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EDM needs to be reviewed, say contractor bodies

Three separate contracting industry bodies have come out in protest of the taxman’s Elective Deduction Model, claiming it fosters excessive tax avoidance.

Her Majesty’s Revenue & Customs have been pesteerd by APSCo, the Recruitment and Employment Confederation and the Freelancer and Contractor Services Association over EDM. The scheme is designed to make it easier to classify self-employed workers under employment regulations yet leaves them as employees under current tax laws – something that the contractor bodies say is fostering a culture of abuse leading to tax avoidance.

HMRC has remained neutral on the scheme so far, which has created shedloads of anxiety amongst APSCo, the REC and the FCSA. Freelancing and contracting industry experts say that EDM is nothing more than a vehicle for short-circuiting the requirements to comply with Agency Workers Regulations and National Minimum Wage laws to name just a few.

For what it’s worth, this scheme sounds absolutely terrible in that it can and does open up a massive can of worms when it comes to disguised employment. IR35 enforcement is already bogging down countless self-employed Brits who end up staying up nights worrying about whether they’re at risk for classification under disguised employment, and we don’t need to be giving HMRC any more ammunition in its unyielding crusade to stamp out tax avoidance. Besides, when you’ve got not just one or two but three industry bodies coming out to express their extreme concern and displeasure about EDM, it’s more or less a foregone conclusion that there does indeed need to be a review undertaken in order to ensure that this scheme doesn’t end up catching on just to have contractors making use of it fall prey to an HMRC investigation.

At any rate, you heard it here first: do your best to avoid EDM, as it’s most likely going to create much more trouble than it’s worth. Yes, it might be tempting to try to have your cake and eat it too – especially when it comes to your tax burden – but the risks are too great that you’re going to end up with HMRC come a-knocking on your door with some very pointed questions. With any luck the taxman will heed the warnings of all these contractor bodies and decide to take a much closer look at the scheme. I simply hope that this review comes sooner rather than later so as to minimise its exposure in the freelancing and contracting marketplace.

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