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  • Care Workers Not Entitled to Minimum Wage When Sleeping Jul 17, 2018

    Care workers who sleep overnight at a client’s home are not entitled to the national minimum wage while they are sleeping, the Court of Appeal has ruled.
    In its consideration of two similar cases in the care sector – Royal Mencap Society v Claire Tomlinson Blake and John Shannon v Jaikisham and Prithee Rampersad (trading as Clifton House Residential Home), the Court of Appeal found employees who stay at a disabled, elderly or vulnerable person’s house overnight are only entitled to the national minimum wage while they are carrying out their duties – not for the full duration of their sleep-in shift.

    Charity Mencap, which appealed against decisions made by the employment tribunal and employment appeal tribunal, said the back payments it and other care providers were previously required to make would have threatened to bankrupt many organisations.

    The decision also restores the position that existed before the Department for Business, Energy and Industrial Strategy changed the government guidance to state that sleep-in carers must be paid at least the national minimum wage (NMW) throughout their whole shift, even when sleeping.

    Lord Justice Nicholas Underhill said: “Sleepers-in… are to be characterised for the purpose of the regulations as available for work… rather than actually working… and so fall within the terms of the sleep-in exception.

    Sleep-in shifts involve significant caring responsibilities, often for very vulnerable people. With too few staff on at night, most care workers are often on their feet all shift, only grabbing a few minutes sleep if they can – Dave Prentis, Unison

    “The result is that the only time that counts for national minimum wage purposes is time when the worker is required to be awake for the purposes of working.”

    Harry Abrams, solicitor at Seddons, said the decision now meant there was a clear distinction between “working” and being “available for work”.

    “We now have confirmation that it is not sufficient for the worker to be at the care home and ready for work if needed but in fact they need to be awake and working (in the ordinary meaning of the word) to be entitled to NMW and for it to count as working time,” he explained.

    “Had the decision once again gone against Mencap, they, along with others, were faced with having to pay back pay for up to six years in breach of contract claims and/or up to two years’ back pay for unlawful deduction from wages claim for their current workers.”

    Employers that had started paying staff the national minimum wage for sleep-in shifts might choose to stop the payments now, suggested Emma Burrows of Trowers & Hamlins. However, this might result in increased staff turnover.

    She said: “Many employers may seek to recover back pay that they have already paid. Many employers are in the social care compliance scheme [which is run by HMRC], and HMRC’s approach will have to change as a result of this judgment.

    “Under the scheme care providers had until 31 March 2019 to make back pay payments, which are conservatively estimated at £400m. There is sense in care providers now withdrawing from the scheme, if it continues.”

    However, public services union Unison said the Court of Appeal’s decision was at odds with legal precedents. It is considering lodging an appeal with the Supreme Court.

    The union’s general secretary Dave Prentis commented: “Sleep-in shifts involve significant caring responsibilities, often for very vulnerable people. With too few staff on at night, most care workers are often on their feet all shift, only grabbing a few minutes sleep if they can.

    “That’s why it’s such a disgrace that workers have been paid a pittance for sleep-ins – with some getting just £30 for a 10-hour shift.”

    Derek Lewis, chair of the Royal Mencap Society, acknowledged that care workers were given “false expectations” of an entitlement to back pay and many would feel disappointed about the decision.
  • HMRC Estimates that the IR35 Reform in Public Sector Boosted Revenues by £400 Million Jul 16, 2018

    HM Revenue and Customs (HMRC) has recently released its Annual Report for 2017 to 2018. According to its estimates, the IR35 reform in the public sector has been a success. HMRC estimates that it has resulted in an increase of £410 million in public revenues.

    A report by one of the UK accountancy firm also shows a positive effect of IR35 rules. A survey had revealed that nearly 86 percent of contractors had been affected by the reform.

    The survey had shown that some contractors have decided to become permanent employees. Others had walked away from the public sector roles due to being deemed inside the IR35. This has created a glut of contractors in the private sector.

    HMRC had introduced the IR35 reform last year in April. The tax reform had made end-clients in the public sector responsible for determining the employment status of a worker. End-clients had to decide whether a worker who offers services through the personal service company (PSC) falls within the IR35. In case IR35 rule applies to a worker, the recruitment agency has to deduct NI and tax from the worker’s salary.

    The IR35 reform in the public sector has boosted Government revenues and NIC contributions. As a result, the government is currently consulting to extend IR35 rule to private sector companies. The consultation is expected to run until 10th August 2018.

