money. Prior to Gordon Brown things were pretty smooth with the odd hiccup. Now look, IR35, (what a total mess that is - taking away Limited Company status) quarterly accounts that are meaningless (the only reason for it is to put the SE onto RTI.

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By jimeth
21st Oct 2016 11:41

I think Simon has made a very real point here. The definition of self-employed should not include those who work long-term for a single "client" aka "employer". These people should get taxed as employees and gain employment rights.

What we absolutely need to avoid is the ridiculous situation where tax, pension, NI and other rules apply inconsistently so that someone is effectively an employee for some purposes and not others. Either someone is employed and gets all the rights of employment and is taxed accordingly or someone is genuinely self-employed and gets none of those rights and is taxed accordingly. There should be no middle-ground.

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Replying to jimeth:
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By johnjenkins
21st Oct 2016 11:59

There is no definition of self-employed. Yes you are quite right there is no middle ground. Only HMRC want there to be middle ground to extract maximum tax and nic.
There is no such thing as being genuinely self-employed or disguised self employment. It's all spin by HMRC.

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