Articles - 27th November 2018

Are Freelancers slipping between the Brexit cracks?

Words by Mark Smith
Illustration by Jonathan Vermersch

With EU leaders signing off on the most recent draft of the Brexit deal and the March deadline looming closer, freelancers need to be ready for the changes in policy but perhaps not for the reasons you’d expect. Mark Smith writes on freelancing in post-Brexit Britain.

We live in uncertain times.

Regardless of whether people voted leave or remain in the 2016 Brexit referendum, one word which crops up time and time again is ‘uncertainty’. Despite article 50 being triggered in March last year signalling Britain’s intention to leave the EU, to this day nobody actually knows what that post-EU relationship will look like, with clear ramifications for businesses of every size, including freelancers. While the new withdrawal agreement was tentatively passed by her Cabinet despite a flurry of resignations, it still remains to be seen whether it will pass through Parliament.

And that’s not the end of the uncertainty, because even once the agreement has been reached on how Britain leaves the EU, there then remains the prospect of two – possibly four – years of negotiations ahead which will dictate how Britain trades with the EU going forward. In its quarterly survey of freelancers, IPSE (The Association of Independent Professionals and the Self-Employed) found that Brexit was having an increasingly detrimental impact on their business confidence. Jonathan Lima-Matthews, Senior Policy Adviser at IPSE, said: “In Q1, freelancers told us Brexit was one of the top three factors most detrimental to their business performance, and in Q2, it became their number one concern.”

Freedom of Movement

Arguably the largest impact on freelance workers in post-Brexit Britain will be freedom of movement, or the potential lack thereof. As things stand, a worker can live and ply their trade in any of the EU’s 27 member states just as easily as they could in their own country. After Britain leaves this is likely to change, although to what extent is – you guessed it – still largely uncertain.

If Britain were to leave the EU without a special deal, then after the conclusion of the transition deal in December 2020, freelancers would be required to obtain a work permit or a visa if they wish to take up work in an EU member state.

Workers from the UK who do take up residence before the end of the two year transition period would be allowed to stay beyond that date, but according to the latest current draft agreement due to be debated in Parliament, would need to apply for a new residency document. If they stay for five years, however, they would be allowed to stay in that country permanently.

All of this may not even come to pass, with other non-EU nations having struck their own separate deals on freedom of movement.  So a continuation of the status quo is not beyond the realms of possibility.

Bhavini Kalaria, Managing Director of The London Law Practice, said: “Of course, If we negotiate a deal similar to that of Switzerland, then not much should change for self-employed who want to work in the EU.” she said.

“The Swiss agreement includes symmetric freedom of movement of both workers and self-employed between the EU and Switzerland. It means the Swiss can work in other EU member states and EU citizens can also settle and work in Switzerland.”

She added: “Much of the debate has centred on immigration, especially of the less skilled, but the subject is incredibly complex. Short term visas for seasonal work, such as in construction and agriculture is what most people expect to be the sensible and probable outcome.”

“For the skilled, we expect there will be legislation allowing visas giving much more flexibility.”

This lack of concrete detail over freedom of movement has even prompted calls for clarity from a freelancing Earl in the House of Lords.

Nicholas Trench, the 9th Earl of Clancarty, a freelance artist and poet, told the Upper Chamber of the ‘real concern’ among the freelance creative industry about the possibility of the loss of free movement.

He told UnderPinned: “If we leave the single market it will mean every other European with that access will have a competitive edge and for whom the red passport will remain their work permit.

“This is because for so many freelancers that movement is essential.

“In the creative industries and IT, for example, it is ‘themselves’, and their innovation and creativity which is being sold: their presence abroad as part of that trade is crucial.”

Tax and GDPR

Confusion around tax and other legal requirements is something that has weighed heavily on the mind of Diane Milburn of The German House. A freelance German to English translator, over the last ten years she has gradually built up her business with clients in the UK and the EU, the latter of which accounts for 40% of her trade.

“I am a sole trader, not a limited company and I am not VAT registered.” She says.

“This has already caused some problems with invoices to German clients because German tax law requires a supplier’s VAT number to be included on an invoice. I have got around the issue by putting my Unique Tax Reference number on the invoice and although this is meaningless, the sight of an official-looking number has satisfied the German authorities.

“I am concerned that this may be scrutinised more closely after Brexit and I may be faced with the additional expense of having to become a limited company/register for VAT to simply continue trading with EU countries.”

As well as tax, there’s also the issue of GDPR – General Data Protection Regulation – the EU’s flagship data privacy laws which came into being earlier this year.