    Negative Points of IR35 Reform

    A lot of experts feel that IR35 had a negative impact on the public sector. A student by the Harvey Nash Recruitment Solutions had found that 42 percent of contractors who were caught within IR35 had to increase their fees. Nearly 49 percent, according to the survey, had decided to stop providing services to the public sector.

    The Independent Healthcare Professionals Association (IHPA) had warned that patient safety will be compromised due to shortages of skilled workers. Around 98 percent of IHPA’s members had considered leaving the NHS due to IR35 reform.

    Last month, the accountancy body The Institute of Chartered Accountants in England and Wales (ICAEW) had written to the Treasury that the assessment tool of HMRC is not suitable for use in the private sector. The tool does not cover different situations in the private sector. It has been designed for the public sector and should be modified for private sector companies.
  • IPSE Says Government Has Failed to Address Concern Over IR35 Status Tool Jul 12, 2018

    The government is not addressing the concerns of the industry regarding the Check Employment Status Tool (CEST). According to the Association of Independent Professionals and the Self-Employed, the government is not taken into consideration views of stakeholders that include independent contractors, Personal Service Company (PSC), and umbrella companies.

    HM Revenue and Customs (HMRC) had circulated a draft position paper that had clarified its stance on one of the key concept that is used to conform IR35 status — the mutuality of obligation (MOO).

    Industry experts have heavily criticised the tool as being flawed. Earlier this week HMRC had released an updated draft regarding the MOO that had not addressed concerns that were raised during the tribunal decisions.

    According to Simon McVicker, the Director of Policy and Public Affairs, HMRC has not changed its stance in the latest draft, which is highly disappointing. He says that the government has completely failed to address the concerns that were put forward by experts at IPSE and others about MOO, which is present in every contract.

    The stance of HMRC regarding MOO had been undermined in several tribunal cases. The cases have established that pay for work is not enough to establish MOO in regards to the employment contract.

    The CEST tool that is encouraged by HMRC for individuals and clients to determine employment status does not even consider MOO.

    Mr. McVicker says that it’s totally unacceptable for the Government to ask people to use a tool that has been heavily criticized and is out of step with the latest tribunal decisions. The fact that the HMRC paper hasn’t even considered decisions of the tribunal shows that the heads of the government officials are in the sands, according to McVicker.

    Many genuinely independent contractors and self-employed individuals have used the CEST tool and have been misidentified as being inside the IR35. This has caused undue hardships for contractors as their income is hit due to being categorized inside the IR35.

    According to McVicker, the problem will become even more grave if the government extends IR35 to the private sector. The sheer variety of engagements in the private sector will result in misidentified cases whereby the contractor will have to pay taxes unfairly.

    The government should not extend the ill-conceived IR35 to the private sector. This can create fundamental problems that will greatly hurt the local economy.
  • Financial Secretary’s Not Totally Honest to House of Commons Regarding 2019 Loan Charge Jul 11, 2018

    The Finance Act 2017 had introduced 2019 Loan Charge that has raised a lot of controversies. It is a tax charge on outstanding loans taken through any disguised remuneration (DR) scheme used for tax avoidance.

    When Mel Stride, the current Finance Secretary, was asked by the House of Commons to give details about the tax charge, he was clearly not being honest in giving the answers.

    In an answer to a question put forward by an MP, Mr. Stride had stated that 2019 Loan Charge was not a retrospective legislation. He further said that the Loan Charge relates to loans that were not legal when they were obtained. In addition, he had said that the purpose of the charge is to ensure that the persons who have taken a loan through a DR scheme pay the right amount of tax.

    All of the statements made by the Minister about the loan charge were fallacious.

    The 2019 Loan Charge is a retrospective legislation as the charge applies to all loans that were taken since 6 April 1999. It taxes amounts that were not subject to tax in the current year, which would cause financial hardships for thousands of individuals in the UK.

    Although the tax is charged in a prospective manner, it has retrospective effects as amounts received in the past are taxed. So, the claim by the Minister that 2019 Loan Charge is ‘not retrospective’ is not correct.

    Another erroneous statement made regarding the loan charge is that it is imposed on loans that were taken through schemes that were not legal at the time. The fact of the matter is that there has never been any legislation or tax provision that has deemed loan obtained from an offshore trust as illegal. It was only through the cases of Dextra Accessories Ltd and Sempra Metals Ltd in 2005 and 2007, respectively, that the taxable effect of a loan obtained through offshore trusts was known. A loan contract cannot be deemed illegal if it is not mentioned as illegal in any legislation.

    Lastly, Mr. Stride had said that the reason for the 2019 Loan Charge is to ensure that individuals pay the right tax amount. However, the loan charge will consider loan amounts taken in previous years as income in addition to the current year’s income. Taxing amounts collected in the past at a present higher rate will result in individuals paying more than the tax amount originally due.

