HMRC guns for ‘False Self Employment’

 In Data Protection Act, IR35, Osborne

Osborne has said the big new target for HMRC is going to be “false self-employment”.

The chancellor said: “We’re going to tackle the growth of intermediaries disguising employment as false self employment, depriving workforces of basic employment rights like the minimum wage in a bid to avoid employer national insurance.”

But, of course Osborne is not doing this out of the goodness of his heart, it’s estimated they would raise an additional £400m each year for HMRC.

The Shadow Business Secretary, spoke out about this last year, saying, “Bogus self-employment is a scandal that continues to undermine employment rights and hit taxpayers’ pockets. There are too many cases of employees being classed as self-employed when in practice they work for a single company.”

Chuka Umunna, continued, “At the same time rogue companies are using bogus self employment to avoid paying National Insurance, whilst there are numerous reports of the status being used at the top end of the salary scale by individuals as means of avoiding tax.”

Here are the three big flags if you submit your tax return as a self employed person;

1. How many clients do you have?

If you just have one or two clients that will be seen as suspicious.

2. Who pays for the tools you use?
This might be a lawnmower (if you are a gardener) or a computer (if you are a web designer). If you are self employed you’d expect that these tools would be paid for out of your pocket not your employers.

3. Where do you work?

Freelancers normally work from an office or at home, of course builders or gardeners have to work on site, but if you spend most of your time on site without a good reason this is a third red flag for HMRC.

So if you work for one client, in their office using their equipment, then this is something you need to address.

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