Three ways to get the self-employed “off the golf course” and encourage labour market participation
IPSE - The Self-Employment Association
Where self-employment works for you.
By Andy Chamberlain , Director of Policy at IPSE
In recent years, it’s fair to say that government policy has had less than a positive impact on self-employment. In fact, the self-employed population remains around 700,000 below pre-pandemic levels, with many of them telling us that they have no plans to return to the labour market until self-employment is a more attractive proposition.
Nonetheless, at IPSE, we continue to push the key issues affecting the self-employed up the political agenda through our conversations with Ministers, backbenchers and government officials.
I was pleased to be able to participate in one such meeting last week with the Small Business Minister, Kevin Hollinrake, as part of a quarterly SME Action group hosted at the Department for Business and Trade.
We had a positive discussion on the current barriers to labour market participation and how the over-50s, in particular, are now more likely to be leaving the UK’s labour force. It was positive to hear the Minister reiterate his view on the importance of the self-employed and the flexibility they provide to businesses, as he did during an IPSE panel event in April.
Coming away from the discussion, I was left wondering why, if government are aware of these barriers, have they not acted? Perhaps they’re in need of inspiration. So, here’s three policy changes that would get the formerly self-employed back into the fulfilling freelance careers they were compelled to set aside.
IR35 – the bane of many contractors
More than a third of contractors have left self-employment since the IR35 changes in the private sector were introduced. We know that many of these have still not returned to the labour market.
I made this exact point to the Small Business Minister (as I have on many occasions now) at the meeting last week. If government is serious about encouraging labour market participation and getting the economically inactive “off the golf course” – as Jeremy Hunt would say – removing the burden of IR35 would go far in incentivising self-employment once again.
It’s not just had devastating consequences for contractors either, it’s businesses and the wider economy that are also taking a hit. These businesses are now finding it harder to engage the flexible talent that they require to grow. It’s in everyone’s interests to get these workers – many of whom will find the flexibility and autonomy of self-employment attractive – back to the labour market.
HMRC’s enforcement of MSC legislation
Another current area of concern for the self-employed is HMRC’s recent enforcement of Managed Service Company (MSC) legislation. This is currently ruining the lives of up to two-thousand business owners when the legislation was designed for a completely different purpose.
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The idea that any contractor using a specialist accountancy services provider could potentially get caught up in future investigations is particularly concerning. Especially for those already considering leaving the labour market due to IR35.
HMRC must urgently clarify this situation – not least for those caught up in this nightmare – but also many thousands more who are nervously looking over their shoulder at the potentially far-reaching consequences of these investigations. It cannot be right that HMRC goes after those simply seeking tax advice from an accountant.
Clarity in the form of clear guidance on the MSC legislation would be most welcome. As would a halt to these much drawn-out investigations from HMRC (we don’t even have test cases on the horizon yet).
A better deal on ISAs
There’s no two ways about it – the self-employed find it much harder to save for later life. In fact, less than half of freelancers aren’t currently saving into a pension.
So, why can’t we do more to make savings products more accessible for the self-employed and ultimately encourage those that are over-50 to return the labour market after their mass exodus during the pandemic?
That’s why IPSE has joined forces with savings and investment provider Hargreaves Lansdown to back their calls for the Lifetime ISA (LISA) to be revamped and repurposed.
For more information on why we’re calling for an increase of the LISA age limit that currently exists when opening an account from 40 to 55 and reducing the early access penalty, we’ve set out the case here.
IPSE’s efforts
All of the above were central asks in IPSE’s recent submission to the Autumn Statement, where we made the point to the Chancellor that labour market participation could be greatly enhanced if the three areas above were corrected.
Even though government is increasingly concerned with the latest job statistics and getting people back to the labour market, self-employment is almost always overlooked. This is a sector that is ripe for growth. I’m sure I speak for many that have left the labour market, when I say that they would be more than happy to “get off the golf course” and begin contracting again should these barriers to work be lifted or reformed.
Freelance Trainer, Facilitator & Virtual Course Producer Director KSB Learning Solutions & Associate Learning and Development Consultant
1 年I wish I could afford golf course memberships and fees! Personally, I'm struggling to keep a roof over my families head and the idea of saving for a pension is ludicrous to me
I have had an interesting written conversation with Victoria Atkins MP, who is the Secretary to the Treasury. Her reply was: "Mr Robbins also raised concerns about taking contracts that are inside the off-payroll working rules, particularly with regard to expenses. Employees deemed inside the rules are also able to claim tax relief on expenses including overnight stays and business travel away from their usual place of work, along with business-related materials such as laptops and printers, provided these have not been provided or paid for by the organisation they work for. This is in line with the tax relief on expenses that is available for those employed directly." She did not understand that as an inside IR35 contractor, this would be considered travel to and from work and therefore not deductible, as it would be considered travel to and from work, therefore commuting. Her final comment "The Government very much values the contributions of flexible workers to the UK economy but is also under an obligation to ensure fairness between individuals who work in similar ways." What fairness?
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1 年Are they promising a review of IR35? Oh wait, they did that just before the last election. Good to engage, but there needs to be a complete change in government policy towards the self employed. Now, where did I put those golf clubs...