I’ve been reading Modern Workforce, the magazine published by the Association for Independent Professionals and Self-Employed (IPSE).
In one article a freelance/entrepreneur was asked about the benefits of being his own boss. “The good thing is that you can be really flexible, and do various types of jobs and set your own rates,” he said.
I applied this statement to the 37,000+ tradesmen we currently administer and pay, not least because we give associate membership of IPSE to all who are contracted through Hudson Contract. Our payroll statistics confirm that incomes are rising – and far outstripping those who are directly employed in the same trade skills.
Hand in hand with rising incomes comes an increased tax take. Although having said that, I’ve read elsewhere that HMRC officials only compare tax and NI deducted on a ‘like for like’ income basis when alleging a tax “loss” to the Exchequer when CIS overtakes PAYE. Frankly, this is rubbish, and ignores the economic reality brought about by the advantage of the CIS tax deduction scheme and higher earnings.
Flexibility for freelance builders, meanwhile, is evident all around us. Site managers continue to confirm to our workplace audit team that due to the growth in construction output and increased demand for their skills, those who are self-employed are currently moving from one local site to another, as they please, rather than being forced to seek work miles from home.
Incidentally, the same entrepreneur also mentioned: “I hired a team who did the job for a fixed price and it was perfect. I didn’t have to pay them until the job was done.” Of course, this ties into paid outputs on most construction sites that deploy freelancers; pay-as-you-build is the most highly productive and economically viable way to build.
The second Modern Workforce article declared: “Productivity is the key driver of higher wages (or incomes), better living standards, and long-term economic growth.” And it noted that: “Industrial strategy rightly focuses on skills development – but fails to consider fifteen per cent of the workforce, with not one mention of the self-employed.”
From which it seems to me that freelance builders are noticed when it is assumed they need to be corralled into higher taxes, but equally, they are ignored for their high value skills and pay-as-you-build productivity.
I don’t know whether Chancellor Philip Hammond or his team read Modern Workforce (I suspect not) but it would be great if the Chancellor were able to turn his attention to the third edition of economics professor Andrew Burke’s analysis of the benefits to construction of its freelance workforce ahead of the Autumn Budget at the end of this month.
CIS works to the advantage of freelancers, construction firms and HM Treasury alike. And if Mr Hammond wants to significantly increase tax revenues, then it’s high time he closed down the fraudsters who flout tax laws and collect what’s due from them or their clients. Something he already has the powers to do!
Founder & Chairman, Hudson ContractMore from this expert
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The latest version of this key report highlights how freelance builders play a crucial and unrivalled role in boosting economic efficiency and productivity in the construction sector.
Plus debunks the myth that freelancers in the construction industry are exploited.Access the full report here