    Therefore, the argument made by the Minister that the 2019 Loan Charge is there to ensure that individuals pay the right tax is wrong.

    Individuals should beware of politicians and government officials who use sophistry to gain support of their policies. The fact that the Minister has made inaccurate statements without getting any rebuke from the House of Commons is a cause of great concern.
  • IPSE CEO Answers Key Questions Relating to Freelancers, IR35, and Future Plans Jul 10, 2018

    The Association of Independent Professionals and the Self Employed (IPSE) is the UK’s largest community of professionals working for promoting the interest of self-employed. The organization is the voice of the self-employed who make up one in seven individuals in the UK.

    According to Chris Bryce, the CEO of IPSE, his organization believes that the government is making a mistake by targeting self-employed and looking at them with unwarranted suspicion. Self-employed individuals who form part of the growing gig economy are a valuable contributor to the UK economy.

    Bryce says that the Government is misinformed regarding the tax paid by self-individuals. The fact is that they are heavily taxed as compared to regular employees. It is the task of the IPSE to remove any confusions and defend the right of freelancers and independent contractors.

    According to Bryce, the contribution made by self-employed individuals to the economy is totally ignored by the Government. Today there are more than 4.8 million self-employed individuals. The decrease in unemployment to record low levels in recent years can be attributed to a growth in self-employment.

    However, the introduction of IR35 reform has created difficulties for the self-employed individuals. Bryce says that the self-employed are already heavily taxed. The IR35 rule will make these workers pay more taxes, which is unfair, since they don’t avail any benefits such as sick leaves, holiday pay, and others.

    Bryce thinks that this will put a damper on the economic growth. Self-employed individuals may elect to provide their services abroad, retire, or simply stop work altogether. A lot of projects in the government sector have been cancelled or delayed due to IR35 rules. This will cause irreparable damage to the UK economy.

    Talking about future plans of IPSE, Bryce has stated that the organization will oppose the move by the government to extend IR35 reform to the private sector. The UK economy is going through a transition period due to Brexit. It would be wrong to take any steps that would cause a negative effect on the economy.

    Also, Bryce had revealed that IPSE is going to open a new chapter on the other side of the Atlantic. IPSE US will look after specific issues regarding freelance and independent contractors in the country. The organization will provide advocacy for self-employed individuals similar to that in the UK. The establishment of IPSE US will give a commercial advantage in the sense that the organization can work for the cause of freelancers and independent contractors at a global level.

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  • Survey Reveals Contractors Avoid Taking Off-payroll Contracts Jul 9, 2018

    A survey carried out by Contractor Calculator has found that most contractors resist accepting off-payroll contracts. The survey had found that the contractors are reluctant to accept any contract that would result in placing them inside IR35.

    The poll surveyed more than 2000 private and public-sector contractors. Respondents were asked to answer an online survey and the results released on 4th of July showed that most will reject contracts that would put them inside the off-payroll tax rules.

    Nearly 25 percent of respondents had stated that they would never accept the off-payroll contract. Around 24.7 percent private sector contractors and 25.5 percent public sector contractors had stated that they would reject contracts that would put them inside IR35.

    About 73 percent of the respondents had said that they would accept off-payroll contract only if there were a significant rise in the rates. In addition, about 63 percent had stated that they would demand an increase in rate in case travel was required. Nearly 23 percent had said that they would quit contract work altogether if their work was found to be inside IR35.

    Findings of the survey come after the government has opened a consultation to discuss extending IR35 rules to the private sector. The managing director at a staffing firm First Point Group, David Taylor, had stated that all contractors want to remain outside of IR35.

    Increase in the Use of Umbrella Companies
    Any change in IR35 taxation rules will have a significant impact on contracting in the UK, according to Taylor. He further stated that the extension of rules to the private sector will most likely result in increased use of umbrella companies instead of personal service companies (PSCs).

    A lot of contractors in the public sector have already left to work in the private sector. This trend was high in South East of England where contractors had more choice over contract terms and conditions. In London, many contractors had terminated contracts with public sector bodies such as the NHS.

    Having said that, there hasn’t been any mass walk out in other areas in the UK such as Scotland since there aren’t many private sector companies to absorb freelancers. Any worker who is caught inside the IR35 is required to pay taxes, similar to regular employees.

    This is the main reason that most contractors are not willing to accept contracts that would place them inside the IR35.
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  • BBC Enters Into a Negotiation with HMRC Over IR35 Reform Jul 6, 2018

    The BBC is negotiating with HM Revenue & Customs (HMRC) to reach a solution for determining the employment status of off-payroll workers. The talks are underway to determine whether its off-payroll workers are considered self-employed as per HMRC’s IR35 reform introduced in April 2017.

