With this witch-hunt, the devil is in the detail

29 Feb

John Brazier, PCG's Managing Director

In recent weeks PCG have spoken up on behalf of freelancers and limited companies in the media from the Financial Times, to the Guardian, to BBC Radio. In response to enquiries from Exaro news, who have been breaking stories around the use of limited companies throughout the last few months, we submitted the below commentary piece to them which is currently live on the exaro newswire homepage here.

This is yet again intended to redress the balance in the media and prevent panicky decisions that could negatively impact genuine freelance businesses. Below we have shared this latest article, a first person piece from PCG’s Managing Director John Brazier:

With this witch-hunt – the devil is in the detail

Matthew Hopkins was Britain’s last witch hunter, 365 years after his death it would appear his trade is still practiced on these shores.

Around Whitehall the new witch-finder generals have been searching for clues to expose the new ‘devils’ in our midst, men and women who have committed the most heinous of abominations, they have formed their own limited companies!

At the outset may I say that Government is right to look closely at how public servants are being remunerated and where there is disguised employment or tax evasion it should be stopped and fully investigated by HMRC.

The case of Ed Lester caused disquiet at many levels. Only Mr. Lester knows the true details behind his appointment as Chief Executive of the Student Loans Company on a long-term contract. What should be the focus of genuine scrutiny is discovering if the Treasury, civil servants or HMRC facilitated, encouraged or enabled this to happen in any sinister way.

Let there be no doubt, the case of Ed Lester has impacted on the hundreds of genuine interim managers and freelance contractors who are helping companies and organisations in both the public and private sectors. Talented individuals who through their flexibility, agility and capability not only save government and private businesses money, but help them solve short-term crises with their input.

But as the witch-hunt gathers apace I would caution Government, civil servants and the media to avoid demonising the role of limited companies in the UK economy.

PCG represents thousands of contractors, freelancers, interims and consultants and I can categorically state that it is fundamentally inaccurate to brand all one-person limited companies as employees attempting to avoid tax.

The last few weeks have created a dark and menacing climate. Cascading down from the Lester case has been this torrent of odium about the thousands of genuine freelancers, contractors and interim managers who pay their taxes on time and are busy contributing £21 billion according to 2009 independent figures from Oxford Economics.

Those in authority, whether sitting at a desk in Whitehall or around an editorial news desk, must differentiate between wrongdoing and doing right: between people who want to work the system and people who want to work; between opportunists and people who want an opportunity.

We must ensure we do not create an orchestrated witch-hunt against the nation’s smallest businesses that will damage public and private sector growth in the UK. This week at PCG we have witnessed genuine and talented freelancers being pushed out of their contracts and being threatened as a result of hysterical newspaper hype.

I have spoken to good, honest and talented people caught up in this witch-hunt. I have listened to a variety of emotions from anger, to sadness to apprehension.

One-person businesses are a legitimate model and the labour market flexibility they provide is vital to the economic recovery of this country.

Freelancers work without the safety net of employment benefits like holiday pay, sick pay, redundancy benefits and pension contributions. They move from contract to contract, from role to role, from sector to sector, their professional reputation their calling card. Many are involved in the media, the great irony is that many covering this story could well be freelancing.

More and more people in Britain have a growing empathy with this new work/lifestyle choice, indeed Prime Minister David Cameron has been very supportive about the freelance community:

I have a huge respect for all those who make the brave decision to branch out on their own and take control over the way they work. This Government recognises the valuable contribution that freelancers make to the economy and, as more and more people choose to join your ranks, you have all our support.”

Freelancers are providing the first green shoots of recovery we have seen for quite a time and we must ensure those rushing to attack limited companies don’t trample on them.

The press and the authorities are right to look into the shadows for wrongdoing but remember whenever a society has a witch-hunt innocent people suffer shamefully.

Oh, and by the way who paid Matthew Hopkins, the man dubbed the witch-finder general? The Government!

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13 Responses to “With this witch-hunt, the devil is in the detail”

  1. John, like you and your members, we too in the interim management sector are concerned about this. I’ve made contact with David Hencke via his blog to make the point that innocent sole traders operating through limited companies risk being penalised in all this. I think he gets it but then this week we’ve seen the London Evening Standard questioning Ken Livingstone about his income via the limited company he trades through and accusing him of tax dodging. If we’re to prevent every sole trader working via limited companies from being seen in the same light, we must keep explaining and we must write to correct ill-informed reporting. Here’s the link to our blog on this subject from earlier this week: http://bit.ly/wImAFo

  2. Andrew Munro February 29, 2012 at 7:12 pm #

    Excellent piece, John. Indeed, it would be nice to see government supporting the flexibility and value that interims bring rather than running scared from ill-informed press headlines.

  3. justdoproperty March 1, 2012 at 6:59 pm #

    As a PCG member I appreciate this response, in essence on my behalf and protecting my interests.

