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Advice. Opinions. Conversation.

The Shift: Issue #26

Sole trader vs limited company or umbrella – what’s best? IR35 changes; Parliamentary debate on the future of work; Seth Godin on creative practice.

I had to set up a limited company last year for a new contract role via an agency. My tax status only came up after I’d done the interview, a written test, and been offered the role. My agent said, “oh, we don’t work with sole traders.”

It was a chunky project – a six-month contract to write a book for a big brand and they were happy to pay my day rate, so I went for it. I set up a limited company via Companies House – fast, no-nonsense, and costs £12. I had to sort out business insurance (took much longer), an accountant, and a business bank account with a UK address for IBAN (EUR) payments.

A bit of hassle for one contract but that was the deal. And I wanted the job, so I did it but not happily. I’ve been a sole trader since I started freelancing back in 2002 and was gifted a limited company once (we broke up, I wasn’t ready; I have commitment issues). I don’t think individuals should operate as companies unless you’re employing someone. Nor should agencies and companies dictate your set up. These roles are often last-minute so you’re under pressure to act quickly or someone else will get the gig.

Anyway, the project went well – a good challenge and I learned a lot. Great to work with a team and have a physical product at the end of it. The contract was due to be extended in February to finish the editing, but this fell through with lockdown. Things have been pretty quiet on the contracting front since. Companies have cut budgets this year, which tends to hit freelancers first, and bigger clients are preparing for IR35 changes next April which will bring private companies into line with the public sector. Many have now banned the use of limited company contractors which is the way most contractors have operated up to now. See more.

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Advice. Opinions. Conversation.

The Shift: Issue #25

Finding freelance work; The rise of the media artisan; Creative Coalition 2020; Interview with TikTok star Kirsteen Atom. ⚡️

November’s NUJ meeting was on surviving and thriving as a freelancer—tips on finding new work and diversifying with trainers Louise Bolotin and Steve Mathieson. Steve works as a freelancer mainly on tech and government—both growth areas and runs data journalism and freelance courses. He’s had steady work during lockdown and has taught himself how to teach online.

In some ways, the world has been catching up with how many freelancers work, and arguably that has given us a head start. We are often used to working remotely.

Louise has worked for BBC Radio Manchester and launched a local news site. She now works as a sub-editor mostly, doing commercial editing work. She was laid off from her local paper just before lockdown and lost her commercial work, so was left with nothing. She’s busy trying to bring work back and has invested in a new website, logo and training.

Most of it has involved spending my way out of the mire, because you sometimes need to spend a bit to earn a bit.

She pledged to do two things a day to find new work and her efforts have paid off—she was fully booked this month for the first time since March. See more.

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Advice. Opinions. Conversation.

Corona Diaries: Workers Who Fall Through the Cracks

Thank you, Harriet Harman!

The Labour MP for Camberwell & Peckham has written a letter to chancellor Rishi Sunak on behalf of self-employed creatives who fall through the cracks re government support for coronavirus.

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“I am writing to ask what further provision you are considering for these self-employed people who fall between the two schemes and to register my backing of Equity’s proposals to address this issue.

“I am concerned that many self-employed people, those working on a series of fixed-term PAYE contracts and those operating as limited companies are not eligible. This will disproportionally hit those in the creative industries.” Well said 🙏.

The government has done a fantastic job pulling support schemes together at speed during this crisis. Inevitably there will be holes and not everyone is eligible. As a sole director/limited company, I fall through the cracks. I was due to start a second contract via an agency which has now been withdrawn. See this thread on LinkedIn from workers who fall through the cracks. “I’ve been working for a year. I don’t regard myself as new.” – a PR/comms consultant messaged me.

Picture 2If you’re in the same boat, here’s Martin Lewis, MoneySavingExpert.com. More advice in his guide here.

Picture 3So, you may be able to furlough PAYE pay – i.e. get 80% of salary up to £2,500 a month. This isn’t likely to be huge as most earn more via dividends (no help there), but it’s something, and you can combine it with universal credit. But only if your PAYE scheme was created on or before 28 February 2020. And with Universal Credit, what happens if you have money set aside in your business account to pay tax/running costs and are over the savings threshold? Are you then ineligible for support? I’ve asked for clarification as many contractors will be in this position.

If I do furlough myself then technically, I can’t work for ‘the firm’, I can only perform statutory director’s obligations e.g. official legal filings. That’s not practical. I can’t not work for three months – I’ll have no business. I’m constantly pitching ideas, networking, marketing myself online, applying for contracts etc. Am I supposed to write letters to  ‘furlough’ myself and then ‘employ’ myself again? It sounds bonkers! It’s also unfair that sole traders are eligible for a grant AND can carry on working but the same rule doesn’t apply to sole directors. Many of us have no option other than to incorporate as Ltd to get agency work. This is one thing that could be changed along with abolishing the savings rule for Universal Credit for the interim, and including dividends in PAYE income. IPSE has some good ideas here.

The other option is to apply for a Business Interruption Loan – open from 6 April 2020 and now expanded to include SMEs who didn’t meet the criteria before. This is the last resort as I’m debt-averse these days. I don’t have an overdraft and I wouldn’t be eligible as I’m paying off debt and can’t take out credit.

