The Sunday Times reports that the Chancellor is considering another attack on sovereign professionals. The concern seems to be, as before, “disguised employment” and the Sunday Times’ coverage is couched in terms of “levelling the playing field” and “significant tax advantages”.
The reality of course is different.
When running properly, individuals operating through personal services companies are each individual businesses carrying all the risks of business and not enjoying the corporate comfort blanket benefits of traditional employment. If the cost to the client company is higher than employing a traditional employee (and often the fully loaded costs are not as far apart as crude comparisons of “day rates” suggest), then the client business benefits from flexibility and agility that no commitment, on-demand services provide.
A tax raid risks damaging the supply of this important flexibility while also increasing the cost to client firms. This has already been seen in the public sector where restrictions similar to those imagined here have already been implemented. It’s a short-sighted and ill-considered move.
Does “disguised employment” actually exist? I’m sure it does. A number of recent court cases suggest that there has been a trend for some employers to seek the cost benefits of using freelance contractors whilst retaining all of the control traditionally associated with “permanent” employment. Those cases should rightly be pursued, but not by painting the self-employed as either downtrodden, abused workers or system-abusing fat cats.
Being a sovereign professional is a choice. It has real benefits – not least in flexibility – but it comes with risks, costs and responsibilities. A suitable test of employment would investigate the extent to which those risks are real, rather than simply punishing providers of needed skills through a flexible model.