The Web Designer Group Tracking
Thursday, October 22, 2020
Advertisement
Home Blog

A third of self-employed ineligible for SEISS

0

Over a million people were left out of the government’s coronavirus financial support scheme for the self-employed, according to new statistics published by HM Revenue & Customs last Friday.

The Self-Employment Income Support Scheme (SEISS) was open to the approximately five million self-employed individuals who reported trading profits for the tax year 2018-19, but 1.6 million of those were automatically excluded from the scheme because they did not meet the eligibility criteria.

The vast majority of those who were excluded – 1.4 million, or eighty-eight per cent – were denied access to the grant due to having higher non-trading profits than trading profits, one of the key eligibility criteria.  Non-trading profits could include employment income or dividends.  0.5 million individuals, or thirty-three per cent, had trading profits of £0 or made a loss, and 0.2 million, or eleven per cent, had trading profits over the £50,000 threshold.

The 3.4 million self-employed who did meet the eligibility criteria were classed as “potentially eligible” for the SEISS scheme, because their business also needed to be “adversely affected by coronavirus” and still trading for them to be eligible for a grant.

By July 31, 2.6 million individuals, or seventy-seven per cent of those identified as potentially eligible for the SEISS scheme, had claimed a grant, with the value of these claims totalling £7.6 billion – an increase of 50,000 claims since June 30.  Applications for the first SEISS grant closed on July 13.  The average value per claim was £2,900, with grants being paid at eighty per cent of three months’ average trading profits, capped at £7,500.

Chancellor of the exchequer Rishi Sunak told the Commons’ Treasury Select Committee in July that neither the SEISS not the Coronavirus Job Retention Scheme (CJRS) would be extended to cover workers that had “fallen through the cracks”, telling the committee “it is not as if there is no support available for the group of people you have mentioned”.

However, Derek Cribb, chief executive of the Association of Independent Professionals and the Self-Employed, continued to urge the government to reconsider ways to support forgotten freelancer groups in light of the HMRC data, warning that the omission is behind falling numbers of self-employed individuals.

“The August SEISS statistics are a reminder that although the scheme continues to help a large proportion of the self-employed, over a million freelancers – including directors of limited companies and the newly self-employed – are not eligible for it,” he said.  “This is a stark omission that is devastating to hard working self-employed people across the UK.

“We are already seeing the consequences of the gaps in support in the steep drop in the number of self-employed people last quarter.  A second grant opened earlier this week, still without even a nod to these forgotten groups, who now face yet more months with no support.  With the threat of a second wave and further lockdowns looming, government must urgently consider ways to support these desperate forgotten freelancers.”

The HMRC data also revealed that around two-thirds of the potentially eligible population (2.3 million) were male, with less potentially eligible women claiming the SEISS (seventy-one per cent) than men (seventy-nine per cent).  The average claim for women was also lower at £2,300 compared to the average claim of £3,200 by men.

Around ninety per cent of claimants were aged between 25 and 64 and take-up of the grant in those age groups is at or above seventy-six per cent, with no one age group dominating and claims evenly spread.

The sector with the highest number of potentially eligible individuals and the highest proportion of claims was the construction industry. By July 31, construction workers had made 884,000 claims for SEISS totalling £3.1 billion.

Also the two regions with the highest number of claims were London (498,000) and the South East (379,000), reflecting their relative sizes.

27th August 2020.

GDP contraction less severe than anticipated

0
GDP

Official figures now show that the gross domestic product (GDP) of the UK contracted by 19.8 per cent in the second quarter, at the height of lockdown.

A previous estimate by the Office for National Statistics (ONS) showed the GDP as shrinking by 20.4 per cent in the three months to June, compared to the previous quarter.  The 19.8 per cent contraction still represents the largest quarterly drop in GDP since records began in 1955, and by some margin.

Whilst the second-quarter decline was slightly better than the original estimate, the first-quarter contraction was revised down from 2.2 per cent to 2.5 per cent.  Overall, for the six months to June, GDP shrank 21.8 per cent compared with the earlier estimate of 22.1 per cent.

