That is what I find myself wondering as I read this warning from UK unions that “the exchequer was losing around £5bn a year through bogus self-employment – the equivalent of 20 new hospitals.”. The spurious translation of the opportunity cost into hospitals aside (which likely wouldn’t be built had the extra taxes been collected anyway); under what circumstances is self-employment “bogus self-employment”?


There is always a double-edged sword to self-employment: companies may prefer outsourcing to “self-employed” so that they are not responsible for benefits and payroll taxes.

Some self-employed just call themselves that and are more or less working “under-the-table”, collecting their pay without income tax or CPP deductions and then instead of setting some aside, reporting their income, and remitting income tax directly, they just keep it all and hope for the best.

Is that “bogus self employment” or just plain tax evasion?

The important thing for legitimate above-board self-employed is to make sure their affairs are as ordered as the traditional employed: set money aside for taxes, probably paid in quarterly installments to Revenue Canada. Even better, incorporate and pay yourself less witholding, in other words, have your corporation deduct taxes and CPP and remit on your behalf.

I found that once I started drawing a salary from my own corporation which was making deductions “at source” other benefits followed (like having an easier time obtaining credit or applying for a mortgage).

Mark Jeftovic has been a self-employed internet professional since 1994, currently he is the founder and president of easyDNS Technologies Inc., the DNS hosting company and domain registrar. His personal blog is at http://mark.jeftovic.net