How the gig economy finally went into retreat

A loophole that many self-employed people have used to avoid paying income tax and national insurance in the UK has closed.

After a yearlong delay, the IR35 regulation came into force on April 6. It gives larger companies the responsibility for deciding contractors’ employment status, with a view to ensuring they pay the taxes that they are supposed to.

This will reduce the leeway thousands of voluntarily self-employed workers have to avoid tax payments and social contributions. It also makes it harder for companies to avoid taking proper responsibility for these people by denying them employment rights and benefits such as pensions or holiday entitlements, while avoiding the considerable expense of paying employers’ national insurance for them.

The change in the rules for the voluntarily self-employed is mirrored by exactly the same trend regarding the involuntarily self-employed that saw investors criticising Deliveroo’s employment model ahead of its disappointing IPO, and the UK’s supreme court ruling against Uber. The dominant liberal interpretation of the relationship between employers and their workers is becoming less and less acceptable within society. And it raises profound questions about the future of liberal capitalism.

The loophole closes

The new IR35 regulation changes the rules around what is known as off-payroll working for private companies. It puts an end to workers who are really employees voluntarily working as self-employed by establishing their own intermediary company.

Many workers take advantage of the rules to pay themselves very low salaries through these companies and pay most of their income as dividends, meaning they paid far less tax on their take-home pay.


To read the full article by Dr Gerhard Schnyder and Dr Luda Svystunova visit the Conversation.