So, it looks like it’s Universal Credit or nothing – if I’m eligible. As Harriet Harman points out in her letter: “Current government advice is [for her] to sign up to Universal Credit which doesn’t cover her monthly rent, let alone bills or food.

“There can be no justification for self-employed workers to not receive the same level of support as employed throughout this Coronavirus crisis.

“The creative industries contribute over £100bn to the UK economy and are vital for our culture and global identity. When this crisis is over, we will need this industry to be strong and at the forefront of our economic recovery.”

Thank you to Harriet Harman, Tracy Brabin and the many other MPs and business leaders who are lobbying and campaigning to give self-employed creative workers a voice. It is much appreciated.

Have a question for Rishi? Use the hashtag #AskRishi on Twitter. The best way to engage with MPs and government is via Twitter.

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The Guardian: Millions in UK ‘could slip through virus wage safety net.

 

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Advice. Opinions. Conversation.

Corona Diaries: Government Package for the Self-employed – are you happy with it?

Rishi Sunak, the chancellor, has just announced outline details of the rescue package for the self-employed.

Here’s a summary of the key points from Daniel Barnett Employment Law:

  • a newly self-employed income support scheme will pay self-employed people a taxable grant worth 80% of average monthly income, capped at £2,500pm
  • income will be calculated by taking the average income over the last three years
  • self-employed people can claim these grants and continue to do business (so, it’s not the same as furlough leave, where employees have to remain at home)
  • the scheme is open to anyone with trading profits of up to £50k (this covers 95% of self-employed people). Self-employed people who earn more will not qualify
  • the scheme is only open to those who make the majority of income from self-employment; if you are employed but have a ‘side job’ which is self-employed, you will not be eligible
  • the scheme is only open to those who have submitted a tax return for 2019 (to minimise fraud). However, those who did not submit their tax return by the due date of 31 January 2020, and have not yet submitted one, can still submit a tax return for 2019 within a further four weeks from today
  • there are no steps to take. HMRC will contact eligible self-employed people directly and pay the grant straight into their bank account after inviting them to fill out an online form
  • the self-employed income support scheme will be open to people across the UK for at least three months. However, the scheme is unlikely to be up and running before the end of June, so it will not help with immediate cash flow issues

Seems like a fair and generous package in line with what’s being offered to employees, but not all freelancers will be eligible.

Initial thoughts from my NUJ colleagues:

“I’ve just watched Sunak’s briefing, and am relatively pleased with what has been announced. It doesn’t go far enough to help those at the bottom of the freelance earnings scale, but the timescale for payments notwithstanding, by large it seems fair and reasonable.

Sunak claims that the scheme will benefit “95%” of the self-employed and stated clearly that the remaining 5% are those with profits of over 50K/year who won’t be ineligible for the income support grant. But what about those who, say, became self-employed in the last tax year, and have savings? They cannot claim Universal Credit. Sunak’s 95:5% ratio cannot be correct, and I suspect a significant number of self-employed will suffer.” Dr Francis Sedgemore, Chair, NUJ Freelance Industrial Council

“Sky News reported that only a third of freelancers could be eligible, something to do with them paying comparatively less tax.

Ltd companies are apparently not eligible, those who already received top-ups from Universal Credit, moved to UC from existing benefits like Working Tax Credits, (I know of several freelancers in this position) not eligible.

Twitter is already full of a lot of people who became self-employed since the beginning of the last year tax year who are ineligible, there seem to be a lot of these around, possibly a higher number than anyone imagined.

The money will be with freelancers by the beginning of June, backdated, but what are freelancers supposed to do until then?

Those who earn very slightly more in employment than in self-employment in the last tax year are also ineligible.” Matt Salusbury, NUJ London Freelance Branch Chair, Deputy Editor, The Freelance

“It’s certainly more complex than the headline leads us to believe. I’ve seen a lot of people express concern that that due to starting freelancing recently or having time out for caring/illness that they will miss out on this package.

Some photographers will have high overheads for studio/office rent, equipment lease fees, insurances and software.” Dr Natasha Hirst, Photographer, Freelance Industrial Council  

NUJ statement here.

And from Caroline Norbury, CEO of the Creative Industries Federation and Creative England:

“We are seeking urgent clarity for those creative workers who may be most in need and fall between these schemes including those who commenced self- employment after April 2019, recent graduates, those paid in dividends, temporary workers and those short-term contractors normally paid by PAYE. We must ensure that these packages are truly comprehensive and accessible to all.”

Lots of chat about this on Twitter – the main concern seems to be that nothing will be paid until June. What do people do until then? Can you apply for Universal Credit to tide you over? What if you’re above the savings threshold? Newly registered as self-employed? Or a contractor or a sole director/small limited company like me – and therefore not eligible? Not all sole directors are like Boris’ mates!

I asked my accountant Elaine Clark for advice and she sent me this post. Martin Lewis is on the case finding out about sole traders who are a Ltd company and whether they can get help through the Government package. In the meantime, let’s keep making noise on Twitter.

Send your questions/comments to @NUJOfficial @NUJ_LFB @Bectu @Creative_Fed @EquityUK @CarolineNorbury @TracyBrabinMP @IPSEWestminster @RishiSunak and tag me @niccitalbot.

It’s Friday. It’s spring – don’t forget the clocks go forward. Enjoy the sunshine and have a relaxing weekend.  

Photo by Andrew Neel on Unsplash

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