The Association of Independent Professionals and the Self Employed, or IPSE, are well-known for undertaking regular surveys in their community.
Their most recent research offers an interesting insight into the work of freelancers. This shows a large uptick in earnings in the UK, the most since the EU Referendum. The difference between quarter 3 and quarter 4 of 2021 show an average increase of almost £4,000 in that one quarter.
This is most definitely the good news. It marks a positive step forward for freelancers after the burden of uncertainty over the last few years. For freelancers this has meant a reduction in work since 2019 and for many, months where work was patchy.
This research suggests that in the shadow of Brexit and COVID, the demand for freelancers is increasing. The biggest change is perhaps that businesses are once again willing to spend on more than just the essentials. For many businesses, the last few years have ground external work to a halt even where using a freelancer would be most cost-effective.
They have prioritised employees or reigned in spending to reduce the need for potential closure. Perhaps this turn of events shows the tide turning in the right direction for both freelancers and businesses alike. Those that did weather the storm can now look forward to the future.
Yet, there is a snag
There are more aspects that The Freelancer Confidence Index measures. Work levels and pay are both important and relevant to the freelancer experience.
Yet there are additional aspects of life as a freelancer that are of concern. One of these is freelancer confidence, quite specifically in the economy of the UK as a whole. This confidence is found to have fallen significantly within the freelancer group.
This confidence is vital, as concerns in this area can lead freelancers, who provide flexible and essential services to many businesses and especially SMEs, to change their path and move into more reliable paid employment.
The confidence levels in freelancers dropped from -13.2 to -19.1 in one single three-month period (quarter 3 to quarter 4). And the reason for this was found to be quite specific to IR35. This has been driven by reforms made to IR35, since April 2021.
This extended responsibility for deciding worker employment status directly to non-public sector medium or large businesses using their services. The public sector has been required to do it since 2017. This shift added issues to an already complicated situation and has taken power away from the freelancer.
In some cases, contracts leave freelancers out of pocket, as businesses try to manipulate the law. Add to this the highest inflation levels in thirty years, increases in the cost of living and expanding business costs. Is it any surprise that 81% of freelancers express concerns about these issues?
Moreover, its findings show that over a third of freelancers report that they are in debt. Self-employment is a way to drive economic growth. Building on the amazing opportunities that freelancers offer to businesses should be the priority.
Will you pass an HMRC IR35 enquiry?
Take our 5 minute online IR35 risk assessment to find out
HMRC’s soft landing period has ended and IR35 enquiries will soon begin in the private sector. Make sure you identify any risk areas and ensure you’re managing it correctly.
Spring Statement 2022 Avoids IR35 Change – But for How Long?
So, the Chancellor has given his Spring Statement. There are some highs and lows for individuals and businesses.
On the other hand, it could be said that the content was not particularly surprising. One thing that freelancers might have been listening out for though are potential changes to IR35. The possibility of this has been doing the rounds. It would mean yet another shift for freelancers since the previous change to IR35 in April 2021.
These changes cause ongoing difficulties for freelancers in the way the businesses they are doing work for, handle that work. The expectation of further changes will increase that even further. However, this time it was not to be, but then the question remains, will it be something for the Autumn Budget that will come later in the year?
The potential changes are divisive and on the whole, they aren’t so good for freelancers. They would basically extend the changes from April 2021 which gave non-public sector large and medium size businesses responsibility for IR35 in relation to freelancers within a Personal Service Company (PSC).
They would extend it to all small businesses as well. This would firstly add to their administrative burden at a time when issues like Brexit, Making Tax Digital and COVID are all in the mix. Every change takes time to understand and embrace and small businesses have generally been suffering recently.
Secondly, many lack knowledge and experience and are likely to make the wrong judgements about outcomes that affect freelancers in a negative way.
In Summary
In the situation we have now, freelancers with their own PSC are pretty knowledgeable about IR35. It is likely they have been building up experience about it, since it first came in. They know how the work they are doing applies and whether it falls inside or outside IR35.
In comparison, small businesses have little or no knowledge of IR35. Some large businesses have a named person who deals with IR35 as part of their role. Others do not and do get it wrong or get poor advice which has them stepping into illegalities. That is large businesses with a large pool of resources. Imagine how small businesses will find this.
What about situations where freelancers deal with the owner who already has 10 different hats within the business. It is likely to lead to a range of poor practice.
There is a general thought that this measure will make small businesses nervous at a highly testing time.
Perhaps this is why it was avoided at the Spring Statement. Equally it could be simply that the Spring Statement was there to deliver a very specific set of government messages.
This did not fit with those messages so was avoided – for now. The Autumn Budget could well bring this news, we shall have to wait and see.
Either way it will be a difficult pill to swallow for both small businesses and freelancers when it does come.
