IPSE's latest engagement with a Labour party vying for government
IPSE - The Self-Employment Association
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IPSE feeds into Labour’s Policy Forum with alternatives for IR35 legislation and a plan to clarify employment status
By Joshua Toovey, Senior Research and Policy Officer
IPSE has responded to the Labour Party’s National Policy Forum – a series of consultations which ultimately feed into the Labour Party Manifesto for the 2024 election – highlighting the need for action on IR35, employment status, poor commercial payment practices and in training and skills among other areas.
Below, we discuss the key proposals set out in our response to the National Policy Forum and outline IPSE’s efforts to influence the Labour Party over the last few months.
The Labour Party and the self-employed
An election is a little over a year away now and if the polls are to be believed (anything can still happen!), the Labour Party could realistically form the next government.
With Angela Rayner recently adopting the ‘SME' brief and Labour demonstrating a recognition of the importance of the self-employed, the IPSE Policy Team have been in discussions with Angela Rayner’s office over the last few months, raising the key issues facing those that choose to work for themselves.
As part of these conversations with the Labour Party, IPSE plans to participate in a series of roundtables on the issues facing the self-employed with Angela Rayner, SME4Labour, Community Union and other interested stakeholders.
IPSE’s proposals for IR35 legislation and employment status
Our response initially sets out the fundamental problems of the IR35 legislation and the devastating impact of the IR35 reforms, echoing many of the concerns we’ve heard from IPSE members up and down the country.
Using IPSE’s research from the past two years, we demonstrate that the reforms have created a significant barrier to businesses wishing to engage freelancers and have forced many contractors into quasi-employment. Not only do we show that these reforms have devastated the contracting market, we also link the reforms to economic inactivity and demonstrate that the IR35 legislation is holding back wider economic growth in the UK; denying entrepreneurial ventures that could provide a much needed contribution to the economy.
Whilst we initially propose that Labour reverse the IR35 reforms in both the private and public sector, we then offer two proposals that would remove the need for IR35 altogether.
Our first proposal would see that Labour introduce the Freelancer Limited Company (FLC) model, which would see a company formed under the Companies Act whilst agreeing to operate within certain boundaries to demonstrate that the owner is ‘in business’ and ultimately qualify for specific tax treatment.
Under the model, FLC status would demonstrate that a company is not merely a vehicle for disguised employment – which is HMRC’s interest with IR35 – removing the need for tax status assessments for every new engagement.
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The second proposal would see Labour adopt IPSE’s Self-Employed Matrix, a framework for establishing whether a work engagement is, or is likely to be, one of self-employment.
Labour has previously committed to introduce a single status of ‘worker’ for all but the genuinely self-employed. Whilst this shouldn’t inherently impact the self-employed, IPSE will follow the policy carefully to ensure that changes to the status of other workers would not inadvertently make it harder for others to exercise a conscious and deliberate choice to be self-employed.
To help with this, we have recommended that Labour adopt and embed the Self-Employed Matrix into its thinking on this policy to reduce the potential blurring of boundaries that might exist between the single worker status and those that operate as genuinely self-employed businesses.
Proposals on late payment and training for the self-employed
The submission also reiterated our campaign to make 30 days the UK’s standard commercial payment term which we believe would make it more difficult for large businesses to propose and enforce longer terms.
Similarly, we’ve echoed our recommendations from our 2022 report on late payment and non-payment and called for a legal requirement for medium and large-sized businesses to report their payment practices to shareholders and board directors, in a bid to drive top-down reform of payment processes within companies.
On training and skills, we call for reform to the apprenticeship levy, with a portion of the money raised earmarked solely for investment in skills and training for the self-employed. We also cite the fact that freelancers are increasingly covering the cost of the apprenticeship levy when working through an umbrella company.
Alongside this proposal, we’ve also called on Labour to extend existing tax allowances for investment in training to go beyond refresher training and to also cover new skills for the self-employed.
Tackling unfair penalties for the self-employed in Universal Credit and the Maternity Allowance
With Labour previously pledging to reform the Universal Credit and Maternity pay systems, we wanted to highlight the current unfair penalties the self-employed can face when interacting with these lines of support.
We’ve proposed that Labour revamp the Minimum Income Floor and end the current disparity in Maternity Allowance that sees freelance mothers unable to benefit from the first six weeks of maternity pay, whilst employee counterparts can.
At IPSE, we will continue to work closely with Labour to make sure they are aware of the key issues facing the self-employed and continue to champion the vital contribution of this dynamic sector to both the UK economy and wider society.