Out-Law / Your Daily Need-To-Know

Twenty-six percent of UK freelancers have left the country, with a further 32% wanting to go, according to a survey by freelancer's network Shout99. The uncertain economic climate, and problems caused by red tape like the IR35 legislation are blamed for the trend.

The survey shows that 4% of freelancers surveyed have already moved to the US, 3% have gone to the Netherlands and 5% to Germany. Ireland was providing employment for 2% of the respondents and Switzerland 1%. In total, 11% were working in other countries.

Of the remainder, 32% of UK freelancers responding to the survey wished to leave the country, with only 43% were happy to stay.

These figures are very similar to a survey carried out in March 2000 by the network, in which 37% of respondents said they wanted to leave the country and 44% said that they wished to stay. The remainder had already gone.

But the figures also show that 12% more freelancers are working abroad than when the March 2000 survey was carried out. The UK's taxation system is blamed for this.

According to Susie Hughes of Shout99:

"Three years on, IR35 is an established reality and clarification of best operating practice is now helping freelancers move outside the confines of the legislation. But the uncertainty of operating as a freelance business continues to cause problems for many businessmen and women as they have to contend with a depressed market place, increasing Red Tape, lower rates, and new measures which bring added uncertainty such as outsourcing, fast track visas and Section 660 - the business tax on family and friends."

IR35 is the regulation introduced by the British Government to remove what it saw as a loophole for contractors to trade as limited companies to avoid tax and National Insurance Contributions, in circumstances where the individual worker would otherwise be an employee of the client for whom they work.

The aim was firstly to deal with tax avoidance, and secondly to protect workers who were forced to work as contractors by their employers, and were therefore without the normal benefits and entitlements of an employee, such as sick pay.

However, IR35 affects not only those who nominally work for themselves, but also those who are genuine freelancers.

Following a report issued in July this year, The All Party Parliamentary Small Business Group has urged the Government to review IR35, questioning whether the legislation brings in sufficient tax revenue to offset the negative impact it has on genuine businesses.

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