The figures confirm that Britain suffered the worst recession in the first half of 2020 of all the G7 advanced nations, with France faring next worst with an 18.9 per cent fall, followed by Italy, which shrunk by 17.6 per cent.  Japan escaped with an 8.5 per cent contraction and the US economy shrunk by 10.2 per cent.

“More complete data has not substantially changed the picture, with the UK economy still shrinking by around a fifth in the first half of the year, far bigger than any previous contraction on record,” Jonathan Athow, deputy national statistician at the ONS, said.

Andy Haldane, the Bank of England’s chief economist, warned that “contagious pessimism” in the UK was undermining the economic recovery.  He warned that the prospects for continued recovery would be endangered if people started “catastrophising” by looking at the record drop rather than focusing on the bounce back since then.

“Averting an economic anxiety attack calls for a balanced and flexible approach to the words and actions of businesses and policymakers,” the BoE policymaker said. “Encouraging news about the present needs not to be drowned out by fears for the future,” he went on, adding that he did not favour negative interest rates at the moment.

Mr Haldane acknowledged that a second wave of covid-19 cases, as now seems likely, would slow the economic recovery, but said unemployment was expected to rise to a lower peak than the central bank’s 7.5 per cent estimate, especially with the government’s new Job Support Scheme.

“Now is not the time for the economics of Chicken Licken,” he added.

Mr Haldane’s speech came after official figures for the second quarter showed consumers were initially extremely cautious when the UK was in full lockdown.

With covid-19 measures restricting movement and leaving many shops and restaurants closed, people’s ability to spend was limited over the second quarter.  The household saving ratio — the average percentage of disposable income that is saved — increased to a record 29.1 per cent, up from 9.6 per cent in the previous three months.

Household spending fell by £80.5 billion, or 24.2 per cent, “the largest quarterly fall in nominal household spending ever recorded” as lockdown closed much of the economy.  The biggest falls in spending were on “restaurants and hotels, transport — particularly air transport and motor vehicles — and recreation and cultural services”.

It was the first time the value of loans paid off exceeded new loans issued since the first quarter of 2010, after the financial crisis.  Businesses also cut back on investment and halted dividends to preserve cash.

Businesses slashed investment by 26.5 per cent in the second quarter — the fastest drop on record, much worse than the 9.8 per cent drop during the 2008 global economic downturn, suggesting that companies have been pessimistic about the future during the pandemic.

The latest monthly GDP figures for August are due to be released next week, with analysts predicting that the economy is on track to register a record expansion in the third quarter.

However, with the number of coronavirus infections rising and more restrictions being put in place, economists are cautioning that this growth could falter before output returns to pre-crisis levels.

“The renewed Covid-19 restrictions will probably mean that GDP stagnates in Q4, leaving economic activity marooned 5.5 per cent short of its pre-crisis level,” said Ruth Gregory, senior UK economist at Capital Economics. “The risk now is that renewed containment measures send the recovery into reverse.”

Autumn budget cancelled

0
Budget

Contractors will have to wait until the spring to find out what tax hikes – if any – await them in the new financial year, after chancellor of the exchequer Rishi Sunak announced that the Autumn Budget has been cancelled late on Wednesday.

Given the spiraling costs of combating the covid-19 pandemic, tax rises are widely anticipated.  Mr Sunak has floated the idea of raising corporation tax from nineteen to twenty-four per cent, a move that would affect limited company contractors operating outside of IR35.  Harmonising the amount of National Insurance that employed workers and the self-employed pay has also been mooted.

Following the announcement of the government’s new Job Support Scheme, that will see both the exchequer and employers topping-up the wages of workers who have had their hours reduced, a Treasury statement said: “As we heard this week, now is not the right time to outline long-term plans – people want to see us focused on the here and now. So we are confirming today that there will be no Budget this autumn.”

One measure that can be relied upon to take effect next April is the extension of IR35 reforms, officially known as the Off-Payroll rules, to the private sector, which will see end-clients become responsible for assessing their contractors’ IR35 statuses.

“What with covid looming large and Brexit deals not done, a cancellation of the Autumn Budget is hardly surprising,” said Kate Cottrell, co-founder of IR35 investigation specialists Bauer & Cottrell.

