Taxing Times Ahead??

9 Apr

Interests rates are staying at 0.5%. Is this a sign that we are at the bottom of the recession or have we simply hit a psychological barrier below which we are scared to go?  House prices may be starting to stabilise and consumer confidence has apparently been rising for the past couple of months, but these indicators seem to be more fuelled by media hype than grounded in economic fact.  The next month will be very telling – however positive the signs, we are not out of the woods yet.

My attention has been very much been on budgets this week, both that of PCG (whose financial year runs May to May) and even more importantly that of the nation.  Alistair Darling clearly has some ground to cover on April 22nd and the eyes of the nation will be on this budget, perhaps as never before.  I am pretty sure every freelancer will be watching or listening to the news with interest to make sure that no “nasties” creep in.  We will of course be providing a thorough write up from the freelance perspective and there will, I am sure, be plenty to talk about through this blog.

We have certainly left no vagueness in what we expect of the Chancellor, our Chairman Chris Bryce has made some fairly hard hitting headline statements in our submission:

“The largest single impediment to freelance working in the UK, the Intermediaries Legislation (“IR35”) remains in force. In the interests of economic recovery, we advise the Chancellor to repeal it as a matter of urgency.”

Repealing IR35 is not, however, the full story.  IR35 is very much the heart of the freelance lobby as it arose really from a fundamental misunderstanding of freelance working and from an outdated mode of thinking which seems to regard any working relationship other than that of employer and employee to be some kind of abuse – IR35 is essentially based on an assumption that disguised employment is instigated by the worker in an effort to avoid tax.  This is clearly not the case and the expert, hardworking and flexible community that is provided by the UK Freelance sector is potentially one of its key assets in dragging us out of this recession.  PCG’s call to action is for the defects in employment status law to be remedied to prevent disguised employment relationships being possible in the first place; IR35 will then be redundant and can be repealed.  Through our EDM, our direct letters to the Chancellor and in every opportunity within the corridors of power we will continue to make this point. 

PCG’s Budget submission also calls for the abolition of the controversial “S44-7” tax rules, and for the reversal of the decision to remove the VAT staff hiring concession. S44-7 makes it impossible in practice for agencies to pay freelancers gross unless they have a corporate form, thus limiting the choice of legal form available to them.

We can now only hope that the Chancellor takes into account the value that our community delivers and, on a personal note I hope that his focus remains exclusively on the fundamental problems that impact our economy and not the election battle that is just around the corner.


3 Responses to “Taxing Times Ahead??”

  1. Gill Hunt April 9, 2009 at 6:18 pm #

    The Bank of England may have stopped at 0.5% but I’ve just realised my business deposit account is now offering the vast sum of 0% interest – unless you happen to have a cool half million invested.

    Presumably they’ll be demanding payment for looking after it soon. If anyone is fortunate enough to have cash in the bank (and freelancers should always keep something back for rainy day!) they might want to follow my accountants suggestion and lend the cash to themselves to invest in a consumer account.

  2. rpearse April 14, 2009 at 10:31 am #

    Yes, let’s be rid of S44-7. I’m very glad to see the PCG taking this one on. A lot of contractors are self-employed, in the way they operate, and would rather not incorporate.


  1. What’s in store for us? « Inside PCG - April 21, 2009

    […] mentioned in this post we are calling in no uncertain terms for the abolition of the IR35 and S44-7 tax rules that hamper […]

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