But Jonathan Lima-Matthews is cautiously optimistic that neither should change under a new agreement.

He said: “Forecasting is a dangerous game – particularly relating to Brexit – but in terms of compliance around GDPR and tax, we don’t expect significant change.”

He added: “Despite the hassle of becoming GDPR compliant, the law seems to be pretty effective and it’s unlikely that there will be any calls for yet another change on how we manage data.”

Legal Protections

One of the fears raised by some critics of Bexit is that leaving the EU could set back employment rights.

Arguably the two most important employment protections where they relate to freelancers are health and safety regulations, and protections against discrimination in the workplace. Again, there is no concrete guarantee that this won’t change, but talk from inside the government gives cause to think these laws will stay the same.

“In the talks we have had with various government departments”, says Lima-Matthews, “we haven’t heard anything to suggest that Brexit would have an impact on this.”

In any event, during the transition period the UK will continue to remain under the jurisdiction of the European Court of Human Rights, further entrenching existing worker protections for the time being at least.

Payments and Travel

Two areas where freelancers could be hit in the pocket is being paid in Euros and travelling abroad. This is because one of the central pillars of free movement – the movement of capital – could come to an end, which could see workers in the UK who are paid in Euro being hit by charges.

If freelancers are working for a client based on the continent after Brexit and they are paid in Euros, they could find themselves having to pay out for their bank to convert this currency into Sterling.

This is something Diane Milburn is also worried about: “I am concerned that banks will levy additional charges for payments in Euro to UK accounts after Brexit.

“My accountant and bank have so far been unable to advise me due to the general lack of clarity surrounding Brexit.”

Similarly, anyone heading to Europe for a meeting or interview or to take up a new position could find themselves getting hit with steeper airfares. At the moment, the EU is governed by an ‘open skies’ policy where European airlines can fly anywhere they want within the EU 27 and not incur any extra changes, but there is no guarantee that that will remain in place post Brexit, with any increased tolling of airlines more than likely to be passed on to their customers.

Less Regulation

But there are also potential benefits for freelancers in the post-Brexit world, says Bhavini, with a lighter touch to regulation likely to provide a boon to freelancers.

“Micro-businesses may feel the positive effects from a lower regulatory burden being outside of the EU, particularly in employment law,” she said. “For instance, the EU working time directive – largely unpopular amongst micro-businesses due to it preventing staff working overtime should they wish to have received much negative publicity.

“The FSB (Federation of Small business) has campaigned to make the legislation more flexible for the past four years, so this could be a positive.”

New Opportunities

One person’s misfortune is another’s opportunity. The immediate aftermath of the Credit Crunch, for example, saw a boom in self-employment. Indeed, one of the many benefits freelancers can have over larger businesses is that they have fewer overheads and potentially less restrictive policies and procedures, they can be leaner and more fleet of foot, allowing them to adapt rapidly and take advantage of a fast-changing economic landscape. With that in mind, the issues which may prompt larger businesses to cut their costs could provide an opportunity for freelancers to fill in some of the gaps.

That’s the opinion of freelance software developer Leon Brown.

Previously named ‘The North West’s Coolest Techie’, Brown’s company NextPoint offers freelance software and training services.

He said: “Regardless of what happens with Brexit, work will still need to be done. This is good news for IT contractors because companies are already finding it difficult to find people for the jobs, with research anticipating 800,000 IT jobs to go unfilled by 2020.” He says that if Brexit restricts companies from accessing IT workers from outside the UK, this is likely to create a situation where even more jobs go unfilled.

“As companies scramble to meet their deadlines, many of them will seek to hire IT contractors to fill that gap.” He said.

“This will be great for IT contractors, because it will mean they have more work to choose from – and importantly, be in a position to negotiate significantly higher pay, possibly doubling the current going .”

When all is said and done, freelancers are in much the same position at the moment as everyone else, waiting for some clear indication of what the final Brexit deal will look like while understandably feeling vulnerable until that position becomes more solid.

But there’s also the very real chance that this uncertainty could present opportunities for freelancers. As larger businesses tighten their belts, they could realistically turn to freelancers to perform roles they may otherwise have used full-time staff or larger agencies for.

Also, with no layers of management or reams of procedures to adhere to, freelance businesses can be leaner and more fleet-of-foot, allowing them to adapt faster to the changing post-Brexit world. If changing tack into the Brexit headwinds for a big business is like turning around an oil tanker, a freelancer can be a dinghy with an outboard motor.

So the message to freelancers would be watch, wait, and be ready.

We champion the freelancers and every entrepreneur who took a leap of faith with their idea.

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