    The difficulties in administering the tax legislation and impracticalities in using the Check of Employment Status for Tax (CEST) tool were the main topics discussed during the meeting. Also, the stress caused to BBC workers as a result of the tax legislation was highlighted in the meeting.

    The fact that the IR35 legislation has been discussed in the meeting between the BBC and the HMRC is not surprising. The tax legislation has attracted a lot of criticisms for being impractical and unfair for off-payroll workers.

    On its website, the BBC has published information for ‘freelancers’ as to how they can provide service while remaining outside of IR35. In the past, freelancers who worked behind the camera including cameramen could apply for tax exemption by submitting an LP10 letter to HMRC. They were granted an exemption if they offered services for ten or fewer days and provided the right answers to a questionnaire regarding working conditions. HMRC used a grading list that would indicate workers who operated inside the IR35 rules.

    After the introduction of IR35 reform for public sector bodies, the BBC had hired Deloitte to offer guidance regarding the tax legislation to workers and the management. Mark Groom, a specialist tax advisor at Deloitte, had stated that it could only offer general advice and the impact of the legislation depended on the specific circumstances of off-payroll workers.

    The CEST tool that is provided by HMRC to check employment status of independent contractors has become a laughing stock in the UK. Liz Kershaw, the BBC radio presenter, had stated that she had been questioned whether she provided her own plant and machinery when using the tool to determine her employment status.

    The BBC is not the only public-sector body that has been struggling after the introduction of the IR35 reform. Various NHS trusts have faced criticism for a blanket approach to IR35 to avoid hefty HMRC penalties.

    What’s positive about BBC entering into negotiation with HMRC is that it opens up the possibility for other public-sector bodies to do the same. That’s why HMRC will be wary of setting any precedent during its negotiation with the BBC. However, it may consider ‘special’ rules for the BBC, which demonstrates that the IR35 reform and especially the CEST tool does not work well for every organisation. This should serve as a cautionary reminder to HMRC that it could have to enter into similar arrangements with other public and private sector companies that could involve a lot of time, cost, and other resources. It defeats the very purpose of introducing the reform, which is to improve the efficiency of the tax compliance procedure and boost tax revenues.
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  • House of Commons Report on IR35 Shows Slow Progress Since 2000 Jul 4, 2018

    The House of Commons Library is tasked with providing Member of Parliaments (MPs) and the staffs with information that is required to support their parliamentary duties. In consideration of the currently open consultation on IR35 reform in the private sector, the House of Commons’ Briefing Paper was recently released on 13th June.

    As early as the 1980s, there were controversies regarding the Personal Service Companies (PSCs) due to which the government had introduced legislative proposals. Later in March 1999, the government had introduced tax rules regarding individuals who provide services through PSC — the IR35.

    According to the IR35 regulation, the status of off-payroll worker would be determined on the following basis.

    • Whether the individual holds an office.
    • The extent of client supervision of the worker
    • Control of worker over services
    The end client was not required to check whether the off-payroll workers were paying the right taxes. This was considered burdensome and inappropriate for the client. But the end client was required to confirm whether the off-payroll workers using a ‘certification scheme’ were able to make gross payments.

    More than 1,700 comments were put forward before the implementation of the IR35 legislation. It had attracted a lot of media attention and controversies.

    The Professional Contractors Group (PCG), a private sector company that represents freelancers and independent contractors in the UK, heavily criticized the IR35 legislation. The group that has now changed the name to Association for Independent Professionals and the Self-Employed (IPSE) was allowed by the High Court to carry on a judicial review regarding breach of EU laws and Human Rights Act by the IR35 legislation. The agency had carried out a detailed review between 2000 and 2003 and stated that the legislation will result in the mass emigration of skilled contractors.

    While the Judge had dismissed the report of PCG stating that the findings were not conclusive, the IR35 has continued to receive increased criticism by employment agencies.

    HMRC had not surprisingly overstated its estimation regarding the increase in tax revenues due to the enactment of the IR35 legislation. It had claimed that revenues had increased by about £475 million in 2000-01 and £375 million in 2001-02. However, through the Freedom of Information (FOI) request, it was later revealed that the increase in revenues between 2002/03 and 2007/08 were just 9.2 million, which is a far cry from the estimated increase in revenues of £475 million.

    According to the House of Commons’ briefing paper, the IR35 has not solved the problems that were present in the early 1980s. The country still faces the same employment-related tax issues as was present when the tax legislation was first introduced.

