London Eye

Self-employment under the spotlight – 3 things worth noting

Published: 24th March 2017

Author: Fudia Smartt

  1. IR35 and Public Sector contractors:  IR35 is a rule to stop the avoidance of tax and National Insurance Contributions (NICs) via the use of intermediaries (usually personal service companies).  Under the existing regime, it is for the worker’s intermediary (e.g. their personal service company) to determine whether the rules apply to them and if they have to pay income tax and NICs.  To address the Government’s concern of widespread non-compliance, the law is changing from 6 April 2017 so that it will be for the public sector authority  (i.e. the client) to decide if the rules apply and not the worker’s intermediary.  Further, whoever pays the worker’s intermediary on or after 6 April will be required to make the tax and NIC deductions.   Click here for further details on the new rules.
  2. National Insurance Contributions:  In the Spring Budget, it was announced that Class 4 NICs for the self-employed would increase 1% in the 2017/2018 tax year and a further 1% in the 2018/2019 in order to reduce the gap in rates between employees and self-employed.  However, a week later the Government decided not to proceed with this measure, following complaints that it amounted to a breach of the Conservative party General Election manifesto commitment not to increase NICs, income tax or VAT.  Watch this space to see if this issue will be revisited in the not so distant future!
  3. Gig economy:  Following a spate of employment status cases (for example Uber, CitySprint, Deliveroo and Pimlico Plumbers), the Government called an inquiry into self-employment and the gig economy. Evidence is currently being given at the inquiry, which has included leaders and staff from Deliveroo, Uber and Hermes giving evidence on their working practices.  One suggestion has been to remove the worker status category in order to provide greater clarity; either an individual will be an employee or self-employed.  At present “worker” is currently an intermediary class of staff which has some, but not all of the rights which are afforded to employees such as paid annual leave, whistleblowing and discrimination protection and a right to receive the National Minimum Wage/Living Wage.  Hopefully the findings of the inquiry will provide much needed clarity.

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