It's not like HMRC misses out on tax under this arrangement, as the contractor's business pays employer taxes (plus any corp tax from cap gains) and the contractor pays their employee taxes.
A lot of these 'share' companies often don't do anything to inform the tax authority what work these contractors did for them, thereby making tax evasion way too easy.
If you're a contractor you really need to know what you're doing. Meaning: a lot of things you'll need to budget for because it is your responsibility. If a lot of people don't grasp that, then the problem becomes a government problem.
I'm an employee and have pretty flexible working times. I don't see why I'd ever want to be a contractor where as only benefit you have more flexible working hours. That's not a change!
Benefits I enjoy from contracting:
- B2B transactions mean I can retain some cash in the business for investment while paying myself a good salary.
- My performance is more important to my role because I can be easily let go - I prefer to align my interests with those of my employer in this way.
- Being a contractor also means being a consultant to an extent. I am trusted to bring in expertise to improve processes and I enjoy having a positive impact in this way.
I agree that the ongoing issue with labour exploitation with things like zero-hours contracts, forced contracting and using apprenticeships to force lower-than-minimum wages are bad, but they don't take away from the value of contracting itself. In an attempt to address labour exploitation, IR35 and other measures are also becoming major problems for legitimate contractors too.
If the government doesn't protect people against immoral companies, who will? If an employee doesn't understand their obligations to pay extra taxes and cover their own forms of insurance, and doesn't ask for enough money up front to cover those costs, they'll go to jail and/or be bankrupt. That creates costs for taxpayers and corporations, the net loss likely higher than the cost of a bit of regulation and education.
Why not educate those employees (or ensure that they can't get stiffed for a lack of education) instead of allowing them to be funneled (or scammed) into an unproductive dead end? As a taxpayer, I'd rather see them protected and productive than unproductive and bankrupt.
I think we had the same issue in the UK, when uber drivers wanted
to be classified as full time workers.
Yep, the drivers won that tribunal in 2016 [1].Courier company City Sprint also lost a case this year, where the judge described their contractual arrangements as "contorted, indecipherable and window-dressing" [2].
HMRC are investigating parcel delivery company Hermes for similarly classifying drivers as self-employed, and there's a potential case from the GMB Union (who won the case against Uber) [2] [3].
In the UK, the gig economy isn't as simple as companies insisting "you're self-employed because we say you are".
[1] https://www.theguardian.com/technology/2016/oct/28/uber-uk-t...
[2] https://www.theguardian.com/business/2017/jan/06/courier-win...
[3] https://www.theguardian.com/law/2016/oct/20/hermes-couriers-...
[4] http://www.itv.com/news/2017-01-25/hermes-gmb-taking-legal-a...
I'd also add that Uber's software contains many restrictions on how drivers must perform, how frequently and quickly they must respond, etc. It's not without restrictions just because they set their own hours.
I think we had the same issue in the UK, when uber drivers wanted to be classified as full time workers. Although they do work as contractors e.g no fixed timeschedule, money directly in their pockets them doing their own tax etc.
Most uber drivers I talked to in London mention, that they love working whenever they want without restrictions. Well that comes with the price of not being classified as fully employed (at least for now).