IR35 Coronavirus Contractor Crisis
The joint IR35 Coronavirus contractor crisis will have a massive effect on freelancers. It seems that Chancellor Rishi Sunak is preparing a series of measures to help contractors and other self employed.
One hopes he gives as much help to contractors as he did to permanent employees. After all, he and HMRC are claiming that many contractors are off-payroll workers anyway. So, why should they not be equally helped in a crisis?
Questions on IR35 Coronavirus Contractor Crisis
- What did Chancellor Rishi Sunak say about the IR35 Coronavirus contractor crisis
- Why is the Chancellor against helping freelancers on principle?
- Which contractors should Chancellor Rishi Sunak help financially?
- Why the Chancellor should help contractors put out of work because of the coronavirus ?
- Why should the Chancellor help those contractors put out of work by IR35?
- Should the Government Step in and make a statement on blanket banning of contractors?
- Should the Government go further and demand that contractors laid off by IR35 are re-hired?
- Why the Government should help out of work contractors financially.
- Why the Government should step in during the IR35 coronavirus contractor crisis.
- Reasons why contractors should get insurance.
What did Chancellor Rishi Sunak say about the IR35 Coronavirus contractor crisis
Chancellor Rishi Sunak told the House of Commons that he was determined to find ways to help freelancers during the IR35 coronavirus contractor crisis. There have been calls for him to do more for contractors.
Replying to a question from Tory MP Mark Pritchard, Rishi Sunak said that here were “genuine practical and principle reasons why t was much harder to make the same kind of measures to help the self employed like he helped permanent employees.
I’m sure he is right when he says there are practical reasons why it is difficult to help the self employed. However, he must find a solution to those problems.
Why is the Chancellor against helping freelancers on principle
However, I am worried when he says that there are reasons of principle as to why he should not help contractors and freelancers.
It is just another sign that the Government is against helping contractors ‘in principle. They have always been against helping contractors ‘in principle’.
However, let’s hope he can overcome this.
He said “We absolutely understand the situation that many self-employed people face at the moment as a result of what’s happening and are determined to find a way to support them.”
It’s crucial that he gets this right.
Which contractors should Chancellor Rishi Sunak help financially
There are three groups of contractors that he must help:-
- Those put out of work by the coronavirus
- Those put out of work by IR35
- Those who are already out of work for other reasons
Why the Chancellor should help contractors put out of work because of the coronavirus
Firstly he must help contractors put out of work by the coronavirus.
He is helping permanent employees put out of work by Covid-19. He is paying their client companies up to 80% of their income up to £30,000 a year. That’s £2,500 a month. That’s much better than £94 a week unemployment benefit.
He must do something similar for contractors, freelancers and the self employed.
Why should the Chancellor help those contractors put out of work by IR35
Secondly, he should do something for those contractors put out of work by IR35 or due to be put out of work. He may not be sympathetic to them as some are refusing to take PAYE contractors. However, taking one of those could open them up to claims for back tax from HMRC – despite what they say.
Stave Barclay, when asked what the Government were doing for contractors said that they they were suspending the Chapter 10 IR35 changes till April 2012. That was the sum total of specific help for contractors so far.
And this would be a good help – except that many companies like RBS, HSBC, Lloyds Bank, GSK and Virgin Media are going ahead with blanket banning of contractors anyway.
Should the Government Step in and make a statement on blanket banning of contractors
If the Government were to step in and make a strong statement saying that they expected our top companies to step up in this time of crisis by allowing contractors to use their personal services companies for the next year then that would be a big help for contractors.
We saw what happened when Spots Direct decided to stay open. After strong condemnatory words from the Government, Sports Direct closed all its stores.
We need something similar here. This would cost the Government nothing. Indeed it would be a boon for the client companies who desperately need the contractors. And it would be a great boon to contractors.
Should the Government go further and demand that contractors laid off by IR35 are re-hired
The Government should go further and say that client companies should re-hire the contractors they have just terminated for refusing to go PAYE.
After all, the companies greatly need them anyway for their projects.
So, this would financially benefit the big companies, contractors and the Government too.
And all it would take would be a strong Sports Direct type statement from the Government. After all, the gbig banks would not want to be portrayed as villains of this crisis too.
Why the Government should help out of work contractors financially
Thirdly, the Government should help those contractors who are already out of work for other reasons.
Contractors have difficulty in getting unemployment benefits as they are employed by their own companies – and although they don’t have any clients the companies still employ those contractors.
However, many of them are in grave financial difficulties.
What the Government should do is to average their income over three years and then base any help on that.
If they have not had any freelance income over these three years then it would be difficult to argue that they are still freelancers.
Why the Government should step in during the IR35 coronavirus contractor crisis
Chancellor Rishi Sunak should look at all three categories of contractor situations. It us surely unfair that a permanent employee earning the same amount as a contractors should receive government help during this coronavirus crisis and a self employed person should not.
And if the Government doesn’t see it like that then HMRC should change their CEST IR35 test to ask “Did you receive financial Government assistance during the coronavirus crisis” – with a pointer towards self employment if they did not.
Reasons why contractors should get insurance
Lastly contractors, get yourself some insurance for those periods when you may be out of work long term. I never did as a contractor. However, this was to my cost during downturns. It doesn’t cost that much. Contracting is a risky business and this takes some of the risk out of it.
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Many private sector contractors are likely to be told by their client company either that they must operate as an off-payroll employee or join an umbrella company. It’s time to plan for that now.
They need to look at umbrellas ASAP.
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