Articles - 12th June 2019

EU Clients Shun UK Freelance Creatives Ahead of Brexit Red Tape

Words by Emily & Jack

Freelancers face a looming tax nightmare

The off-payroll rules were first introduced in 2000 by the then chancellor Gordon Brown. Known as “IR35”, the rules are designed to crack down on tax avoidance by people who HM Revenue & Customs considers to be “disguised employees”. Until recently, contractors using these limited company structures were responsible for judging whether they were “inside IR35” rules or “outside IR35” and liable for corporate taxes. From 2017, however, the government changed the law so that public sector organisations hiring contractors had to assess whether IR35 applied to these workers.

Hiring companies and recruitment agencies are liable for any unpaid tax if HMRC finds that a worker has been incorrectly classified. HMRC says hiring companies will need to prove they have taken “reasonable care” to assess the IR35 status of their contractors. If they fail to do so they risk being liable for any shortfall in tax and national insurance. “The cost of non-compliance with the off-payroll working rules in the private sector is growing and will reach £1.3bn a year by 2023-24,” HMRC said in a consultation document on the policy. “It is therefore right for the government to take action to address this to secure funds that could otherwise be spent on vital public services.”

Dave Chaplin, chief executive of Contractor Calculator, puts it like this “Two people are sitting at dinner, and the bill arrives for £100. HMRC steps in and says ‘The bill is now £20 more. The client’s portion is four-fifths of that, at about £16, and the contractor’s is an extra £4.’ Each party wants the other to pay the entire £20.”

Meanwhile, IPSE and Mr Chaplin have both launched campaigns urging contractors to contact their MPs to halt the reforms.

“Low paid self-employed people are going to have their tax status decided by somebody else who has a vested interest in getting it wrong, and which means they will earn less money,” Mr Chaplin says.

“How is that fair?”

EU clients shun UK freelance creatives ahead of Brexit red tape

The project-led nature of freelance hires is already starting to bite Brit creatives open to the EU, as commissions are falling now, despite the UK’s exit still being some five months away.

So, rather than hire a UK freelancer, and run the risk that there may be complications to keeping them on from October, clients in the EU are beginning to shun them today.

Asked about its freelance sales figures, which are ‘in the red’ across almost all EU nations, said UK freelancers were losing out to rival traders in “more stable markets.”

The online marketplace also told FreelanceUK that freelancers specialising in two internet-enabled, digital project skills were among the hardest hit. But again, only those suppliers in the UK.

“Many [clients] are now turning to experts from within the EU simply because they’re unsure about the potential for future red tape when collaborating with UK freelancers,” the site said.

Sales by UK freelancers to Pakistan are also up by 56%, as are sales to Bahrain (a leap of 94%) and, in spite of the political differences, the Russian Federation (a leap of 45%).

“We think that this is due to a lack of confidence in the UK market as a whole,” a PeoplePerHour spokeswoman said, referring to the rise of non-EU nations among UK freelancers.

She added: “EU buyers have been looking to use freelancers in what they consider to be more stable markets.”

The trend has even hit those EU member states long-considered by Brits to not only be stable, politically but also reliable – as a lucrative, knowledgeable end-user of UK freelancers.

For example, the overseas freelancing markets of Austria, Sweden, and even Ireland, the UK’s closest neighbour, are down for Brits by 46%; 41% and 14% respectively, on sales.

The Future is Freelance

People are fleeing the 9-5 job nest in search of new horizons and remote working. And it’s becoming more and more popular for clients to hire freelancers, too. The founder and CEO of Lystable, Peter Johnson, told Forbes that half of the workforce of big companies like Google and ASOS are freelancers.

Want to see how the Freelance Market is currently looking and what the top industries to be in are? Find out here.

Food fight: Deliveroo has its knives out in the winner-takes-all $830bn meal delivery industry

In The Telegraph today, Harry de Quetteville reports on the most recent movements of Uber and Deliveroo in the battle for meal delivery supremacy. It is a battle of logistics and infrastructure as much as cooking. And if you trust Jeff Bezos, the man who transformed shopping with the same methods, Shu may well be right. Bezos, after all, has just invested $575m in Deliveroo, valuing it at around $4bn and fanning the flames of a market that is every bit as contested, and prized, as ride-sharing.

Uber, through UberEats, is again a big player – with around 5,700 restaurants signed up in the UK, according to the data company Thinkum). Shu’s Deliveroo has 16,300 or so, and the third big player Just Eat some 29,500.

For a while it may have a slightly rickety image of a bloke with a sky-blue box strapped on to a clapped out scooter, the delivery game, as Shu told Jeff, is “super, super fast paced. There is no complacency. You have to be hyper-vigilant. The level of competition gives you relentless focus.”

Uber’s European rival Bolt enters London market, again

Estonia’s Bolt, which until early 2019 was called Taxify, will on Tuesday re-enter the competitive London taxi market, promising cheaper rides to passengers and a better cut to drivers than its bigger global rival Uber Technologies Inc.

The move comes a month after Uber drivers in London joined a series of strikes to protest the disparity between gig-economy conditions and the massive $82 billion (£65 billion) valuation at Uber’s stock market debut.

Uber takes around a 25% cut from drivers using its app. Bolt promises to charge in London in the first two months just 7.5% and later 15%, arguing happier drivers provide a better service.

Bolt last year raised $175 million in funding from a group led by German automaker Daimler to help its battle against Uber.

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