“I think most contractors would have been outraged to be faced with any Budgetary tax increases … especially with the new IR35 private sector rules already due to come in.

“Until HMT [HM Treasury] and HMRC see the devastation caused from redundancies after the covid support packages deplete, how can they possibly make any sense of the state of the economy?”

“It’s not surprising that the Autumn Budget has been cancelled this year,” Julia Kermode, the former CEO of the Freelancer & Contractor Services Association (FCSA) posted online.

“[Fortunately] … the chancellor will give an update on government plans to continue protecting jobs through the winter.”

25th September 2020.

Tax experts back self-employed tax increases after coronavirus

0
Self-assessment Tax Return

A number of the country’s key experts in taxation have backed harmonising the tax liability of the self-employed with that of employees at a hearing of the Commons’ Treasury Select Committee, raising the prospect of “post coronavirus” tax rises for self-employed workers and limited company contractors.

Currently, permanent employees and self-employed workers pay the same amount of income tax, but the National Insurance liability of employees is higher.  Limited company contractors who are not subject to IR35 can choose to split their remuneration between a salary and dividends, which attract a lower rate of income tax than salaries and are not subject to National Insurance at all.  Limited company profits are subject to corporation tax, however.

Traditionally, the disparity between the overall tax paid by permanent employees, self-employed workers and company directors has been attributed to the greater level of financial risk that freelancers face and the more limited access to statutory benefits that they receive: freelancers and small businesses are more beneficial to the economy, on the whole, but take less out of the system in benefits, and the preferential tax treatment incentivises people to move into self-employment.

However, the covid-19 pandemic threatens to change this precept.  Both employees and the self-employed have received substantial economic support from the government (although, notably, limited company directors haven’t), and even back in March, chancellor of the exchequer Rishi Sunak said: “It is now much harder to justify the inconsistent [National Insurance] contributions between people of different employment statuses.  If we all want to benefit equally from state support, we must all pay in equally in future,” following the unveiling of the Self-Employed Income Support Scheme (SEISS).

But have the self-employed really benefited equally during the coronavirus crisis?  The argument could be made that someone on furlough could stand to receive significantly more than a self-employed individual claiming under the SEISS: an employee furloughed between March and October receiving the maximum amount would receive £19,062.50; a self-employed individual claiming the maximum amount of both SEISS grants would get £14,070.00.  Also, self-employed individuals with trading profits of £50,000 or more receive nothing: employees earning over this amount do get paid under the furlough scheme, to the capped amount.

Other exemptions have left over one and a half million self-employed workers out of the SEISS scheme, according to official statistics, and limited company directors are another demographic who seem to have “fallen through the cracks”.

With government debt spiraling due to the reaction to the global health crisis, the Commons’ Treasury Committee has launched a new inquiry called “Tax after coronavirus”, with the objective of reexamining the tax system.

When asked at a recent oral evidence session if reduced taxation for the self-employed is justified, Charlotte Barbour, director of taxation at the Institute of Chartered Accountants of Scotland (ICAS), said:

“There is a hornets’ nest, thank you.  It is very difficult to justify different tax rates for what people call the three-person problem.  If you have similar work, whether you are employed, self-employed or through a company, there does not seem to be a logical reason in terms of fairness as to why those different people should pay different amounts of tax.  I do question that.”

She did go on, however, to decline to offer any particular recommendation on how to change the system, saying that the issue “needs a wider discussion and a contribution from everybody” and that “the self-employed do face more risk so maybe, arguably, they have to pay less”.

When asked about the issue of “limited company directors who can draw dividends that are not subject to national insurance”, John Cullinane, tax policy director at the Chartered Institute of Taxation (CIOT), agreed with Ms Barbour, but highlighted the political difficulty in altering self-employed taxation.

“If you had a blank sheet of paper, you would probably design something where either they were somehow paying the same tax or, even if there were different taxes for different legal situations, the overall balance was better.  The big problem with saying that — this is, I suppose, why you are putting us on the spot — is that the differences are so huge that to adjust them would be massively painful for self-employed people.

