⚠️ This is a news story and may not be up to date. You can find the date it was published under the title. Our Tax Guides feature the latest up-to-date tax information and guidance.

Autumn Statement: Campaigners welcome commitment to legislate against false self-employment

Published on 5 December 2013

The LITRG has welcomed the Government’s commitment to legislate on employment intermediaries facilitating false self-employment.

LITRG Chairman Anthony Thomas explained:

“Since the removal of the upper earnings limit for Class 1 secondary NIC, workers and business have sought out ways to avoid being in a relationship of ‘employment’. Whilst some self-employed arrangements may be wholly legitimate, there are significant numbers of workers who are treated as self-employed for income tax and National Insurance despite the fact that the way in which they work on a day to day basis demonstrates that they could, in fact, be employees. 

“This means that they pay their tax through self-assessment, rather than PAYE, pay less by way of National Insurance and are able to deduct more generous expenses than would normally be allowable for those who are in employment.

“The UK has particularly high levels of ‘self-employment’ which is partly due to the difficultly people have in applying the complex ‘status’ tests. In the construction industry, for instance, there is a lot of grey area and it is the norm for workers to be considered their own bosses, because they provide some of their own tools and equipment or are responsible for correcting any defective work caused by their actions.

“However, under the relatively new trading structure of a 'self-employed umbrella', there is little room for doubt that the tests are being distorted and the incidence of 'self-employment' is growing amongst workers who are very unlikely to be in business on their own account. For example it is not uncommon to find self-employed waiters and waitresses and factory workers.

“This is false self-employment. Not only does it deny the Exchequer tax that is properly due, but it is also unfair to other workers who may be doing exactly the same job as the incorrectly classed 'self-employed' person but on an ‘employed’ basis. LITRG also have concerns that it is often the worker rather than the engager of the worker who finds themselves under HMRC's spotlight, when actually it is the latter that should be HMRC’s first port of call. Furthermore a person’s employment status has much wider implications in terms of employment law rights and protections, and so false self-employment can leave low paid workers in a very vulnerable position. 

“We therefore look forward to a thorough, comprehensive review of this complex area and a simplification of the rules, something we have called for on many occasions.”


Contact: Robin Williamson (please use form at http://www.litrg.org.uk/ContactUs)

Tax guides

Share this page