    After the introduction of IR35 reform last year, the public-sector bodies including the NHS and BBC have made grave mistakes in determining the tax status of independent contractors that has led to great hardships for the affected contractors.

    The decision to make end clients in the private sector responsible for determining the tax status of independent contractors will have disastrous effects. End clients are not provided with the required information to make an accurate decision regarding IR35 tax status. The government should delay the implementation of IR35 reform in the private sector to avoid damage to the economy in general and independent contractors and private sector companies and the contracting agencies in particular.
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  • Deliveroo Riders Win Six-Figure Payout in Latest Gig Economy Rights Claim Jun 30, 2018

    Deliveroo has to pay a six-figure bill to settle an employment rights battle brought by dozens of ‎its riders, underlining continuing tensions over the treatment of so-called gig economy workers.

    We had learned that the food delivery app had agreed to award‎ 50 of its British courier’s sums “in the low thousands of pounds” each to settle the claim before it was formally heard at an employment tribunal in London.

    The settlement includes no admission of liability, according to a source close to Deliveroo, meaning that it is not expected to change the self-employed status of the company’s army of riders.

    Brought by the law firm Leigh Day, the claim was one of a string of such cases which have brought into sharp focus the dividing lines between gig economy companies like Uber and their freelance workforces.

    One insider familiar with the settlement said it would have “no direct impact on Deliveroo’s fleet of moped drivers and cyclists nor the company’s business model of using self-employed riders to deliver food”.

    It is, however, thought to be the first such case that Deliveroo has agreed to make payments about, following a victory for the company in a similar claim last year.

    A source close to Deliveroo said the cost of the settlement was lower than the prospective legal costs to the company if the cases had run their course at the tribunal.

    “The company will continue to focus on providing the well-paid, flexible work that riders value,” the source said.

    “Courts have carefully considered Deliveroo’s model and concluded that riders working with the company are self-employed.”

    The long-term legal landscape for the treatment of gig economy workers remains unclear, with the Supreme Court ruling earlier this month that a long-standing Pimlico Plumbers contractor was entitled to benefits such as holiday pay.

    Experts said, however, that the case of Gary Smith was unlikely to set a precedent for workers at other companies such as Deliveroo and Uber.

    Uber, the world’s most richly-valued ride-hailing app, has had mixed fortunes from a ‎string of similar rulings.

    The battle over employment rights has also underlined the disparity between the benefits enjoyed by full-time workers and contractors at some of the UK’s fastest-growing technology start-ups.

    Will Shu, Deliveroo’s founder, recently announced that permanent workers would be handed stock options worth an average of £5,000 as the prelude to a stock market flotation.

    The restaurant delivery app’s couriers, however, will not share in the windfall because of their self-employed status.

    Deliveroo was valued at well over £1.5bn last year when it raised a new round of funding from the asset managers‎ Fidelity and T Rowe Price.

    Bankers believe an initial public offering, which could take place in London or New York, is unlikely for at least 18 months.

    In his note to staff, Mr. Shu‎ said he wanted “all of you to be owners”.

    Mr. Shu, an American who founded Deliveroo in 2013, has expanded it to a dozen countries and overseen explosive revenue growth as consumers increasingly turn to the convenience of home delivery services.
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  • If You’re Happy and You know It, You’re Self-Employed Jun 29, 2018

    IPSE expressed its satisfaction with the CRSE Report which claims that in pure numbers, on average self-employed employee’s exhibit higher levels of life satisfaction than their full-time counterparts. In a grand sense of irony, the report was released on National Freelancers Day that had already announced it was focusing on self-employed individuals’ well-being.

    Subjective assessments of different aspects of life were evaluated which resulted in the conclusion that self-employed people have a higher rate of satisfaction. This also marks the first time that a holistic view of satisfaction and well-being was examined i.e. looking at jobs, health, family life and leisure – leading to a thorough and insightful projection of what constitutes life satisfaction rather than relying solely on economic stability.

    The report further calls on policymakers to take these factors into due consideration and to enact policies that address the diversity related to self-employment. Additionally, the report found that there’s a varying degree of life satisfaction among different self-employed groups. It also forwarded a number of recommendations intended to improve the well-being and life satisfaction of specific self-employed groups.

    Some of these recommendations were:
    Abolish the New Enterprise Allowance (NEA) or improve it’s extremely low uptake
    : Either offer accompanying training and mentoring, specifically confidence building measures for individuals that are self-employed due to a death of better opportunities.