“People often talk about the few-percent differences on employees’ national insurance, or not having national insurance on dividends, as being what it is all about, but the elephant in the room is the employer’s national insurance of 13.8%, which is being taken out of the system by having somebody move off payroll, whether they are incorporated or not. The amount of money that self-employed people are able to charge in the market no doubt reflects the fact that they are less heavily taxed than if everything was run through an employed basis.

I do not pretend it is easy to get from A to B.  I would plead the Chair’s comment at the beginning about political unfeasibility.  The politics are much more difficult here, frankly, than with VAT on food or some other things we have been talking about, and for good reason. It would be a massive shock to people.”

Anita Monteith, tax manager at the Institute of Chartered Accountants in England and Wales (ICAEW), brought up The Taylor Review of Modern Working Practices, published in 2017, which recommended making “the taxation of labour more consistent across employment forms while at the same time improving the rights and entitlements of self-employed people”.  She said:

“Can I remind everybody that we had some really good work done by Matthew Taylor a few years ago?  He was spiked before he even got started because he was told specifically not to look at tax.  I think all of us here went in to see him, one after the other, and said, ‘But you must look at tax; otherwise you are missing the elephant in the room.’  We need to have a proper conversation.”

Rishi Sunak is almost certainly going to have to raise taxes over the next twenty-four months given the unprecedented amount of public funds that have been needed to combat coronavirus, and the economic fallout of the crisis.  He is not bound by the recommendations of the Treasury Committee, but will certainly be following this inquiry.  Whether or not the tax treatment of the self-employed or owner-directors will be targeted remains to be seen, but the conversation about alignment with employees continues, in earnest.

23rd September 2020.

Claims for second SEISS grant already top two million

0
UK Tax Return

More than two million people have already applied for the government’s second self-employed coronavirus grant, according to recent official figures.

In May, chancellor of the exchequer Rishi Sunak announced that the Self-Employed Income Support Scheme (SEISS) would be extended, with those eligible able to claim a second and final grant capped at £6,750.  Applications for the second grant opened on August 17, with HM Revenue & Customs receiving 2 million applications between the opening date and the end of August from a total potentially eligible population of 3.4 million.

The 2 million claims for the second SEISS grant will cost the exchequer £5.1 billion, with these numbers expected to rise before the closing date for applications on October 19.  The average award per claimant is currently £2,500.

September’s figures compare to statistics published last month relating to the first grant, which was claimed by a total of 2.6 million between May and July, with the value of claims totalling £7.6 billion and an average claim payout of £2,900.

5 million individuals reported self-employment income for the tax year 2018-19 and had their data assessed for potential SEISS eligibility.  In order to be assessed, a self-employed individual needed to have traded in the tax year 2018-19 and submitted a self-assessment tax return on or before April 23, 2020 for that year.

Via this process, 3.4 million self-employed individuals were identified as potentially eligible for the SEISS scheme.  This means that they met the criteria for the scheme based on self-assessment returns from the tax year 2018-19 and earlier years.  To be eligible for the SEISS scheme, an individual needs to have had profits of £50,000 or less over the past three years, to have not made a loss and for their trading profits to be at least equal to any non-trading income that they may have received.

However, a business also needs to be adversely affected by coronavirus to be eligible, and not all of the 3.4 million businesses will have been.  Some may also have ceased trading since the 2018-19 financial year, which would make them ineligible for support.

Of the 2 million individuals who have already submitted a claim for the second SEISS grant, around 90 per cent of claimants are aged between 25 and 64 and take-up of the grant in those age groups is at or above 56 per cent.  No one age group dominates and claims are evenly spread.

The sector with the highest number of potentially eligible individuals and the highest proportion of claims is the construction industry.  By August 31, construction workers had made 693,000 claims for SEISS totalling £2.1 billion.

The two regions with the highest number of claims are London (390,000) and the South East of England (292,000), reflecting their relative sizes.

With the number of total applications received for the second SEISS grant currently 600,000 less than for the first, any self-employed individuals who may be eligible are being urged to make their claims before the closing date in four weeks’ time.  A claim for the second SEISS grant will not be made automatically by virtue of a first claim having been made.

Information on how to claim for the second SEISS grant can be found here.

22nd September 2020.

