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November 21, 1995

TELEWORKERS BEING PENALISED BY UK TAXES, SOME EMPLOYERS GIVING WORK OVERSEAS TO AVOID PAYING

By CBR Staff Writer

The civil service bureaucracy detests anything that is not neat and tidy and conventional, so Britain’s 2.5m teleworkers – people working from home with varying degrees of connection to a central office – are unfairly penalised by the Inland Revenue tax-gatherers, reports the Guardian. British Telecommunications Plc estimates there will be over 3m teleworkers next year and more than 130 ‘telecottages’ have come into being in the last five years, offering local teleworkers joint access to services such as phones, facsimile messages, modems and videoconferencing facilities. Some telecottages also act as ‘network brokerages,’ pitching for work that they can the sub-contract to teleworkers. According to Jane Berry, manager of the Wren telecottage at Stoneleigh Park near Coventry, inflexible tax rules are among the biggest barriers to growth. Many firms want the flexibility to contract out work to teleworkers on short-term contracts she said, but the Inland Revenue is standing in the way by clamping down on what it calls ‘loose’ working practices. If the Inland Revenue declares a teleworker ’employed’, the ’employer’ will also have to pay extra National Insurance. Berry said many companies now prefer to give work to overseas teleworkers. Most of the this kind of work is location- independent, she said. Some companies prefer to deal with people they meet, but much of the work is being subcontracted to teleworkers in Ireland or as far away as the Pacific Rim. If teleworkers were making widgets there wouldn’t be a problem. But because most of the work is processing information, the Inland Revenue retains this traditional view that it’s office work carried out by company employees. Many telecottages are funded by local authorities and rural development agencies who see teleworking in rural areas as crucial to regeneration. Some authorities, such as Powys County Council, have hired staff to promote teleworking, while the Brecon Beacons National Park has given the go-ahead for the country’s first televillage. Most teleworkers are self-employed, but tax offices are treating many of them as contracted, the paper said, taxing them at source via PAYE and preventing them from offsetting expenses against profits. ‘Employed’ teleworkers must also pay Class 1 and possibly Class 4 National Insurance on top of their Class 2 self- employed contributions.

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