Scrap “disastrous” IR35 for a statutory definition of self-employment
by Alan Little
In the wake of recent news reports of high profile celebrities becoming embroiled in IR35 court cases and strong indications that the Government is planning an early rollout of the legislation in the private sector, the Association of Independent Professionals and the Self Employed (IPSE) has repeated its call for a statutory definition of self-employment if the future of freelancing and independent contracting is to be saved.
IPSE’s Press and Public Affairs Officer, Tristan Grove, made the call after ITV presenter Eamonn Holmes hit the headlines, revealing that he was in the midst of a legal battle with HMRC over his employment status. HMRC is challenging his use of a personal service company (PSC) over the last seven years. He faces a staggering tax bill of up to £2 million if HMRC succeeds.
News has also emerged that the veteran presenter of BBC’s Woman’s Hour, Dame Jenni Murray, is also facing a tax tribunal showdown with HMRC. Like Mr Holmes, Dame Jenni refutes HMRC claims of inappropriate remuneration through a PSC.
For Grove, the true problem is not deliberate non-compliance, although he acknowledges that a small number of unscrupulous gig employers have been coercing low-skilled workers into false self-employment simply in order to avoid employee tax obligations. The true issue, he insists, is the fact that British tax and employment laws for self-employed people, including millions of freelancing and contracting professionals, “are absurdly complex” and have failed to keep pace with the changing nature of work in the UK. As a result, it is far too easy for many people to fall foul of them, even though they are legitimately freelancing.
Despite the fact the HMRC appears to be aggressively targeting contracting and freelancing workers with charges of disguised employment, Grove notes that it has lost four out of the five cases it brought to the tax tribunal in 2018 alone.
While the UK has legal definitions of employee and worker status, it currently has no statutory definition of self-employment. Without it, the lack of clarity results in “pernicious” IR35 investigations that often culminate in legitimately self-employed people being re-classified as employees, but without receiving any of the statutory benefits that status normally brings.
The Government, Grove states, needs a simpler, clearer tax system that supports and encourages, rather than punishes, freelancers and contractors and it should scrap the “disastrous” IR35 instead of proceeding with a private sector rollout.
He concludes: “Until the government creates a better system for the self-employed, you can expect more TV tax scandals, more exploitation and more honest, hard-working self-employed people being unfairly dragged through the courts just to decide their employment status.”