A move towards clarity for the self-employed

Anna Scott

A diverse range of employment options for individuals exists now. The employment status of a ‘colleague’ (are they on the payroll, a consultant, a contractor or freelance?) is often unknown.

The variety of ways in which companies want to employ people has fundamentally affected the way recruiters work, and been a catalyst for the creation of the recruitment support industry.

Freelancers – of which there are an increasing number – now have a range of choices in how their tax. Whether it’s spending a weekend hunched over a laptop filling in a self-assessment form, hiring the services of an umbrella organisation or setting up as a limited company, those who work for themselves have a number of decisions to make, which affects the cash they can bank each month.

Even a basic understanding of tax can have a significant impact on the income of freelancers: a recent survey of 2,000 of them found that 56.5% did not understand every aspect of their payslip, putting them at risk of either being incorrectly paid or fined by HM Revenue & Customs.

The already-complicated self-assessment and income tax systems show little signs of becoming simpler, despite ongoing government consultations on the subject.

Increased government scrutiny of individuals’ tax arrangements – and the way umbrella companies work – has brought into focus the operations of recruitment support organisations.

The recruitment sector has faced accusations of exploiting ‘loopholes’ when employing agency workers and disguising employment as self-employment, among other things, which it has fiercely defended.

So this week’s announcement that a body representing freelancers and contractors is extending its code of conduct to cover companies that provide self-employment services will be welcomed by many in the industry.

The Freelancer & Contractor Services Association’s code of conduct now covers providers relating to self-employment and the Construction Industry Scheme, having previously only applied to accountancy and employment service providers.

The code requires professional providers to be transparent about the results of any onsite reviews and share them with HMRC. Ultimately it will increase standards of compliance for this industry.

This is obviously welcome news for recruitment agencies, who must ensure the law is followed when candidates are placed, and contractors who want to know they are paying the right amount of tax.

It must also be a positive development for providers operating in this sector: enforcing clarity and openness and highlighting the invaluable service they provide to freelancers and contractors.