Government announces U-turn on office working

0
Coronavirus

People in England should return to working from home “if they can”, a government minister has said, in an apparent U-turn on previous government messaging.

Michael Gove, the chancellor of the Duchy of Lancaster, made the announcement in a series of interviews on Tuesday morning, saying that workers should return to working remotely where possible and only attend their workplaces should their job “require it”.

The interview came the morning before prime minister Boris Johnson announced a tightening of coronavirus restrictions including making face masks compulsory for bar staff, shop workers and taxi drivers, and reducing opening hours of pubs, bars and restaurants, requiring them to close by 10pm from Thursday.

Cases of covid-19 are rising fast in the UK and could reach 50,000 new cases per day by mid-October, the government’s top science adviser, Sir Patrick Vallance, announced on Monday.  He also warned that covid-related deaths could number 200 per day by mid-November if action was not taken to slow the spread of the virus.

Gove told BBC Radio 4’s Today programme that there had been a change in advice, and employers should now be encouraging working from home instead of returning to offices.

“We are stressing that if it is safe to work in your workplace, if you are in a covid-secure workplace, then you should be there if your job requires it,” he said.  “But if you can work from home you should.”

When asked if this was a change to official advice, Gove said it was.  But he told BBC Breakfast that England was “not going back to the sorts of measures that we had in the spring”, when strict nationwide lockdown measures were imposed to restrict the reasons people could leave their homes.

In a “People’s PMQs” session on social media in July, Johnson told people to “start to go back to work now if you can”.  And in the last month the government has encouraged workers to return to offices, amid rising numbers of layoffs in the hospitality sector as footfall has dropped in urban centres, saying that many workplaces were now “covid secure”.

Speaking at a Downing Street press conference on Monday, Sir Patrick Vallance stressed the figures given were not a prediction, but added: “At the moment, we think the ep-idemic is doubling roughly every seven days.

“The challenge, therefore, is to make sure the doubling time does not stay at seven days,” Vallance said. “That requires speed, it requires action and it requires enough in order to be able to bring that down.”

On Tuesday lunchtime Boris Johnson warned the House of Commons that the UK had reached “a perilous turning point” as he set out new restrictions to combat coronavirus that could last for up to six months.

He told MPs that businesses in the hospitality sector would be restricted to table service only and required to close at 10pm and that the limit on wedding attendees would be reduced from thirty to fifteen.

Face masks will now also be compulsory for retail staff, waiters, bar staff and taxi drivers, and for customers of bars and restaurants while they are not sat at their tables, with the fines for breaking the rules increased to £200.

“We always knew that while we might have driven the virus into retreat, the prospect of a second wave was real.  I’m sorry to say that, as in Spain and France and many other countries, we’ve reached a perilous turning point,” he said.

After a meeting of the Cobra emergency committee this morning, Johnson told the Commons he would provide police and local authorities with extra funding to increase enforcement of the regulations and the option to draw on military support.  He also warned that failure by the public to follow the rules could mean the government would be forced to implement even stricter controls.

The UK’s coronavirus alert level was upgraded from three to four on Monday, meaning the risk of transmission is “high or rising exponentially”.

In an interview with Sky News, Gove described the latest changes in restrictions as a “shift in emphasis” and unavoidable as coronavirus infection rates continued to rise.  “It’s important to stress that there are many roles which can’t be performed from home … where we recognise that that’s simply impossible,” Gove said.

“We need to balance, obviously, the need to ensure that people can continue to work and, critically, continue to go to school against taking steps to try to reduce the virus,” he said.

Additionally, Gove told BBC Breakfast this morning that trials of spectators at sporting events would be “paused” until the rate of covid infections was brought down.

22nd September 2020

Crownfunded Loan Charge review seeks participants

0
High Court

An effort to repeal the controversial 2019 Loan Charge via judicial review is seeking donations as it passed eighty-five per cent of its funding target.

The Loan Charge Judicial Review European Union (LCJR EU) campaign plans to launch two challenges to Loan Charge, in Scotland and at the High Court of Justice in London. The challenges will argue that the Loan Charge is incompatible with European Union law, which currently has “primacy”, or supremacy, over laws made in Westminster.

