Another month, another drop-off in the number of self-employed people in the UK. Have they seen the writing on the wall? IPSE chief Chris Bryse thinks so.
In the rolling quarter to July, another 51,000 independent professionals decided not to be so independent. The decline isn’t as steep as at the beginning of the trend when 133,000 chose to shut up shop in one quarter alone.
But still, the numbers the ONS continue to churn out highlight only one thing:
the UK is becoming a less enticing place to set up shop on your own.
Umbrella companies and PSCs to bear the brunt
Recent changes to the what qualifies for tax relief announced by George Osborne are wiping the rose-coloured tint off contractors’ and freelancers’ specs.
Travel and subsistence relief is set to disappear. This is one of the most contentious moves the Chancellor has called for.
The reason the reliefs are being deprecated? Because normal employees don’t claim travel costs.
So what? Umbrella contractors are not normal employees. In most cases, they’ve set up shop to offer their specialist services for companies who don’t need a long term fix.
The decision to operate this way involves some risk on the part of the contractor. Their continued employment is not guaranteed, unlike permies who have a long-term contract.
And unless they take out specialist contractor insurance, contractors have neither death-in-service or injury/illness protection.
It’s almost as if the Chancellor wants his cake and to eat it. And then order seconds if he’s not satisfied. You cannot expect any worker to forfeit that sort of protection and not give them leeway to take out that cover independently.
What’s the alternative to contracting?
There is, of course, an alternative. Shut down all the umbrella companies and ask businesses to engage full time staff for a project that they foresee lasting only 3 months.
How is that going to promote moral in industry and retain the competitive edge flexible working has enabled UK industry to keep – even enhance – during these strained economic times?
This is the aspect of contracting that the government just doesn’t seem to understand. And if the trend continues, it’s reality that will become manifest.
The flexibility and benefit short term workers offer to the economy as a whole far outweighs the small amount of tax per individual that HMRC is insistent upon chasing to the penny.
IR35 teams already questioned
Independent reviews have cast doubt on both their capacity and the choice of case that IR35 teams have historically decided to follow.
With a capacity of around 250 cases at a time and targeting sitting ducks, they’re not doing the job envisaged at the turn of the century when the legislation was passed.
There’s already a skills shortage across many industry sectors. The unfulfilled roles are those typically taken on by freelancers, umbrella contractors and independent professionals operating through their own limited company.
But because of how difficult the taxman is making contracting, people with genuine skills are giving up the ghost.
Sink or swim: the skills gap needs plugging now
If the government doesn’t do something to stem the tide soon, it won’t be a skills gap. It will be a skills gulf that the UK economy faces.
Yes, the government is looking at higher-level apprenticeships. Yes, it’s drawing on the business community to get involved in 16-18 year old further education. But those programmes will take time to develop, and their success is far from guaranteed.
We need action now. The Chancellor needs to do something today to entice those going back to full time employment to U-turn.
Britain needs a freelance community like a Cambridge cox needs his team of oarsmen. Without it, they’re going nowhere fast.