Dave Chaplin, CEO and founder of ContractorCalculator and IR35 Shield, discusses the lack of rights and support available for the self-employed during the COVID-19 lockdown
It has taken a pandemic to highlight that the most vulnerable workers in society today are the self-employed making it a hot topic on the political agenda and much debated in the public eye.
Government’s scant regard for the self-employed was underlined when the sector was simply an afterthought in the Chancellor’s initial ‘emergency rescue package.’ The Government pledged to fund 80% of employee wages up to £2,500 per month and whilst a portion of the vulnerable self-employed workers will also be able to access similar support, many will not get that money until June, with others getting nothing.
Yet this group of workers have also had their lives and livelihoods turned upside down by COVID-19 and they too have mouths to feed and bills to pay. Moreover, many limited company owners do not qualify at all as the Chancellor seems to think that many of them are high earners and do not need financial support. However, many freelancers who work through PSCs are not the high earning professionals Mr Sunak believes they are and they will struggle to survive over the coming months. And, what’s more, those gig economy workers on zero-hours contracts or in temp roles may not even qualify for any help at all according to the new law published in the Treasury Direction.
The very group of workers on whom the UK economy increasingly relies are now being left well and truly out in the cold. This is the very group of workers on whom UK firms will want to turn to for help to help get the economy back on its feet again. They are the tax-paying flexible talent who provide essential skills and expertise and it is crucial that they are supported now so that they are still around to help rebuild the economy as we emerge from this crisis.
Off-Payroll tax
Before the coronavirus crisis occurred, the Government was planning on rolling out the Off-Payroll tax to the private sector, another measure that would have had a devastating impact on the lives and livelihoods of the freelance and contracting workforce as well as on the firms that rely on their flexible skills and expertise. The pandemic brought the Government to its senses and it took the pragmatic approach by cancelling its introduction this year, though still signalled its intention to impose it on the sector from April 2021.
It’s arguable that the decision to delay the legislation in light of the pandemic could be seen as an indirect admission of the difficulties posed by the Off-Payroll measures. More recently, the House of Lords Finance Bill Sub-Committee has publicly condemned the Off-Payroll Tax proposals querying whether businesses will have recovered enough from the COVID-19 crisis to be able to bear the extra burden imposed by the Off-Payroll tax come April 2021, not least the inherent unfairness in its ability to generate ‘zero rights employment’, where clients are free to deem contingent workers ‘employed for tax purposes’ without affording them the rights of an employee. The Treasury’s lack of forethought has certainly not been lost on Lord Forsyth and his fellow Lords who posed some tough questions to the Government in a letter asking:
- When will Government publish its response to its 2018 consultation on employment status?
- Will Government use the year-long opportunity resulting from the Off-Payroll deferral to review its proposals, using up-to-date labour market information in any such review?
- What assessment has Government made of the impact of zero-rights employment on innovation and flexibility in the UK workforce?
- Why has the Office for Tax Simplification (OTS) not been consulted during the recent review of the Off-Payroll proposals?
- Given Government has stated it will do “whatever it takes” to support UK businesses in light of the coronavirus pandemic, how does pressing ahead with the proposals help UK business?
The Lords have seen the Off-Payroll tax for what it is – ill-considered, ideologically led, unsubstantiated, cruel, misguided and ultimately not fit for purpose. Let’s hope the Government can be persuaded to halt it altogether. The UK industry is on its knees due to the COVID-19 crisis so applying another straight jacket in the form of the Off-Payroll tax will finish it off. The Tories purport to be the party for entrepreneurship and small business but their actions fly in the face of that claim.
Before this crisis hit, many legitimate contractors were already bracing themselves for the prospect of ‘zero rights employment’. The prospect of months without work and zero support from the government is arguably much worse.
American business tycoon Ray Kroc, of McDonalds once said: “If any of my competitors were drowning, I’d put a hose in their mouth and turn on the water.” The same could be said of how the current Government is treating contractors. Why does the UK Conservative Government hate the freelance sector so much?
