What do new government proposals mean for sub-contracting?

Wednesday 17 December 2014

The government has proposed changes to agency reporting standards that will see company directors supply personal information to be relayed to HM Revenue and Customs (HMRC) by agencies on a quarterly basis.

Should the proposals be passed, sub-contracting among self-employed individuals will be particularly affected.

Simon McVicker, director of policy and external affairs at IPSE, explained: "The new rules mean that a freelancer who wants to sub-contract a piece of work out to another self-employed person will not only have to register the details of their peer with HMRC, but will be forced to continue reporting on this person for a full three years after the work is completed."

For contractors, limited companies and sole traders, this will create additional an additional compliance burden, making staying on the right side of HMRC more complicated.

The new proposals have been designed by the government to help crack down on false self-employment in the construction sector and other industries.

However, there is a fear that should the rules become a reality, the flexibility that has been the asset of self-employed people will be threatened.

"The modern economy is built on flexibility, with entrepreneurial freelancers working collaboratively among themselves, often on short term projects lasting a matter of weeks, or even days. These new measures threaten to stifle this vital component of Britain’s economic growth just as it begins to gain momentum," Mr McVicker said.

Self-employed professionals will need think carefully about their own capacity before taking on projects and ensure they have professional advice and support to help them stay on the right side of HMRC.

Of course the proposals may never become a reality and the IPSE is just one body asking for the draft regulations to be reviewed in order to build in safeguards that protect the genuine self-employed.

This comes after chancellor George Osborne announced that the government would be working to ensure self-employed people in the UK have access to basic rights, such as minimum wage and maternity pay.

Introducing such protections for contractors, limited companies and sole traders is a crucial step in ensuring those that chose to go out on their own can continue to do so throughout their career. It recognises the important role the self-employed play in the UK economy and is sure to encourage yet more professionals to work in this way.

Nevertheless, pressure is on the government to iron out HMRC compliance requirements in order to ensure genuine self-employed people are supported and not placed at a disadvantage.

By Victoria McDonnell

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