07 November 2008

According to a recent survey, fourteen per cent of UK contractors are still unsure of the implications of the MSC legislation and their personal compliance status 18 months after it was introduced.

The research carried out by Brookson, the leading provider of accountancy, tax advice and other support services to contractors, questioned 700 UK professional contractors on freelancers’ website Shout99.

The survey also revealed that less than a quarter of the respondents were confident that they were operating within the new regulations.

In addition, it showed that the majority of professional freelancers understand what the government wanted to achieve with the new legislation (61 per cent), however nearly everyone (99 per cent) felt that it was not handled very well with over a third saying that it has been done at the detriment of genuine contractors.

Martin Hesketh, MD at Brookson, comments: “I have tremendous sympathy for contractors. Working in an environment proliferated by complicated legal and compliance regulations must feel like walking on eggshells for most of them. At the end of the day, whilst these are highly qualified professionals, they are engineers, healthcare workers and IT professionals - not lawyers or accountants.

“As such, I’m not surprised that so many people still can’t make sense of it all. Nevertheless, it is essential that they get to grips with it and take professional advice every step of the way – especially in light of the recent Dragonfly case which clearly demonstrated the risk contractors face.”

Contractors have four potential options of working, however the ‘right’ choice will vary from individual to individual dependent upon their personal and professional circumstances:

1. Agency payroll (PAYE)
2. Umbrella companies
3. Sole trader
4. Own limited company

Each contractor should take regular, tailored advice from a reputable accountancy services business to understand which option is most appropriate for them, and the risks and responsibilities associated with each. The cost of getting it wrong could prove to be very expensive indeed.

A key factor in determining the best way of working is whether the contractor is genuinely “in business on their own account” or not – especially important following the Dragonfly case. Put simply, if an individual is not in business on their own account, options 1 or 2 are likely to be the most appropriate. If an individual is in “business on their own account,” potentially option 3 or 4 will be the more appropriate option.

The survey results demonstrate that many professional contractors are not clear on their personal compliance position for the way they have chosen to work and the risks that contractors face as a result of not getting appropriate advice remain real and significant.

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