  4. Rob March 1, 2012 at 8:24 pm #

    Perhaps people should also be aware that Matthew Hopkin, the Witchfinder General was himself found guilty of witchcraft and burned at the stake.

  5. Steven Porter, freelance orthodontic technician March 1, 2012 at 10:14 pm #

    Firstly, thank you for all your good work sticking up for us.

    What I don’t fully understand – and I acknowledge this may simply be my own ignorance – is how there can be a witchhunt in the first place, given that forming a limited company simply does not save us a single penny on tax.

    For example, see this – admittedly simplified – illustration: http://pointbeing.net/weblog/2012/02/contractors-a-limited-company-is-not-tax-efficient.html

    • Ray Smith March 7, 2012 at 8:31 pm #

      Steve Porter you have missed the point totally. The reason a Ltd Co IS more tax efficient than Employment is because you mitigate the National Insurance.

      The scandal of the Ed Lester case is not that Ed was dodging tax but it was in fact his EMPLOYER, the Student Loans company that was better off because they weren’t liable for the NI on his earnings.

      Unscrupulous employers in the past have been known to push Employees into Contracts for Service for this very reason and this is the main reason IR35 was introduced. The issue is and remains that IR35 is a blunt tool that now demonises ALL Ltd Co Contractors.

      The reason for as this article states the reason for Mr Lesters working arrangement should be investigated to see if he was in any way coerced into this arrangement. If not, and he was working as a genuine Freelancer in Business of his own Account then people should get off his case!

  6. David Mitchell March 1, 2012 at 10:16 pm #

    So why aren’t HMRC chasing Mr Lester under IR35 legislation as I seem to recall that he was supposed to have paid himself with dividends to avoid NI and Tax…

    David

  7. fixit44 March 2, 2012 at 7:58 am #

    Government are not running scared. They are deliberately using this as a diversion for real corporate tax dodging to pretend the are doing something about it.

  8. James Wallker March 2, 2012 at 1:22 pm #

    This will only get worse.

    The gutter, tabloid press have been attacked from pillar to post over phone hacking, and paid for informants within the police and rightly so, they are looking for any scapegoat to direct the public’s gaze away from their business model, shoddy as it is so, so that they can continue with BAU, making their profits at the expense of every one else.

    The Press, their informants in the police, Members of Parliament and the Government Press Officers are in a sick self feeding cycle which is racing for the bottom. They are irrelevant to the majority of working people and cause more harm than good.

    IR35 has been, and continues to be a disaster for the knowledge industry in the UK. Well over 400,000 well paid jobs have been exported to the Far East as a result, those jobs will never return. The Westminster village refuses to reform the dual taxation system of Income tax and the Job tax NI for fear of alerting the electorate of just how much money is extracted at the threat of criminal sanction or “gun point” from their wages.

    The Dutch reformed their personal taxation model 15 years ago, which is where I went to 2 days before IR35 came into force. Labor cannot be trusted with the economy or with the taxation system. In my memory, they have spent every penny in the coffers four times, wrecking the economy and cursing working people into poverty, again and again. They only understand Tax, and spending more than they take in, they are political vampires feeding of the working classes yet still asking them to vote for them, once voted for they are forgotten, and their taxes put up to keep them in their place.

  9. Tom Meadows March 2, 2012 at 3:35 pm #

    On the train this am, I was obliged to listen-in on a phone conversation. The chap next to me, an IT manager I believe, bellowed to the poor unfortunate at the other end that …”if he’s agency, show him the ******** door. If he’s on the books, were stuck with the ********** “.
    Now I have the security of a stable job and, whilst I have no idea of his offence – I feel for Mr Agency: pilloried by the press and evidently with a contract worth about as much as a chocolate tea-pot! So maybe he is a tax avoiding fiend, but I’d still rather keep 50% of my earnings than 100% of his, come any day! On a more serious note, the point of course is that it is not all about tax.

  10. Graham March 12, 2012 at 6:14 pm #

    Has anybody in the gutter press or even the government looked at the amount of VAT a contractor adds to the Treasury?

    • James Wallker March 30, 2012 at 7:13 am #

      According to the Treasury VAT is nutral, either we or a n other consulancy would do the work.

      However, work creators, like us with little vat imputs generate the largest proportion of VAT on the work item in the first place, middle people like the agency add their mark up VAT fraction, untill Joe Public picks up the end product with the pasty tax added to it.

      Bluntly in this country we have to many wealth consumers, and to few wealth creators, with most of the wealth consumers in the public sector.

Trackbacks/Pingbacks

  1. With this witch-hunt, the devil is in the detail – PCG’s John Brazier | Andrew Munro's Blog - February 29, 2012

    […] John Brazier of the PCG hits out at the current public sector witch-hunt that is seeing genuine inte…, as appears to be the case with Jon Seddon and Paul Brown at the Office for Nuclear Regulation. […]

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