Company directors want self-employed NI to rise

The Institute of Directors has spoken up about why it appears to be the only supporter of enterprise calling for the national insurance ‘perk’ that freelancers get to be cancelled out.

In a business manifesto paper, the institute hinted that the lower NI rate for the self-employed drives the decision on how a business is set up, and says it should not.

The IoD made its feelings known in March when Philip Hammond, the chancellor, was forced to cancel his plan to hike Class 4 NIC. The institute wanted it to go ahead.

That positions the IoD, which speaks for company directors (who don’t pay Class 4), in line with the IFS and the RSA. But it puts them at odds with its bedfellows -- the UK’s other business groups.

The Association of Independent Professionals and the Self-Employed, for example, has objected to any equalising of NI for workers, believing different workers take different risks.

Qdos, an adviser to independent consultants has said that proponents of the move should “remember” that freelancers have no guaranteed sick pay, holiday pay or paternity pay.

The adviser has also pointed out that people who work for themselves go without employer pension contributions, job security and, often, a regular pay cheque. They face ‘MTD’ too.

However, the IoD argues that the “increasingly flexible labour market means it is time to review the national insurance treatment of different business structures.”

The institute’s call follows the lower NI rate for freelancers being denounced as a “huge open invitation to tax avoidance.”

And the rights or protections such workers forego were dismissed as an argument to entitle them to pay less NI than employees before Budget 2017 by the Institute for Fiscal Studies.

Ominously for those who have chosen to ‘go it alone’ in business, the Taylor Review into modern work practices has made clear that it too believes that differing tax rates -- based on the business structure used -- deprive the exchequer of much-needed revenue.

Ahead of the review’s imminent recommendations, the IoD has now indicated that its members would support action to “create a level playing field for employed and self-employed individuals.”

It said that around 6 in10 of its members (who typically run incorporated businesses) believe that self-employed, unincorporated traders should pay roughly the same in NI as staff.

The finding will disappoint the Freelancer and Contractor Services Association. It has said: “[The] argument that…[a National Insurance] increase would level the playing field between employees and the self-employed is flawed.

“Self-employed workers do not have access to NICs funded statutory benefits like unemployment benefit or sick pay and when it comes to maternity allowance, employees receive at least 57% more than self-employed workers”.

 

11th May 2017

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