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Self-employed predictions for 2023
- 15 Dec 2022
With a general election now on the horizon, uncertain economic conditions ahead and the off-payroll rules no longer a ‘new’ feature of contracting, what can we expect in 2023? Here’s three things to look out for.
The future of self-employment will open a new electoral front
Followers of IPSE will know that one of our biggest gripes is with how often the self-employed can be overlooked in policymaking and in discussion at the highest levels of government. Might have the Conservative’s political rivals picked up on this too?
The Labour Party has already put some weight behind efforts to outflank government on its offer to the self-employed. During the 2022 party conference season, Labour Deputy Leader Angela Rayner MP used her keynote speech to commit a future Labour government to giving the self-employed the right to a written contract and timely payment by law. The deputy leader also recently criticised government for failing to launch a promised review into self-employment.
Overall, it’s notable that whilst one of Labour’s most senior figures seems to have taken the interests of the self-employed into her purview, government’s small business minister (a role that lay vacant for a time) doesn’t sit at Cabinet.
Expect Labour to use 2023 – which could be the last full year before a general election – to broaden its policy offer to the self-employed in an attempt to attract what could be a larger than usual cohort of floating freelance voters. Whether government feels forced to react, and how they do so, will be the thing to watch for next year.
Self-employed headcount could finally resume growth
Whilst the opening two decades of the 21st century brought with it a 43% increase in the UK’s self-employed population, totalling more than 5 million at the start of 2020, the Covid-19 pandemic reduced that number to around 4.2 million by early 2021 – and it has been relatively stagnant since.
Uncertainty over the cost-of-living crisis and a looming recession makes for a difficult operating environment for a self-employed sector already scarred by the pandemic. At the same time, pressure on the incomes of those not currently self-employed could drive greater net inflows into the sector – whether it’s retirees with skills to sell on a freelance basis, employees adopting a ‘side-hustle’ to top-up their income, or recently unemployed workers with an idea to become self-employed.
We know from IPSE research published on National Freelancers Day 2022 that two in five (39%) of UK employees have considered working for themselves one day, whilst 46% could see themselves launching a side-hustle – and 12% already have one. It’s possible that economic conditions will bring forward this choice for many.
IPSE will be watching trends in the self-employed population very closely next year, but it will be even more important that government does the same. As more people choose to work for themselves, the importance of addressing holes in public policies for the self-employed grows with it – from taking firm action to tackle late and long payments, to developing a sustainable solution for long-term savings.
IR35 trends, court cases and enforcement
By April 2023, we will be two years on from the rollout of the off-payroll reforms to the private sector. Being firmly past the adjustment period for the reforms, will we begin to see clients – but perhaps more importantly, HMRC – begin to alter their approach?
Six months on from the private sector rollout, IPSE research suggested that 21 per cent of contractors were subject to a blanket ‘inside’ IR35 determination by their client, whilst a further 11 per cent reported their client insisted that they move onto a payroll without a status assessment – a blanket ban.
But more recently, through engagement with members, IPSE has heard increasing reports – albeit anecdotally – that a mixture of labour shortages in some sectors and a refusal by many contractors to accept inside IR35 engagements, could be prompting clients to engage more earnestly with the idea of returning to hiring incorporated freelancers. Where this isn’t possible however, clients may be open to increasing the rates they pay to payrolled contractors to account for the difference in net pay.
We will be watching just as closely for developments in HMRC’s approach. It’s worth remembering that whilst the off-payroll rules have been in place in some capacity since 2017, their enforcement has not yet – at least to our knowledge – been robustly challenged. Though a handful of public sector organisations have been handed large IR35 bills by HMRC, there was no real prospect of these bodies defending their position in court. The same can’t be said for private sector organisations – might we see the first real test of the rules in 2023?
There are also a number of live, pre-reform IR35 cases still to consider next year – most notably, HMRC’s disputes with Atholl House Productions Ltd and Professional Game Match Officials Ltd (PGMOL). What sets these cases apart from others is that in both instances, Court of Appeal judges sent these cases back to lower tier tribunal courts on the basis that those tribunals – which had initially found in favour of the defendants – had ‘erred in law’ in their interpretation of some aspects of their cases.
Strictly speaking, this is neither a win nor a loss for either side – but HMRC are likely to have taken some reassurance that they will have the opportunity to fight the cases again. It’s likely we will see these disputes heard in court again in 2023, and the contractor world will be following closely to see how tax status law could once again change.
For the latest insight and support with IR35 and your business, visit IPSE's IR35 hub.
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