Small to medium-sized enterprises (SMEs) have told they should look to use more contractors and sole traders because it will help to give their business a financial boost.
Research from the advisory website Unbiased.co.uk looked at the cost of employing a person to do a job and the cost of hiring in a contractor.
It found that collectively contractor workers would save SMEs more than £2 billion in national insurance payments as well as the funds they would save by not having to provide payment for sick leave or holidays.
However, Unbiased warned that firms should never put people onto self-employed terms just to take advantage of lower tax payments.
Indeed, all business owners are advised to familiarise themselves with rules such as IR35, which was designed to clamp down on ‘disguised employment’, something is considered to be tax avoidance by the HMRC.
‘Disguised employees’ are often those which have moved to self-employed status but effectively continue to work for their previous employer in the same capacity they did before, for the purpose of reducing the firm’s tax liabilities.
Karen Barrett, chief executive of unbiased.co.uk comments: “Tax is a vast and complex subject and it can be hard for business owners to find the time to understand how to optimise their tax status whilst also running their business day to day.
“Our Small Business Tax Action Report reveals that by utilising self-employed workers better, SMEs could be saving tax payments but it also highlights that tax can be a bit of a minefield!
“A professional adviser can help you to understand your business’s tax liabilities, make sure you are using any tax breaks available to you and make sure you are not crossing the line into tax evasion.”
She added that using a professional accountancy firm will also free up your time and allow you to concentrate on operating your business better.