Self-employment declarations should be respected

29 July 2010

With thousands of people predicted to start up their own micro-businesses as unemployment rises, a business group has called on the tax authorities to respect their employment status.

The Federation of Small Businesses (FSB) has estimated that the likely boom in people going it alone could see as many as 300,000 new small businesses set up this year.

However, the FSB voiced concerns that those who do opt for self-employment could be forced to switch their legal status from self-employed to employee by HM Revenue and Customs (HMRC) if they work for other companies on a contracted basis for any length of time.

John Walker, the FSB's national chairman, said: "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 tax man who, when they work for other companies, is 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 peoples wishes to be self-employed."

The FSB added that HMRC must check within a six-month timeframe to determine whether the entrepreneur meets the criteria for self-employment, and once their self-employed status has been accepted the applicant must be considered as self-employed unless a material change has taken place.

A HMRC spokesman said: "HMRC does not discriminate between different types of taxpayer and fully respects the right to be regarded as self-employed so long as this is supported by the facts.

"HMRC bases its employment status rulings entirely on the circumstances of each specific case and we do all we can to support business."