According to the papers on Sunday, Eamonn Holmes is locked in a legal fight with tax chiefs as HM Revenue & Customs is challenging his freelance pay, which he receives through his own limited company and he may owe millions from the past seven years. BBC celebs, whose salaries are paid in the same way, have already been targeted by HMRC, which says they are employees. However, Karen Collier Careers will not register a freelance garment technologist who refuses to agree that they are employees and working inside IR35. We have had difficulty explaining this to them, as they know they are much better off working outside IR35, so that they can pay a reduced tax rate and can claim expenses back through their limited companies. There are a lot of retail head offices who are still paying freelancers through the thier limited business, so they are getting away with it. They say they will be worse off, but I try to explain to them that they won’t be worse off, they have just been better off as they have not been paying the correct tax in the first place. Freelancers are still using the same doctors and hospitals as employees who are paying the correct tax and national insurance, so why should they not pay fully for these services when others are.
Let us explain: 99% of the time a garment technologist will be working inside IR35, and therefore are deemed to have the same responsibilities or benefits as a permanent employee, their earnings for that assignment are also considered the same as a full time employee. As such, their earnings are treated as an employee’s would do in terms of national insurance tax deductions. Whilst there are much better tax benefits to working outside IR35, if they are found to be working inside IR35, they will need to ensure they are paying the correct tax. Their accountant can help them with this, however, in our experience; we have found that accountants do not always understand the nature of the assignment, so they believe they are working outside IR35 and do not deduct the correct tax. This is why we insist that they are paid through an umbrella company, as this is the only way we can guarantee that the right tax has been deducted. If they get caught out by IR35, then they will end up paying all of the unpaid taxes in a lump sum.
The HM Revenue & Customs spotlight are on freelancers and Karen Collier Careers will not take on any freelancer who is not willing to be set up with an umbrella company, as we are 100% compliant.