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28 July 2010

Boom in small businesses but with a legal sting in the tail

Reference number: PR/2010/41

Boom in small businesses but with a legal sting in the tail

A record number of people will become self-employed this year

With the UK facing high unemployment, the Federation of Small Businesses (FSB) is expecting a boom in people going it alone this year.

As unemployment continues to be a worry, the FSB is expecting a record 300,000 people to become their own boss this year and set up their own small business. This will not only help grow the economy but could in turn create more jobs as these small businesses flourish.

However, the FSB is concerned that those that do become self-employed are penalised by the taxman if they go on to work for other companies. If you are working from home as a plumber, hairdresser or interior designer you probably won't be affected, but if you are contracted to work for another company for say three months, the taxman will want to put you into the PAYE bucket and turn your legal status from self-employed to that of an employee.

The FSB is calling on HMRC to respect a declaration of self-employment as just that. HMRC must check within a six-month timeframe whether the entrepreneur meets the criteria for self-employment. Once their self-employed status has been accepted the applicant must be considered as self-employed unless a material change has taken place.

John Walker, National Chairman, Federation of Small Businesses, said:

"Unemployment continues to be a worry for everyone, and this year we are expecting more people to become their own boss and go it and alone by setting up in business, which will both help the economy grow and tackle unemployment as these businesses flourish.

"However, those who do become self-employed need to beware of the tax man who is penalising these people when they work for other companies, putting them in the PAYE bucket and turning their legal status from self-employed to an employee. The FSB is calling on HMRC to respect peoples wishes to be self-employed and for the HMRC to cease their tactics in pushing people into the PAYE net."  

ENDS