The risks to any business paying for the service of an individual are significant. Paying a person as if they are self-employed can result in large arrears of PAYE and NIC being payable by the employer.
An indication of the complexity of the issue is to be found in a report by the Office of Tax Simplification (OTS) which runs to 190 pages. It rapidly became clear to the OTS that the tax system is still in many ways stuck in an out-of-date mindset. In the 1950’s and 1960’s many workers were firmly on the payroll as employees. The traditional independent contractor was self-employed. The huge growth in freelancing as a way of life (and work) doesn’t fit readily into this traditional model.
Has the OTS come up with a solution? No it hasn’t but it does suggest that some useful improvements which could be made in the short term to provide more certainty for businesses. It also suggests longer term ideas. We shall see if the government picks up the baton so that some progress can be made.