    Create a more appreciative culture where business failures are seen as part of entrepreneurial life: The stigma related to entrepreneurial failure must be eradicated. The best way to do that is to reform the bankruptcy regulation in order to create more room for good faith business failures.

    Ensure better and faster access to mentoring: Specifically during periods when people are starting out or during a business crisis in order to curtail the amount of stress and elevate confidence at crucial moments. Job centers must be equipped to deal with mentoring requirements.

    Improve access to skill-development resources: The treasury must elevate its efforts to make skills development more cost-effective by making tax allowances more accessible and granting-self-employed people access to training vouchers.

    Improve long-term financial stability of self-employed: The DWP and pension providers need to inculcate financial products and information that may make saving for retirement easier for self-employed individuals. The “default” and “sidecar” model needs to be introduced that would create an accessible savings account.

    Create more co-working spaces: Efforts need to be increased in order to end the sense of isolation among self-employed individuals. It should also guarantee insurance, childcare and other business-related services. The government, co-operatives and other organizations need to work together to create more incentives.

    Solutions to stress caused by irregular cash flow: Banking industry needs to introduce self-employed friendly banking services as well as other services that make funding and emergency credit initiatives easier to access.

    Chris Bryce, Chief Executive of IPSE, commented: “This timely report shows why we at IPSE are working day-in, day-out to support self-employment and open it up to more people. Being your own boss, picking your own projects and choosing how and when you work can clearly improve wellbeing for millions of people across the UK.

    “As this report shows though, it’s not a completely even picture. There are still some areas of self-employment where policymakers and business leaders need to do more to improve wellbeing. That’s what this year’s National Freelancers Day is all about, and we hope policymakers will take note of both the day and the recommendations in this excellent report to start making self-employment work for everyone.”

    Martin Binder, Professor of Economics at Bard College Berlin and the report’s author, commented: “Looking only at income or job creation when it comes to the self-employed experience is too narrow and can be misleading. Putting the overall life satisfaction of the self-employed centre stage gives us a much more comprehensive picture of how they are doing – beyond just their income. What, after all, is the point in encouraging more self-employment if people just end up more anxious, stressed-out and miserable?”
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  • IPSE Introduces the ‘Self-Employment’ Matrix in a Bid to End Confusion Jun 27, 2018

    One of the contentious issues surrounding the HM Revenue & Customs (HMRC)’s IR35 tax reform relates to the self-employment status. A lot of court cases today relate to the status of independent contractors. The confusion needs to be resolved to ensure that companies and contractors alike don’t face financial hardships and fewer cases end up in the court regarding the matter.

    To solve the confusion regarding self-employed status, the Association of Independent Professionals and the Self-Employed (IPSE) has developed a ‘self-employment matrix’. The matrix is said to bring more clarity regarding what exactly constitutes self-employment. It will avoid what experts say is exploitation of independent contractors and also help them better understand how to present services on their own account.

    In addition, the matrix developed by IPSE will help companies know the correct status of the contractors and avoid paying heavy fines to the exchequer.

    The matrix developed by IPSE contains four categories.

    Autonomy — It reflects the power self-employed/independent contractor has within the relationship. It assesses factors such as Mutuality of Obligation (MOO),exclusivity and right of substitution.

    • Lack of Mutuality of Obligation (MoO) (10 points)
    • Right to substitution (5 points)
    • Use of a substitute (10 points)
    • Lack of exclusivity (5 points)
    Level of integration in client business — The category assesses whether the individuals represent the company such as by wearing a specific uniform or other means. Also, it assesses whether the employee uses own tools or equipment.

    • Control of tasks (15)
    • Control of method (10)
    • Control of hours (5)
    Business risk — This category assesses the level of business risk. Is the employee genuinely interested in the business? Is the employee paid on a project basis? Is the rate of pay fixed or negotiated regularly?

    • Pay per job/task (10)
    • Two or more clients (5)
    • Entrepreneurial activity (5)
    • Rate of pay (5)
    Control of process and working environment — This is about how much control the individual who offers services as an independent contractor has over the work. It is assessed whether the individual has control over hours of work and type of tasks assigned.

    • Representation (5)
    • Equipment and tools (5)
    Scoring and next steps
    65+ = Self-employed
    50-64 = Likely to be self-employed
    35-49 = Unlikely to be self-employed
    <36 = Not self-employed

    Each factor in the category is weighted to reflect the importance of determining self-employment. Scores are added and the final score shows whether the contract represents genuine self-interest.

    The most weighted categories include autonomy and control of the process as IPSE believes they are central to the self-employment status. The self- matrix will enable self-employed independent contractors to quickly know their status and whether they have to pay taxes. It will also help them know what terms of the contract need to be changed for the engagement to be considered as self-employment.