European Union law contains overarching principles known as the four freedoms, one of which is the freedom of movement of capital. The campaign seeks to make the argument that the Loan Charge legislation breaches this freedom and is therefore invalid.

England and Wales is a separate legal jurisdiction from Scotland and the campaign believes that European Union law is “looked upon more favourably” in Scotland, hence the second challenge. It is also cheaper to launch an application for judicial review in Scotland.

The Loan Charge, which took effect in April 2019, is an anti-avoidance measure designed to counter “disguised remuneration” schemes which paid taxpayers via loans to avoid income tax and National Insurance. A significant proportion of the users of such schemes were contractors. Controversially, the Loan Charge can levy income tax on loan balances relating to payments made before it became law, giving it a quasi-retrospective scope.

The judicial review process is usually used in English law to challenge the lawfullness of a government decision, rather than legislation, but the process can be used to “disapply” legislation that is incompatible with EU law.

The LCJR EU campaign has raised eighty-five per cent of its £180,000 funding target in just ten days and is now asking affected taxpayers who have not yet donated to contribute, in “one big final push”. The campaign has instructed a legal team which includes Richard Clayton QC and Andrew Thornhill QC and has received a joint opinion from Mr Clayton and his junior that challenging the Loan Charge on the grounds that it is incompatible with EU law has a “better than fifty per cent chance of success”.

“[This] is the last and best hope of challenging the Loan Charge legally and [so we] urge people facing the Loan Charge to chip in and fund it, to make it happen,” said LCJR EU spokesperson Andrew Earnshaw.

“This is the only Judicial Review that if it succeeds, would stop enforcement of the Loan Charge. Other JRs can only challenge certain decisions made relating to it, but would leave the Loan Charge in place.”

The campaign’s website states: “As a direct result of the challenge being launched qualified counsel will provide a short opinion, this opinion will allow you to go to your accountant and or tax advisor and if he agrees with the opinion and takes into account the planning which you have used you will be able to legitimately not enter the details of loans on your SATR [tax return]. This should remove the risk of penalties but not interest should the challenge fail. This step does not have to be taken before 30 September.”

Prime minister Boris Johnson committed to a “thoroughgoing” review of the Loan Charge last September at Prime Minister’s Questions. The subsequent review, led by former National Audit Office chief Sir Amyas Morse, narrowed the scope of the levy slightly but upheld its basic validity.

“I support the essential purpose of the Loan Charge,” said Sir Amyas in his eighty-three page report, before going on to call the design of the charge “highly unusual”.

“The goal posts moved dramatically following the outcome of the review published before Christmas,” former tax inspector Liz Coleman told website ContractorUK.

“The effect of this was that many settlements had to be rewritten at short notice – and are still being amended. An additional complication was that contractors…who had settled based on the forthcoming loan charge may not have settled had the revised rules been in place.”

“So HMRC are therefore contacting those who are affected and have undertaken to make the appropriate adjustments and make repayments where appropriate.

“For any further amendments to be made would mean extensive rewriting of settlements and frankly, I cannot see that HMRC would be willingly do this.”

Now a consultant at advisory firm Integrated Dispute Resolution, Coleman believes the Revenue’s wide adoption of Morse’s recommendations would likely be grounds for it to “vigorously oppose any suggestion of further amendments”.

Number of self-employed drops for fifth consecutive month

0
Self-employment

The number of self-employed individuals in the UK dropped by 154,000 in the three months to July compared to the previous quarter, representing the fifth consecutive month that the number of self-employed has contracted, according to official data.

Last month’s labour market statistics, published by the Office for National Statistics (ONS), revealed a record quarterly drop in the number of self-employed workers of 237,000 in the three months to June.

The Association of Independent Professionals and the Self-Employed (IPSE) called the decline “alarming and avoidable”, and blamed the continuation of the falling numbers seen in previous months on gaps in the government’s coronavirus support schemes.

It has called on the government to prepare a “fair, flexible and focused” extension of the Self-Employed Income Support Scheme (SEISS) to support freelancers through any second wave of the pandemic. Chancellor of the exchequer Rishi Sunak has so far been unequivocal in saying that the current coronavirus support schemes will not be extended.

