Simon McVicker: 'Companies, afraid of falling foul of the complex rules, are now scrapping their contractors altogether'

It was the weekend to be loved up. So, is that the love factor locked away for another year?

According to a report published recently, the UK’s 5 million plus self-employed community are in love all the year round… with work.

Research from my organisation IPSE showed that three out of four freelancers said they were happy with working for themselves.

The research also found that people are going into freelancing for positive reasons, including having greater flexibility, 88% said this was a factor; the freedom to choose where they work (83%), when they work (84%) and having a better work-life balance.

But as you may have found out to your cost with the Valentine roses, watch out for the thorns.

Among the thorny issues facing Scotland’s 306,000 self-employed are:

Late payments. This is one of the most serious problems for the self-employed because it can make financial planning difficult. It can be time-consuming for some and crippling for others, who may not have the reserves to cope when their cashflow is under pressure. IPSE research found that 63 per cent of self-employed people had experienced problems with late payments and 43 per cent had completed work they were never paid for. Freelancers spend an average of 20 days a year chasing late payments and in sectors such as the creative industries, freelancers lose an average of £5,400 a year through unpaid work.

Access to statutory benefits was another concern for 46% of the 2,000 plus freelancers who took part in the IPSE survey conducted in association with i2media and YouGov.

Not having access to sick pay, holiday pay and parental benefits was a concern, especially among women. Almost a quarter of freelancers felt unable to take time off when feeling sick or unwell and a similar proportion had missed or had to cancel a medical appointment because of their self-employed work.

One other area of concern for over half of freelancers is saving for later life, and previous research has shown that only a third of self-employed people are paying into a pension.

Unlike employees, there is no one-size-fits-all solution for the self-employed. As the sector continues grow, we at IPSE believe the government and the pensions industry need to develop other innovative solutions to encourage self-employed people to save for later life.

In the meantime, the Government seem hell-bent on introducing changes to IR35 in April, essentially shifting responsibility in the private sector for judging whether contractors are “falsely self-employed” or not from contractors themselves to their clients.

Companies, afraid of falling foul of the complex rules, are now scrapping their contractors altogether. Most of the larger and naturally more risk-averse banks have done this, and many smaller companies are following suit.

Many taking part in the survey agreed with IPSE’s stance that we need a more strategic tax system that genuinely supports our smallest businesses. The current tax system is based on the outdated employer/employee principle. It is no longer fit for purpose in an age of growing self-employment and new forms of work.

Indeed, in the hallowed halls of the House of Lords, the noble Lords and Ladies have launched an inquiry into the negative impact of the Government’s proposed changes. Let’s see whether the ermine army can save the day.

The IPSE survey underlined that freedom and flexibility were the attractions more and more people loved about being self-employed and that was especially true among women. In fact, figures show the number of women joining the self-employed ranks has grown by 57 per cent in the last ten years compared to 25 per cent among men.

Now it is up to the government to make sure this vital and growing sector has the support and freedom it needs.

It seemed everything was coming up roses last December when the then Chancellor Sajid Javid said: “We’re committed to helping the self-employed” and pledged to review the changes to IR35 self-employed tax law.

Just as we thought Sajid’s promises were set to wither on the vine like those Valentine roses up pops a new Chancellor.

Chancellor Rishi Sunak is on record as saying that regulation regarding small business and the self-employed should be sensible and proportionate and that Government should always consider the needs of small businesses when devising new rules.

Mr Sunak has an early chance to back these words up at the Budget on 11th March by halting the changes to IR35 in the private sector and by launching a fundamental review of small business taxation, to create a system fit for the 21st century.

Simon McVicker is director of policy and external affairs at Ipse, the Association of Independent Professionals and the Self-Employed (at www.ipse.co.uk), the biggest organisation in the UK representing some of the five million contractors, consultants and freelancers who make up this sector.