The recent Self-Employment Review commissioned by Prime Minister David Cameron and carried out by Cambridge Satchel Company entrepreneur Julie Dean should be welcomed. It is a vital document for demonstrating the importance of the UK’s 4.6 million contractors, freelancers, temporary workers and self-employed people and includes a series of valuable recommendations that should be acted upon by Government immediately.
However, the document also raises some serious questions and misses some key points. The most disappointing aspect of the report is that taxation was beyond the review’s scope. Despite this, it did touch on this issue and recommended that the Government ensures all future policy takes the needs of self-employed people into account. Another concern is that, while the review’s recommendations will help to improve the bottom line for independent workers, it could also make it much easier for the HMRC to target this sector.
Perhaps most importantly, the review supports the growing impetus for a full review of how people now work in the modern world and supports growing calls for a full judicial review into the impending travel and subsistence restrictions which will hit the lowest paid workers hardest.
What does the Self-Employment Review recommend?
First, what does the review actually have to say? Julie Deane has provided ten key recommendations which include better education for people to prepare for life in self-employment, IT guidance for one man bands, maternity pay to match that of employees and mortgage and other financial products to become more freelancer friendly.
Arguably the most important recommendation is that the independent workforce should be recognised by the Government and all future Government policy decisions should take the self-employed into account.
Remarkably, the sector is currently not considered by Government lawmakers. An impact assessment is carried out by the Government to understand how different sectors will be affected by all new policies, but the self-employed are not one of those sectors. Unsurprisingly, Julie says that must change immediately.
Other recommendations include the creation of a “central portal” for freelancers and contractors to access official advice and support and to help clear confusion around the multiple official bodies that self-employed people have to contend with.
How will the Self-Employment Review affect tax rules
Changes to the tax system were left outside the remit of this review. The cynic in me suggests this was deliberate as the Government knew it would receive heavy criticism. However, Julie does speak out on the issue as it was mentioned so heavily by those involved in the review.
Tax came up so often that Julie says in the review that officials should look at the issue in “more detail” and one of her key recommendations does lend itself to the taxation and regulation of the sector.
In the review she calls for a single definition of self-employment for tax and employment law purposes. Julie Dean argues the lack of a definition is “causing an issue” and says the sector needs “simplification and clarification”.
The desire for simple definitions is nothing new and we, like many others, have been fighting hard for simple clarifications on key issues affecting contractors. This is something that should be welcomed, every self-employed person would love certainty over their tax and regulatory liabilities, but it does also come with potential concerns.
By encompassing all self-employed people under a single definition, it will make it much easier for HMRC to target these workers and find new ways of taxing one single group. In light of the recent hunger for taxing contractors and freelance workers through a range of restrictions and definitions, could this lead to more issues?
Most importantly, this shows that the whole taxation system for the self-employed sector needs to be very carefully considered by Government officials. We need a fair system that ensures everyone pays their equitable share and a full review will help to deliver this.
What happens next for self-employed people?
David Cameron has welcomed the review and said the recommendations will be “carefully considered” while adding: “Up and down the country there are millions of hard-working self-employed people and I want to make sure they get all the support and security they need to achieve their ambitions.”
Julie says she expects to hear back from the Prime Minister on the recommendations in the coming months and adds that some recommendations may even be addressed in the forthcoming budget next month. This is amidst growing calls for the Government to do full reviews into travel and subsistence restrictions and a range of other issues that will directly impact the self-employment sector.
Ultimately, this report has some very valuable recommendations that will help to improve the lives of contractors, freelancers, temporary workers and self-employed people and they should be adopted by the Government urgently.
Critically, it has once again thrown the spotlight on the self-employed sector in the UK – which makes up 15 per cent of our workforce – and has clearly demonstrated how important it is to the future of our economy. That’s something the decision makers can never afford to forget.