Freelancers’ Questions: Can I freelance for one firm indefinitely?

Freelancer’s Question: I’ve been creative consulting for a Spanish firm for just over the last two years and expect to continue freelancing for them, even though they are my only client. Under UK law, is it the case that a company engaging a freelance or contract worker for more than one full year and where that company is the worker's only client, would need to employ the worker full time, as their employee? Is this ’12-month then payroll’ rule a rumour or reality?

Similar time-based thresholds apply in other countries - would such a cap also apply in Spain, and would I be caught by it, even though my contract with the Spanish firm is clearly marked ‘consultancy contract’?

Expert’s Answer: Assuming you are tax resident in Spain, correctly structured and declaring your gross contract rate in that country as a ‘profesionale automono’ (independent professional), you appear to be operating in line with current Spanish law.

As you have correctly noted, some EU states are openly formulating ideas to give full employment rights to freelancers and the self-employed operating in those countries after a fixed period of contracting their services. To answer your specific point, this is not law in the UK.

However,the UK government is currently looking at altering IR35 – regulations that, broadly, seek to stamp out ‘disguised employment.’It has been pointed out by IR35 experts that while the UK tax authority does consider that the longer you contract for a company the more likely it is that you will be ‘part and parcel’ of the company (and therefore potentially caught by IR35), the length of an engagement is not an indicator of IR35 status. Put another way, and as many industry people see the situation, the UK government has IR35 almost as a weapon for converting self-employment into employment without having to take the time period of the engagement(s) into account.

It is highly likely that the Spanish government is also giving due consideration to when self-employment becomes employment and what measures should regulate that transition. For your peace of mind, I recommend that you share any concerns you might have about your employment status with a local accountant. Make sure in advance that the accountant is likely to be well-briefed by his or her Professional Institute on any moves being made in this complex area of employment status by the Spanish authorities.

The expert was Mike Philips of its international, an advisory to freelancers working overseas.

Editor’s Note: Related Reading –

How will I know if I’m caught by IR35?

Freelancers’ Questions: Can I avoid IR35 entirely?

Freelancers’ Questions: Do many short contracts preclude me from IR35?