I have just watched a broadcast on the BBC Parliament channel showing a hearing with chair Damian Collins, various MPs and a bunch of BBC presenters – Paul Lewis, Liz Kershaw, Kirsty Lang and Stuart Linnell. It was FASCINATING.
It also pertained to me on a personal level. So I was interested and vestedly so.
It’s all about IR35. And that means tax.
Liz pointed out that HMRC is going after the “low-hanging fruit” by attacking individuals who are either self-employed or who work as contractors (self-employed but as an incorporated – or limited- company), instead of going after the big tax-dodging multinationals.
It often seemed to be torn between traditional political lines – Labour/ Socialist/ Trades Unionist/ Employee lines versus Conservative/ Capitalist/ Freelance lines.
This comes up time and time again – I recall the Uber thing recently. It’s no good trying to get the modern world to fit ye olde worlde politicale partye crap.
That is not to say that the issue is simple, nor that a solution to the various problems is easy. Not at all. But then again, it’s not terribly difficult either.
I recall Thatcher’s Britain: she encouraged the Self. Companies would pay off 51 % of their staff on a Friday, and they would turn up on Monday to do their exact same job but this time as self-employed or contractors. They would have received a lump sum redundancy payment – this bought them shares in Sid (British Gas), allowed them to buy their council houses, put their kids in private schools, get a mobile cell phone and so forth.
This simple idea – to make people entrepreneurs/ self-employed/ MDs of their own firms – was designed to weaken Trades Unions and provide the engine for home-ownership, and the world as we know it today (for good or ill).
I have been self-employed (Schedule D), but when I work in the construction sector that is not allowed, so I have had to work via Personal Service Companies, umbrella companies, and incorporated – or limited – companies. In addition, I have worked direct (invoicing the client) and indirect (invoicing an agency who invoices the client).
I love it.
I feel free. I am free from office politics, back-biting, arse-covering, career-building, aspirational social climbing, blaming, bickering and laziness. No one, employers, trades unions nor anyone else can tell me what to do.
My tiny wee Limited Company invoices my clients/agents and I take out what I need (not what the company is paid). I pay VAT, I pay PAYE, I pay NIC, I pay Corporation tax, I pay an accountant and I pay an agent to pay me each and every week for each and every hour I worked.
I could “go direct” and invoice the client myself – but that means I would have to wait until I got paid. Poor cash flow, irregular income and the stress of chasing payments and keeping track is a pain. Sometimes you have to withdraw labour or threaten to, sometimes you have to sell the debt (factoring) at a knock-down rate just to get some income to pay the bills. Working via an agency means I always get paid each week, and they get to chase the client for outstanding unpaid invoices. Lovely.
My wee tiny company pays me when I am sick or on vacation. It can pay me and my family BUPA or whatever other benefits I choose, from mobile phones, Christmas dinner to a company car and everything in between.
However, the BBC presenters presented this differently – that because the client the BBC) doesn’t pay the contractor (the presenter) for sick days or holidays, there is a trade-off; the loss of “security” (as they put it) is traded off against the higher rate of pay. My view is that it is a mistake to confuse the limited company with a person. The presenter’s company pays them as employees – and should pay them – all the proper benefits; sick pay and holiday pay has nothing to do with their client, the BBC.
It’s a subtle point, I know, but important.
The BBC presenters definitely confused the person with the firm. This is probably because there is an important difference between people who like working that way (me) and those who are forced to set up self-employment or companies against their natural disposition and inclination.
The trouble is that there is no current distinction, and so whatever is decided by the government will favour one over the interests of the other.
IR35 has been the sword of Damocles for 18 years and it seems to be getting near to crunch time due to media coverage of what’s going on at the BBC. I personally do feel anxious about this direction of travel – the mood seems to be about ruining my life. HMRC is coming after me as a tax dodger! Yet it’s simply not true! I pay all my taxes and take all the risks. I have to have professional indemnity insurance, I have to keep on top of continuous professional development, I cannot settle down to my job and become lazy and complacent at my desk.
Yet I have sympathy for Liz Kershaw having to return to work too soon after her planned Caesarian sections. The life I chose (and like) is not suited to her, and she was forced into it. I get that.
Did Liz do this to dodge tax? No. Did I? No.
The BBC is a publicly owned and funded corporation so it cannot be seen to dodge tax. But why put it like that? Why deliberately confuse the company with the person to score political points?
Why doesn’t HMRC leave us alone and get on with catching the big multinational tax dodgers instead?
Better still, why do we pay all those MPs, MEPs, MSPs, councillors and civil servants? if we cut them back we wouldn’t need to raise so much tax to pay them all.