Successive Governments have seen fit to harass freelancers, setup rules and legislation like IR35 to bash them and invite people from other countries to come here and compete for their jobs.
So, why do they do it? Don’t they know that someone who works as a freelancer works completely differently from a permanent person? They take risks, they don’t get paid when not working, don’t get sick pay, holiday pay, maternity benefits, pensions, share options etc.
They are not part of the structure of the company and even if they do well they will not be promoted. They can be got rid of pretty sharply without redundancy money and sometimes without even any notice period.
So, why do they see people who operate this as ‘disguised employees’ (for tax purposes only)? Do they not understand this?
My instinct is that Labour when in power didn’t truly understand this. After all the party was set up to represent workers against the bosses. There were only two groupings when they were set up and it was a class war for the protection of the workers against the bosses.
Even when in power Old Labour still saw it that way to a certain extent and many of the ministers in the cabinet had at least traces of Old Labour in them still.
They didn’t understand this new entity of the freelancer who looked like a worker but behaved like a company. That couldn’t be right could it? They must have been up to something.
They must be disguised employees operating for tax purposes as if they were a company. That was a bit sneaky. They needed to be caught and taught a lesson. They were getting a bit uppity thinking themselves as companies rather than ordinary workers like everybody else.
However, they operated more as companies rather than permanent employees and took the risks that real businesses took – even if they only had one customer at a time.
That’s why Labour brought IR35 in (as well as to calm a media frenzy about genuine disguised employees who left permanent jobs on a Friday and started as contractors at the same firm on a Monday).
IR35 should have been framed to catch those people and stop that practice (which it has. No one does it now). However, it sucked in genuine freelancers who had been freelancing for years.
As far as the Conservatives are concerned I do believe, unlike Labour, that they understand what a freelancer is. I think their attitude to freelancers is a lot more cynical and not based on any ideas of a class war.
I think they think that UK freelancers are a soft touch and they can extract more tax from them to help cure the deficit and they can offer their jobs as a bargaining chip to countries like India to get access to their markets for our big companies especially in the banking and insurance sectors.
They cosied up to the Professional Contractors Group before the last election hoping for a whole load of freelancer votes which they are likely to have got at the last election. If the PCG thought that they had intended to abolish IR35 then that was well and good.
They didn’t actually say that. All they said was that they would ‘look at’ IR35 again – which they did after the election and decided that they would not abolish it.
This is the cynical bit – the main reason that the panel they set up recommended that IR35 should be kept was that if it was abolished many contractors would dump their umbrella companies and set up Limited Companies.
That would cost the Government as Limited Company contractors pay around 10 grand less in taxes and NICs than umbrella company contractors. So, there wasn’t any moral reasons for deciding that many freelancers should continue to be seen as ‘disguised employees’.
The Tories fully understood what a freelancer is. It was purely a bean count. Freelancers are not treated as employees in any other way financially except when it comes to being taxed.
The cynicism goes further. Having seen that treating genuine freelancers as disguised employees was quite lucrative for them they decided that more freelancers should be considered as disguised employees for tax purposes only.
Then they could pull in even more taxes from them. So, the Chancellor announced in his 2012 budget that the Government would STRENGTHEN IR35 and he has spent much of the past year putting in place measures to get more of these freelancers to go into Umbrella Companies rather than operate through Limited Companies.
And yet who could be more of a ‘disguised employee’ than someone who operates through a PAYE Umbrella Company. Everyone knows that they are not real employees of these companies.
It’s just a ruse so that they can set some expenses against tax.They do no work for those companies at all.
And that’s the cynicism of it. The Government knows that.
They don’t take in much from people who declare themselves caught by IR35 as most people who think they are caught by IR35 become ‘disguised employees’ of PAYE Umbrella Companies.
However, the Government and HMRC don’t care as they act as per se tax collectors for them and they get the money monthly rather than annually so they are happy enough to let them claim some expenses that a real employee couldn’t.
What could be more cynical than to create a law to fix ‘disguised employees’ and then forcing real freelancers into to become disguised employees of PAYE Umbrella Companies?
It’s nothing to do with morals. It’s a pure bean count and the reason that this Government does it is for money and because they see freelancers as soft touches.