    IPSE believes that the government needs to consider factors that constitute self-employment. It needs to bring greater clarity regarding what constitutes self-employment. The Self-Employment matrix can serve as a framework that will help achieve this purpose.
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  • Hermes Drivers win ‘worker’ status in gig economy case Jun 26, 2018

    A UK employment tribunal ruled the couriers were workers rather than self-employed. A group of couriers at Hermes, the delivery company, have won a legal battle to be classed as workers rather than self-employed in the latest case to have implications for the “gig economy”.

    An employment tribunal in Leeds ruled on Monday that Hermes couriers were workers and not independent contractors, as the company had contended. As workers they are entitled to receive benefits such as the minimum wage and holiday pay.

    The GMB union, which helped bring the claim, said that the ruling affects a number of couriers who have already brought cases but says it will have implications for the wider network of 14,500 Hermes couriers.

    This is the latest ruling to affect workers in the “gig economy” and adds to a growing number of legal cases where courts have ruled that individuals should be classed as workers and not as self-employed.

    The Supreme Court ruled last month that a tradesman working for Pimlico Plumbers should be classed as a worker rather than self-employed. Its decision has been seen as important because it will influence the way judges in the lower courts deal with similar cases. Employment tribunals have also ruled against Uber, the ride hailing app, and Addison Lee saying that drivers have been wrongly classed as self-employed.

    Some decisions are being appealed. The case involving two Uber drivers who claim they are not self-employed and are therefore entitled to the minimum wage, will be heard by the Court of Appeal later this year.

    Hermes said that the latest ruling would affect 15 couriers. In a statement it said: “We will carefully review the tribunal’s decision but we are likely to appeal given that it goes against previous decisions, our understanding of the witness evidence and what we believe the law to be. Nevertheless, we have always been fully prepared for any outcome of this decision and its impact on 15 couriers and former couriers. In the meantime, it is business as usual and we remain committed to providing couriers with the benefits of flexible working.”

    Tim Roache, GMB general secretary, welcomed the ruling: “Bosses can’t just pick and choose which laws to obey. Workers’ rights were hard won, GMB isn’t about to sit back and let them be eroded or removed by the latest loophole employers have come up with to make a few extra quid.” Frank Field, Labour MP and chairman of the work and pensions select committee called the decision “among the most substantial judicial interventions ever to support vulnerable workers in this country.”

    Hermes did not comment. Uber said that in a survey of its drivers conducted in September, 80% said they wished to remain working as an independent contractor.
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  • IR35 Reforms Has a Damaging Effect on the NHS Jun 25, 2018

    A new study has found that changes in the IR35 reforms have a damaging effect on the NHS and other public sector bodies. The research study was carried out by the Chartered Institute of Personnel and Development (CIPD) and Association of Independent Professionals and the Self-Employed (AIPSE) found.

    The study had evaluated response of more than 115 hiring managers and 867 contractors. Around 84 percent of the respondents belonged to NHS trusts. It was found the changes in the IR35 self-employed tax laws resulted in the loss of around 50 percent of skilled independent contractors in the public sector. In addition, nearly 70 percent of the respondents had said that they are suffering to keep skilled contractors.

    Nearly 40 percent of independent contractors associated with the public sector had stated that they had experienced delays in projects due to the lack of skilled labour. Furthermore, around 35 percent of respondents had stated that there has been an increase in labour costs since the tax reforms were introduced.

    The rate was higher for hiring managers as around 52 percent stated that the reforms has resulted in project delays, cost overruns, and even project failure.

    Problems Caused by IR35 Tax Reforms

    IR35 tax reforms that was introduced in the public sector in April 2017 has caused a lot of financial distress — both among public bodies and the affected independent contractors.

    Nearly eighty percent of public sector hiring managers have reported a significant increase in the administrative workload involved in hiring and paying contractors. In addition, about three quarters of hiring managers have reported that it’s has now become harder to employ new contractors.

    The Association of Independent Professionals and Self-employed (IPSE) have requested the government to stop the extension of the IR35 reform to the private sector.

    According to the CEO of IPSE, the results of the study prove that the HM Revenues & Customers (HMRC) has not carried out a research to find out the impact of the tax reform in the public sector. They echo the failure of HMRC’s plan to boost revenues by taking independent contractors. The changes have not worked and caused serious damage across the sector, and even cause damage to NHS and other public agencies.

