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Are we looking at a scandal of post office proportions? 

Currently attracting much media comments are the issues around a large number of Self Employed workers who joined tax saving schemes that were later deemed unlawful by HMRC and who then sought to charge the participators in the schemes the tax – plus penalties – that HMRC actually deemed chargeable. Recent Reports say that whilst some 15k individuals have settled, HMRC estimates that 40K taxpayers are still being pursued over outlawed tax avoidance schemes.  Some of the individual sums involved are around £200k, although settlement figures are thought to be lower.

The inevitable question that many who have been following this story will be “Are we looking at a scandal of post office proportions? “

In financial terms, this looks likely to exceed losses of post office sub postmasters by some considerable margin The emotional and personal damage suffered by all thos involved is likely to be fairly similar, but where the difference arises is in culpability, albeit marginal. But still ruinous.

What happened to sub postmasters was outside their control. What is happening to these self-employed contract workers has always been within their own control and, in the end, and in brutal terms, it was their decision to go ahead with these now outlawed schemes.  Paradoxically this risk is the ultimate test of self-employment. YOUR business;YOUR decision. 

Those closer to it – Independent Professionals, Intermediaries  and Employers alike – will also be increasingly more  concerned about the need to review and revise the legislation and procedures around IR35?”

Blaming HMRC is a distraction. The task of HMRC is to assess, levy and collect tax, as and when due. If they didn’t, they would be failing the government and all taxpayers.

However, the real problem does lie with the Government.  They have invariably failed to recognise the realities of the current workplace and the way in which it is changing, particularly since 2019. Their approach has been inherited from the EU, whose philosophy was and is to put as many people as possible onto someone’s payroll, where they can be controlled and taxed. Additional support such as social benefits, personal security, protection are all welcome – but, with an increasing number of workers wanting to operate independently, particularly at the higher end of business management and age ranges, working on an independent basis and  personal responsibilities that go with this are becoming more relevant and more pressing.

Nevertheless, it is important to recognise the impact of the duck model. If it looks like a duck; if it waddles and if it quacks, it is likely to be a duck.  This test, obviously, should be applied to all workers but increasingly is becoming increasingly more subjective and difficult to apply  as the market grows and includes a greater proportion of genuine individuals and small consultancies who need to be treated as such.

It is difficult to define and assess the size of this independent worker market – and this issue is shared by all who are involved. The CIPD defined these people as Atypical Workers. Atypical Working · Working Free.  Our company, Working Free Limited, defines them as Self Drive Workersand makes the case that it is approaching about half the total UK working population of 33m.

Other definitions abound, such as Part-timers, Self-employed, Contractors, Freelancers, Interim Managers, Temps, Consultants, Management Consultants, Semi-retired people, Portfolio Workers, Off-payroll workers, etc. (Portfolio Workers include a broad mix of Professionals who have more than one source of income and work-type activity (whether on the payroll, freelance or non-remunerated – or a mix of these.)

Several years ago, Working Free put forward its own solution to the IR 35 regime.  This envisaged creating a different form of limited company – operating rather like the VAT mechanisms – which could be used by anyone registering the company and which would entitle payment to be made gross to this company.

This is the full description of Working Free Limited’s IR35 Solution 

The government should create a new type of limited company which any independent worker, domiciled in the UK, may set up and trade through. Normal rules for limited companies apply except that this type is forbidden to pay dividends and remuneration to family members not formally employed in the business and taxed.  They would file quarterly reports – virtually identical to the VAT system – and pay over PAYE and NI relating to remuneration paid out by the company during that period.  In this way, legitimate expenses – including pension contributions – can be charged in accordance with company and tax law and the engaging client companies have no responsibilities in this regard.  If, and when wound up, any surplus would be deemed to be income of the Directors at the time of winding up and taxed accordingly, following the principle that all retained earnings from whatever source will eventually be taxed as income and as appropriate.  

The inherited – and still lingering – belief of government is that self-employed individuals are mostly those who cannot find a proper job.  HMRC sees most of them as tax dodgers.  Unions see them mostly as Zero Hours Contractors – and are committed to abolishing the practice.  The future of the UK wealth creation process – usually referred to as growth – will increasingly rely on the entrepreneurial drive and energy of ambitious and committed individuals – admittedly some of them on payroll, but most keen to do their own thing and unfettered by bureaucratic nonsense.

They wonder what has happened to the small government/ big people philosophy of this current Government and fear the threatening noises about more employment regulation from a likely Labour Government.

About Working Free 

Working Free supports the Senior Executive considering or embarking on a new career as an independent professional. We deliver our comprehensive and flexible Programmes to Individuals directly and to Organisations as part of restructuring, redundancy, outplacement, career development or other mid-career transitioning arrangements and where independent working at senior levels is seen as an attractive way forward.

Charles Russam – 11.4.24

Charles.russam@workingfree.co.uk.  07785 297059

Working Free Ltd. www.WorkingFree.co.uk

“Better Comes Next” is our collaborative and inclusive management mission.

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