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Tradition vs Technology: Employees and Freelancers.

Tradition vs Technology: Employees and Freelancers.

Technology has created a culture of convenience. The number of 'on demand' workers, also known as freelancers, is growing. This has always been a grey area where there is confusion in respect of status and how one should be treated not only for tax purposes but also in respect of the benefits of such working practices.

The benefits for the contractor or employer are many. They can remain lean and mean and only hire when they require the resource. There is no notice period, they can set project deadlines and also terminate the use of the sub contractor or freelancer when that work is completed. It has to be completed to their satisfaction otherwise payment could be withheld. It is commercially a very sensible way to operate.

However, our friends at HMRC consider that this method of operating avoids tax. Particularly national insurance in the UK tax environment.

Hence the first piece of legislation being IR35 and the many attempts to make this somewhat subjective tax much more objective, still continue. Freelancers are being considered employees more and more in terms of their own modus operandi and taxation.

Now we have those working for a public body being taxed at source on their income. How will this work in practice after 5th April 2017. We don't really know.

There has to be room for freelancers running large and lengthy projects otherwise the commercial world will seize up. Firms cannot afford to pay everyone as if they are an employee with all the fringe benefits of holiday pay, employee rights and the added employment costs such as employers national insurance. In other worldwide countries there are these needs but not such a grey area of mixing the two for the purposes of taxation. You are an employee or a freelancer and no such system tries to muddy the water.

Let's stay mean and lean and keep the risks associated with freelancing such that their work may end ahead of the project being finished, there is no designed right to employment if they are not producing the goods and no notice or redundancy payments...........

HMRC must get real.

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