“The labour market statistics this month reveal an alarming and avoidable drop in self-employment,” said Derek Cribb, chief executive of IPSE. “In a recession, we would usually expect self-employment to be flourishing as companies seek out flexible expertise. Instead, we are now seeing a drastic and continuing decline in the sector.

“This is almost certainly because of the glaring gaps in government support: next to nothing was done for limited company directors and the newly self-employed and now we are seeing the consequences.

“The self-employed are vital for economic recovery, but huge swathes of the sector have been undermined and left behind. As a second wave of coronavirus approaches, government must do more. We urge the government to prepare a fair, flexible and focused extension of the Self-Employment Income Support Scheme – for the sake not only of the self-employed themselves, but also the economy.”

16th September 2020.

Nearly 700,000 less on payroll in August

0
Unemployment

The official UK unemployment rate rose to 4.1 per cent in the three months to July, up 0.2 percentage points from the previous quarter. However, with five million people still temporarily away from work (including furloughed workers), the official rate does not currently provide a clear picture of the state of the labour market, as it is being kept artificially low.

Of more interest during the pandemic has been data from HM Revenue & Customs that indicates the number of people who have left their employers’ payrolls – a loose measure of the number of redundancies – and in August that figure was down around 695,000 compared with March, according to data published by the Office for National Statistics (ONS) on Tuesday.

The figures suggest that hiring activity as lockdown measures have been eased has not done enough to offset redundancies. Despite this, the official employment rate rose to 76.5 per cent between May and July, up 0.1 percentage points on the quarter and 0.4 percentage points higher than the same period in 2019. The rate of economy inactivity, which measures the number of people who are out of work but not actively seeking a job, also fell.

Young people aged between 18 and 24, who are disproportionately more likely to work in sectors of the economy hit hardest during lockdown such as hospitality and the arts, saw a record drop in employment of 146,000.

Figures for the period to July will not include job losses that have occurred since employers have had to begin contributing to their furlough payments from the start of August. Economists believe the situation will have worsened significantly this month. The Institute for Employment Studies (IES), a consultancy, has warned that covid redundancies will exceed anything seen “in at least a generation”.

The IES obtained data via a freedom of information request that revealed that employers notified the government of nearly 380,000 staff at risk of redundancy between May and July.

Tony Wilson, director of the IES, said the data “[laid] bare the scale of the jobs crisis” the UK was facing in the coming months. He added it was a “sad reality” that redundancies could not be avoided entirely, but employers and the government could do more to minimise job losses.

“Our top priority must be to support those facing the prospect of losing their jobs to find new, secure and good-quality work as quickly as possible,” he said. “At the same time, we are in the midst now of a significant recession, and we need urgent action to support employment demand.”

Paul Dales of consultancy Capital Economics told the Financial Times: “It’s encouraging that the first step in unwinding the furlough scheme has not led to a surge in job losses, but we think it is only a matter of time before that happens.”

“All the evidence is pointing to a mounting jobs crisis across Britain,” said Nye Cominetti, a senior economist at the Resolution Foundation. “The reopening of the economy this summer after lockdown may have boosted economic activity, but it has not spurred a recovery in the jobs market”.

Chancelllor of the exchequer Rishi Sunak said of the unemployment figures: “This is a difficult time for many as the pandemic continues to have a profound impact on people’s jobs and livelihoods. That’s why protecting jobs and helping people back into work continues to be my number one priority.”

15th September 2020.

Mental health issues on the rise amid pandemic

0
Mental Health

Over a quarter of freelancers reported having “poor” or “very poor” mental health in a recent survey by a trade body for self-employed individuals.

The research, by the Association of Independent Professionals and the Self-Employed (IPSE), found that the number of freelancers experiencing poor mental health had increased from six per cent to twenty-six per cent during the covid-19 pandemic, a rise of three hundred per cent.

Accordingly, the number of people who said they are in “good” or “excellent” mental health has dropped from sixty-eight per cent to thirty-nine per cent since the beginning of the pandemic. Women and freelancers in the 16-34 age group were the worst affected.

