Contractors – heroes or villains?

The formation of a Select Committee to examine the impact, good and bad, of personal service companies for tax collection in the UK, has recently been announced.

Calling for the inquiry, Lord Myners (former City Minister) recognised that PSCs offer users tax benefits which are “generally seen as acceptable”, as long as the PSC is a “genuine one-person business.” However, he also pointed to the 2,400 “off payroll engagements” found in central government departments last year by the Treasury and it is clear that this and revelations around the BBC have not helped the genuine contractor in the private sector. The Select Committee is taking hearings from interested parties, has been described as being “short” and is intended to report to ministers by 31 March 2014.

The context for the above is also what appears to be a ramp up in HMRCs resources and expected activity in relation to IR35 reviews during 2013 and 2014.

Weighed against all of this is the hope that the committee and the government will place emphasis on the importance that genuine contractors and freelance businesses play in the UK economy and its recovery and growth – as reported in several previous blogs about the importance of contractors in plugging skills gaps, particularly in IT – and the fact that IR35 makes it harder for them to get on with their job and contribute in this way.

In stark contrast, contractors have been receiving high praise in the build up to the National Freelancers Day on 21 November, from prominent spokespeople, including: Boris Johnson saying that their “contribution to the lifeblood of our economy is immense”, the Minister for Skills and Enterprise Matthew Hancock stating that: “Freelancers make a huge contribution to the UK economy” and Conservative Party Small Business Ambassador (and TV’s The Apprentice ‘judge’) Karen Brady quoted as saying “As a businesswoman, I have first-hand experience of working with freelancers and know that they provide an invaluable flexible resource to clients, helping them grow”.

Posted by John Hoskin