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HMRC’s treatment of the self-employed is exposed for all to see

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CEO of ContractorCalculator, Dave Chaplin says the self-employed are getting a bad deal from the Government, and the coronavirus crisis has only highlighted their plight…

“Only when the tide goes out do you discover who’s been swimming naked”, said business magnate and philanthropist Warren Buffet; and whilst the tide from the tsunami of COVID-19 is yet to ebb, it is clear that HMRC has been well and truly caught with its pants down, and it is not a pretty sight.

The self-employed, who work through their own limited companies, have been left high and dry as the coronavirus outbreak has shone a very big spotlight on the risks the UK’s self-employed are exposed to.

Once, the marginally favourable tax treatment these workers used to get was considered fair exchange for their lack of security and employment rights.

However, in recent times, the Government has clawed back much of the tax advantage through dividend tax hikes, but, still dissatisfied, HMRC has gone further to introduce ‘deemed employment’ to the masses via Off-Payroll.

HMRC comes under fire

Whilst the legislation has been deferred for a year in the private sector, it is already in place in the public sector, contrived so that hirers are encouraged to assess their contractors ‘employed for tax purposes’ in an effort to limit their own tax risk.

Such an arrangement effectively promotes ‘zero rights employment’ and will subject the genuinely self-employed to paying tax in excess of the tax paid by their permanent counterparts yet without any of the rights that such a tax status warrants.

HMRC and the Treasury have come under fire from the Lords too in their treatment of the self-employed clearly evidencing the damaging unintended consequences of the legislation – zero rights employment, legitimate commercial arrangements destroyed and firms passing their new tax bills onto workers by way of 25% income cuts.  – Even the Lords think that is not fair.


It has taken a pandemic to highlight that the most vulnerable workers in society are the self-employed.

The Government’s scant regard for the self-employed was underlined when the sector was simply an afterthought when Chancellor Rishi Sunak announced his ‘emergency rescue package’.

Are they all high earners?

The Government pledged to fund 80% of employee wages up to £2,500 per month and whilst some vulnerable self-employed workers will also be able to access similar support, they will not get that money until June. 

Moreover, many limited company owners do not qualify at all as the Chancellor seems to think that many of them are high earners and do not need financial support. However, many freelancers who work through PSCs are not the high earning professionals, but Mr Sunak believes they are so they will struggle to survive over the coming months.

Pressure on the NHS

The irony is that the sector tasked with steering the UK through this coronavirus crisis is already being hampered by the Off-Payroll legislation. The NHS is heavily reliant on locum doctors and nurses and trusts are facing intense recruitment struggles as a result of the draconian measures applied in the public sector.

COVID-19 has well and truly exposed HMRC’s Off-Payroll practice for what it is, had this health crisis struck later in the year when the legislation would have been already underway in the private sector, thousands of genuinely self-employed workers would have been cast adrift.

An exploitative policy?

Those forced into ‘deemed employment’ arrangements by clients keen to avoid the tax liability risk imposed by Off-Payroll would have already been thrown overboard with no employment rights to cling onto, with many having lost a good chunk of their earnings to an unlawful double tax charge. The remedy is simple; if firms want to hire ‘deemed employees’, they should do so on an employment contract. They should not be afforded a loophole by legislation that promotes unlawful behaviour at the expense of the UK’s most vulnerable self-employed workers.

The coronavirus outbreak has pulled back the tide on a twenty-year long policy of creating ‘deemed employees’. HMRC has been found floundering and when things revert to normal, this illogical exploitative policy in the form of the Off-Payroll legislation must surely sink without trace.

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