Nearly a third (thirty-two per cent) of freelancers reported feeling highly-stressed, with half of those feeling depressed or anxious as a result. Forty-seven per cent of stressed freelancers said they were losing sleep because of worry and forty-six per cent said they felt a reduction in their confidence and energy. Twenty-two per cent said they had lost clients due to job-related stress.

To counter stress, sixty-seven per cent of freelancers said they made time to exercise, and half also said they make sure they get enough sleep and make time for hobbies and entertainment to support their mental health. Forty-nine per cent said that they try to maintain a healthy diet to boost their mental health.

However, few freelancers reported seeking external help for stress or mental health issues. Only seventeen per cent said they had accessed support for their mental health during the pandemic, including: online information and advice (twelve per cent), counselling or therapy sessions (seven per cent) and mental health helplines (one per cent).

“Lockdown and the pandemic have clearly shaken the mental health of the freelancing sector,” said Chloé Jepps, head of research at IPSE. “Before the pandemic, many people went freelance for the freedom and flexibility.

“Now, however, with financial worries mounting and not enough support from government, one in four freelancers are struggling with their mental health. This is a simmering crisis for freelancers across the UK – and one that government and industry have to confront.

“One of the most practical things government can do is help stave off the financial worries of freelancers and the self-employed, since this sector has been hit harder than most by lockdown and the pandemic. The government should make sure there is no cliff-edge to its support schemes and that any further support is open to all the self-employed, not just a proportion.

“We also believe it is vital government and industry begin promoting mental health advice and guidance that is tailored to freelancers. This essential and large part of the workforce has not had the mental health support it needs and in the current financial turmoil, that need is more urgent than ever.”

14th September 2020.

Autumn Budget may be postponed

0
Budget

Chancellor of the exchequer Rishi Sunak has left the door open to postponing the autumn Budget by making a request for the production of official economic forecasts without comitting to any tax or spending plans or setting a specific Budget date.

The unusual written statement to the House of Commons from Mr Sunak on Friday asked the Office for Budget Responsibility (OBR) “to prepare an economic and fiscal forecast to be published in mid-to-late November”. The Treasury said the instruction was deliberately vague in the current economic circumstances to give ministers the option of delaying the annual Budget.

Fears had been raised in the contractor community recently that the chancellor was eyeing raising corporation tax and/or the rate of self-employed National Insurance Contributions as a means of funding burgeoning public debt created by the government’s response to the covid-19 pandemic, after a series of apparent “kite-flying” exercises in the media.

A Budget had loosely been expected in October or November, but now seems extremely unlikely to take place at least until after the publication of the OBR forecast. The move signals that the chancellor is not keen to commit to spending plans and tax proposals while coronavirus cases are rising and the medium-term economic outlook is far from certain.

The Budget may even be delayed until the spring, as happened this year. The chancellor is still planning to announce a multiyear spending review this year, but this does not need to coincide with the Budget. The Budget will have to be held before the new financial year starts next April, in order for the government to have the power to collect certain taxes such as income tax which are legislated for annually, but the Treasury is hoping the outlook for covid-19 and the economy will be clearer by then.

It may be that contractors are left waiting until the last minute to find out what tax hikes, if any, are waiting for them in the 2021-22 financial year. The IR35 reforms known officially as the Off-Payroll rules are almost certain to be extended to the private sector next April, however, having been legislated for already in this year’s Finance Act.

11th September 2020.

Recent Posts

Most Popular

GDP

GDP contraction less severe than anticipated

Official figures now show that the gross domestic product (GDP) of the UK contracted by 19.8 per cent in the second quarter,...
Budget

Autumn budget cancelled

Contractors will have to wait until the spring to find out what tax hikes – if any – await them in the new financial...
Self-assessment Tax Return

Tax experts back self-employed tax increases after coronavirus

A number of the country’s key experts in taxation have backed harmonising the tax liability of the self-employed with that of employees...
UK Tax Return

Claims for second SEISS grant already top two million

More than two million people have already applied for the government’s second self-employed coronavirus grant, according to recent official figures. In May, chancellor...
Coronavirus

Government announces U-turn on office working

People in England should return to working from home “if they can”, a government minister has said, in an apparent U-turn on previous government...