When the PCG recently hosted National Freelancers Day they used it as a means of gathering important information about relevant contractor issues. According to their findings, contractors are struggling with a lack of choice available to them with regards to the framework they work within.

According to their data, currently only two per cent of IT contractors are self employed while three per cent are working through an umbrella company. These figures are based on a survey of 900 contractors. The other 95 per cent of IT contractors who took part in this research are actually working through a limited company.

One contractor spoke of his experience: “When I first started out, I was self-employed, direct to client but going out to the wider market meant using agencies [so] I was forced to go ‘Ltd.’”

PCG commented: “Freelancers in the IT industry most generally work through recruitment agencies. According to the S134 rules, the agency could be held responsible for unpaid taxes of a Schedule D worker. The risk-averse nature of agency businesses resulted in nearly all of them refusing to accept ‘workers’ who were Schedule D. This forced freelancers who use agencies to incorporate.”

Experts suggest that many contractors would prefer to be Schedule D but this option is not available to them unless they work direct with their client.

The PCG concluded: “PCG wants to see the repeal of sections 44-47 of the Income Tax (Earnings and Pensions) Act 2003 – which effectively force a nano-business to operate on a corporate basis, denying freelancers the opportunity to be truly self-employed.”

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