Wednesday, 24 September 2008

Freelancers - you will be assimilated. Resistance is futile.

The plot to ensure that everybody becomes an employee of some large organisation (preferably the state) for their 'protection' gathered pace this month. If the announcement that Economic Work Units (aka mothers) are to be required to hand their 2 year olds over to some state sponsored indoctrination centre wasn't enough, there was the disappointing, but largely inevitable, result on the IR35 'Dragonfly' case.

Once again Freelancers are going to have to look closely at the way they operate and review their relationships with clients if they don't want a 'a-posteriori' bill from HMRC.

Conspiracy theorists will have enough to go on at this point. Thanks for reading. Those of you who want the details - read on.

The New Rules

I won't go into the gory details. There is plenty of analysis elsewhere: the best being:

Dragonfly appeal by Roger Sinclair at Egos
Dragonfly shot down in cold blood by Steve Gratton on AccountingWeb

What the new 'clarification' boils down to is this:
  • if you do work for somebody and get paid for it that is enough to to satisfy one condition of being an IR35 employee. You are essentially assessed against a Day Casual Worker and not a Full Time Employee.
  • That you determine what and how (and probably where in these days of homeworking) the work is done is no longer sufficient. You have to have the right to do more than a similarly qualified professional employee would ever be allowed to do.
  • if you allow yourself to become part of the furniture you will become an IR35 employee regardless of what is written in any documents.
  • intention is nothing: perception is everything; what the client employees see you as is probably definitive.
IR35 has become a 'Duck Tax', to slightly mangle that wonderful Ruby term. Arguably that is as it should be. So your tax bill may very well be determined by client employees terrified of an HMRC investigation into them. Bear that in mind in how you allow them to treat you.