    Senior Performance and Reward Adviser at the CIPD, Charles Cotton, have stated that their research study suggests that implementation of IR35 tax reforms have caused unintended damages to public sector bodies. A large number of public sector HR-professionals have revealed that they are having difficulty in recruiting skilled contractors. He has said that there needs to be a complete revaluation of the plan to roll out tax reforms in the private sector.
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  • Will the Extra NHS Funds Come from Private Sector IR35? Jun 22, 2018

    On Sunday, Theresa May had announced an extra £25 billion budget for the NHS over the next five years. However, the government had not clarified where the extra funds will come from.

    Funding will increase by £4.5 billion during the period 2019 – 2020 — an increase of 3.6 percent as compared to the existing budget allocation of £125 billion. This increase in funding does not reflect a rise in the budget for Northern Ireland, Scotland, and Wales. It also excludes extra cash to reduce NHS pension deficits.

    After revealing the new funding plan, May had stated that certain proportion of the fund will be made available from the Brexit dividend. However, this claim has been rejected by senior member parliaments.

    In addition, an independent UK research firm the Institute of Fiscal Studies have suggested that the Brexit dividend does not exist and is imaginary. Many experts are in fact predicting reduced tax revenues and growth after Brexit. This means that the only way that the government will be able to raise the amount is through increased borrowing and taxation.

    A Financial Black Hole
    The extra funding for the NHS represents a financial black hole in Chancellor’s Autumn Budget that must somehow be filled. Industry experts have suggested that the timing of the IR35 private sector reform has been driven by the government’s recent plans to expand the NHS budget.

    Experts suggest that extending IR35 to the private sectors represents a quick fix for the problem. According to Crawford Temple, the CEO of PRISM, an independent trade association representing intermediaries, the consultation for expanding IR35 off-payroll working to the private sector appears to be a means to an end.

    Temple has described the consultation to be extremely disappointing and stated that contributing to the consultation will entail a considerable cost, time, and effort of individuals and businessmen will be wasted. He had suggested that goodwill among many businesses men will be lost resulting in new problems.

    The lack of strategic thinking, planning, and innovation in implementing tax policy has been severely condemned. Crawford had criticized the recourse to ‘sticking plaster’ measures used by the HMRC stating that there appears to be complacency due to low unemployment figures that can have grave consequences. There is a great need for reform in the tax and employment sector in line with the modern employment and business landscape.
  • Union Wins First Stage of High Court Challenge Over Deliveroo Riders Jun 18, 2018

    A union has been given the go-ahead for a high court challenge over the employment rights of Deliveroo riders in another step forward for gig economy workers.

    The Independent Workers Union of Great Britain (IWGB) wants the court to overturn a ruling that confirmed the self-employed status of those working for the delivery firm.

    Mrs.Justice Simler gave the union permission for a full judicial review of the ruling, given by the Central Arbitration Committee in November last year.

    The CAC, which considers union recognition and collective bargaining cases, rejected an application by the IWGB to represent drivers in parts of north London.

    The committee concluded that because riders were able to pass on a job to a substitute or abandon a job, they were not obliged to provide a “personal service” and therefore could not be classified as workers with the right to collective bargaining.

    The union said that, as independent contractors, the riders were denied basic employment rights including a guaranteed minimum wage and holiday pa

    Simler rejected a number of the union’s arguments related to employment status in its application to review of the CAC decision, but said it was arguable the CAC should have considered the right of the Deliveroo riders to bargain collectively – as enshrined in Article 11 of the European convention on human rights.

    The union, which has raised £23,000 so far in crowdfunding for the legal costs of the case, is expected to launch the judicial review by the end of this year.

    Jason Moyer-Lee, general secretary of the IWGB, said: “This is no longer just an employment rights issues, this is a human rights matter. It is now time to proceed with our high court challenge and wipe that smug smirk off Deliveroo’s face.”

    Rebecca Long-Bailey MP, Labour’s shadow business, energy and industrial strategy secretary, said the ruling was “an important and positive step towards victory for workers and trade unions across the UK”.

    “Companies like Deliveroo and others have built their success on an exploitative business model, denying worker’s their rights and swerving their obligations under the law,” she said.

    “The next Labour government will clamp down on bogus self-employment and strengthen employment rights for all workers.”

    Deliveroo also claimed victory saying that the court had upheld the CAC’s ruling that its couriers were self-employed.

    “The court has allowed a limited challenge on human rights grounds. Deliveroo has long argued that the self-employed should have access to greater protections, and we welcome any debate on how that can best be achieved,” the company said.

    Deliveroo last week announced that it will begin offering it’s 35,000 cycle couriers free insurance to protect them and their earnings if they are involved in an accident. It includes cover for up to £7,500 of medical expenses and up to 75% of average gross income.
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