Recently I read an article on Linkedin by Damian Hinds MP, Minister of State for Employment, Department for Work and Pensions (DWP), showing the UK government supports freelancers, the self-employed and small businesses, but is this true?
Damian talked starting your own business, listing “have more control”, “flexible hours”, and “additional income” as reasons to work for yourself. All of which I would agree with, and would add the ability to work with different clients and a better work/life balance to Hinds’ list.
According to Damian, Matthew Stevens, a resident of Swansea, Wales, walked into his local job centre and walked out with funding to set up his own business and a business mentor in tow. Great news and good luck to Matthew.
Hinds then encouragingly tells us:
“As Minister for Employment, I want to create opportunities for more people who are in Matthew’s position…”,
and points us in the right direction:
“If you’re interested in setting up your own business, check out the support you can get through the NEA. It’s available to people who are on Jobseeker’s Allowance, Employment and Support Allowance, Income Support, and some Universal Credit claimants and can provide a start-up loan worth up to £25,000.
Over 100,000 businesses have now been started or supported through NEA, and more information can be found here”.
Ain’t the UK Government great!
Do Government Departments Actually Talk to Each Other?
The problem with Hinds article is clearly the Department for Work and Pensions (DWP) doesn’t chat with the Chancellor of the Exchequer, The Rt Hon Philip Hammond MP.
The Chancellor of the Exchequer is busy doing his best to undermine the freelance community in the UK. In the March 2017 budget, Hammond imposed tax increases on the self-employed and small business owners. These tax increases have been discussed thoroughly in the daily rags, with most of them calling Torie’s liars for going back on their election manifestos. Furiously peddling backward, Hammond has had a change of heart on some of these increases in tax. However, the self-employed and small business owners, the backbone of the United Kingdom, will still face more red tape and higher taxes.
And it gets worse.
IR35: The UK’s Anti-avoidance Tax Legislation (Providing You’re a Freelancer, not Big Business)
Her Majesty’s Revenue & Customs are intent on taxing out of existence every single freelancer under legislation commonly known as IR35. IR35, the “Intermediaries legislation”:
IR35 refers to the United Kingdom’s anti-avoidance tax legislation designed to tax “disguised employment” at a rate similar to employment. In this context, “disguised employees” means workers who receive payments from a client via an intermediary, for example, their own limited company, and whose relationship with their client is such that had they been paid directly they would be employees of the client.
HMRC latest effort to stamp their heavy boots on the self-employed places the onus on public sector employers to decide if a freelancer contracted to the employer is either in or out of IR35. Most public sector employers, including the NHS, will deem all freelancers to be inside IR35 meaning freelancers will be taxed as if they are employees. Being taxed as an employee is fair enough, providing the freelancer is judged within IR35. It seems to me, being taxed as an employee should mean the freelancer receives the same benefits as an employee. Alas, no, the freelancer loses all the benefits of being taxed as an employee but receives none of the benefits. No paid holidays, no paid sick days, no employee pension contributions. Nothing. Nada. Zilch.
Coming into force on 6th April 2017, this legislation is widely expected to cause a mass migration of freelancers from the public to the private sector. Ironically, freelancers are deserting the public body responsible for IR35 – Her Majesty’s Revenue & Customs.
So, emerging from a recession that has seriously harmed small businesses, facing uncertainty from withdrawal from the EU, and the possible break-up of the UK, what are we faced with – less income, more red tape, and the continuing onslaught of the Chancellor of the Exchequer and HMRC.
Who’d be a small business owner in the UK?
Want to know more about IR35? Download your free guide here (other accountants are available)