Contractors are increasingly being designated as pay-as-you-earn (PAYE) by the taxman, who is turning their legal status from self-employed to employee.
The Federation of Small Businesses (FSB) is concerned that self-employed individuals are being penalised by the taxman if they go on to work for other companies.
HMRC must check within a six-month time frame whether the entrepreneur meets the criteria for self-employment, once their status has been accepted the applicant must be considered as self-employed, unless a material change has taken place.
HMRC must check within a six-month time frame whether the entrepreneur meets the criteria for self-employment
National chairman for the FSB, John Walker, says: “Unemployment continues to be a worry for everyone, and this year we are expecting more people to become their own boss and go it and alone by setting up in business, which will both help the economy grow and tackle unemployment as these businesses flourish.
“However, those who do become self-employed need to beware of the taxman who is penalising these people when they work for other companies, putting them in the PAYE bucket and turning their legal status from self-employed to an employee.
“The FSB is calling on HMRC to respect people’s wishes to be self-employed and for the HMRC to cease their tactics in pushing people into the PAYE net.”
With the UK facing high levels of unemployment, the FSB is expecting a record 300,000 people to become their own boss this year and set up their own small business.
