There are a vast number of small business owners who sub-contract their skills and expertise to other companies. These small businesses are real businesses operating just like a major corporate, the difference being that instead of a potentially large workforce involving multiple departments and with a structured management team the small company often has just one or two employees.

The Chancellor decided in the 1999 budget that these small businesses weren't real in the true sense of the word, and for taxation purposes the owner of these companies ought to be treated as a deemed employee of the clients that they worked for. Which is all very well, but under IR35 (where it might apply) the deemed employee gets to pay not only his/her employEE contribution for National Insurance but has to pay the employERs National Insurance contribution as well! Plus the disguised employee doesn't get to share regular employee rewards such as pension, holiday, sickness and other benefits that a salaried employee can take for granted. When the deemed employee is out of work for any reason he/she doesn't get paid. IR35 is supposed to be about fairness, but the actual implementation is very heavily weighted in favour of the disguised employee paying more tax than an equivalent employee would.