Entrepreneur Julie Deane OBE’s just-released review of the issues facing the UK’s self-employed and contracting workforce has been warmly applauded by organisations representing Umbrella Company Employees and other independent professionals for its recommendations for a definition of self-employment and an analysis of taxation.
Crawford Temple, CEO of employment intermediary trade body PRISM, welcomed the study and repeated his call for a strategic review as “the right vehicle for a wide-ranging study of how the tax system was currently failing flexible workers.”
He added: “Julie Deane has picked up on the complexity of the tax system, which does not help anyone, least of all flexible workers including contractors. I hope [Prime Minister] David Cameron listens to her advice and heeds our call for a strategic review.”
Mr Temple explained that PRISM wants a Treasury review led by the Office for Tax Simplification (OTS) in the hope that its recommendations will at last bring about tax changes that fully recognise a third type of UK worker – the contracting professional – who does not conform to the traditional categories of ‘employed’ or ‘self-employed’.
Although there are 4.6 million people in the UK who fall under the banner ‘self-employed’, Mr Temple added, there are another 1.6 million contractors in the country who consider themselves self-employed but who technically work through an employment intermediary, typically an Umbrella Company.
PRISM believes this category of contracting professional is not properly accounted for and, as the Deane report alludes, the failure to recognise these professionals is becoming a growing problem.
Simon McVicker, director of policy and external affairs at the Association of Independent Professionals and the Self-Employed (IPSE), also welcomed the study.
A pressing example of the iniquitous treatment of flexible contracting professionals is, of course, the plan to abolish tax relief on their travel and subsistence (T&S) costs. HMRC has stealthily altered the scope of its rules on supervision, direction or control (SDC) to include not simply actual SDC but merely the right to SDC. As a consequence, huge numbers of formerly independent contracting professionals will, from 6th April, be re-designated as temporary employees for tax purposes only, even though their role will remain exactly the same.
What this boils down is a complete failure to recognise these professionals as a unique group of skilled flexible workers, who typically travel far greater distances than traditional employees to complete business-critical project work for geographically distant end-clients, incurring far greater T&S costs in the process. They stand to lose around one-third of their income as a result of the change, according to PRISM’s calculations, which will either deter them from travelling and deprive businesses of their valuable skills or force them to substantially increase their pay rates.