Insulting to Contractors


The Chancellor of the Exchequer has little respect for the UK Contracting Industry and his tax farmers HMRC remain fixated at keeping Contractors in their searchlights.

Headlines regarding crack-down on avoidance are not appropriate to those self-employed, Limited Company or Umbrella Contractors who go about their business in a correct and compliant way.

This suggestion that avoidance is a dirty word does not wash well with me and is insulting to the hundreds of thousands of contractors that oil the economy of UK Plc with their hard work, independence of spirit (now sadly lacking in many others), and their dedication to providing a service to their clients.

HMRC are tax farmers who are told by their political masters to collect an amount appropriate for the latter to spend it. Like all tax farmers they will flog those parts of the economy that they see as an easy touch and where they can maximise returns.  Obviously they place Contractors in this Category. It also makes for good media coverage.

The reality is far different.  The onslaught of APNs is now being defended by well orchestrated defence teams challenging HMRC administrative procedures and fairness in raising such tax demands. The sew-saw is now turning against the sausage factory approach taken by HMRC in issuing thousands of demands.

These concerted efforts by Contractors and their advisors are to be applauded and copied in other business areas.

For example:

Self-Employed: Why bother with Limited Companies? 

A myth has been developed that some-how Contractors cannot have self-employed status. This myth benefits accountants, tax-advisors, pay roll operators and indeed HMRC themselves.

There is nothing improper for Contractors being self employed with their place of business at home and claiming every expense they wish travelling from their place of business – their home – to their clients’ place of business. Indeed self-employed business people have benefits above those with Limited Companies. One of the most overlooked benefits is anonymity. The confidentiality of business financial accounts is maintained by the self-employed contractor. Have you really thought through the negatives of having your competitors and every Tom, Dick and Mary in your local pub look up the public details of your company?  They can discuss why your accounts are late, where your registered office is, why the officers of your company have changed? Whether your company might be worth suing or whether your company’s financial affairs might affect your ability to pay their school fees!

Is it really worth your ego to call yourself a company director and be liable to all the legal responsibilities that comes with that?

HMRC will not like you to be self employed but in fairness they promote self-employment and have a fantastic web page to guide you along – see  

Compare the above site to  This latter site sets out the criteria for determining self employment which whilst helpful gets in the fear factor statement of having a tax liability if the self-employment status is incorrect.

Compliance, or indeed non-compliance is another benefit for the self-employed. An individual with a company has a double cost and a double opportunity of getting things wrong. They have to ensure that they are compliant and their company is compliant. That’s a lot of extra things to go wrong. Be warned and take advice and no rushing into things.

And it is also the case with Limited Companies. Your Limited Company can be registered at your home. It is where you do business from. All legitimate business expenses may be claimed. If not then challenge it. Contractors need to stand up and challenge more. Let’s see what HMRC will do with thousands of claims.

It is high time that the Recruitment Industry and Contractors unite to hit back at high handed efforts being made by HMRC to tie us up in very inappropriate red tape and repeated suggestions that Contractors can be squeezed for more taxation.

Limited Company

Of course there are benefits to having and operating a Limited Company. Generally it is more acceptable to employment agencies and 3th parties. However it is a fact that Limited Companies come under more scrutiny from HMRC than self employed individuals.

The advice that a contractor has limited liability should be taken with a pinch of salt. This is last century thinking and only applies to those with “clean hands”. In other words if the business goes broke by chance, economic or otherwise. If any creditor can claim that a Director was at fault for trading insolvantly or making preferred payments then the Director may be personally liable. Be careful, Directors very often have personal liability especially in cases of corporate negligence.

My Advice

Take responsibility and know exactly what you are doing and what is the reputation of your business partner whoever that might be – payroll provider, accountant, tax advisor, lawyer etc.

Do not allow HMRC or the recruitment company to bully or intimidate you.  Do not allow a recruitment company to force you to use a specific payroll supplier. Think of yourself and not the recruitment company. You are skilled – any decent recruitment company will not bully you into using their preferred payroll provider. You can transfer that skill to many other recruitment companies. Also do not be forced by HMRC to use a particular method of working through.

Source: Research

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