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March 24, 2020updated 25 Mar 2020 8:08am

IT Contractors on Tenterhooks as Self-Employment Clause Hits Parliament

"A recession of a scale we have not seen in modern history is looking increasingly likely"

By CBR Staff Writer

IT contractors, like the other million of self-employed people around the UK, are on tenterhooks amid growing pressure on the government to step in with a rescue package for those unable to work as a result of the COVID-19 pandemic. 

Proposals to secure “statutory self-employment pay” have been tabled within the emergency Coronavirus Bill, requiring that Government top up the earnings of self-employed workers at the same rate afforded to employees.

Current Guidance: Claim Benefits

At present, the most recent government guidance for “employees, employers and businesses” merely suggests that the self-employed should claim benefits.

It reads: “If you are self-employed – You are able to claim Universal Credit, providing you meet the usual eligibility criteria. To support you with the economic impact of the outbreak, and allow you to follow government guidance on self-isolation and social distancing, from 6 April the requirements of the Minimum Income Floor will be temporarily relaxed. This change will apply to all Universal Credit claimants.”

Emergency Bill: Self-Employed Rescue Clause

The emergency bill goes before the House of Lords on Tuesday, and is expected to become law by Thursday at the latest. Details of how this would work remain thin. Pundits suggest it will be based on three years of tax returns.

This will leave many newly self-employed in a very tight spot.

The wording at present reads: “The Secretary of State must, by regulations, introduce a scheme of Statutory Self-Employment Pay.

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“The scheme must make provision for payments to be made out of public funds to individuals who are (a) self-employed, or (b) freelancers. The payments to be made in subsection (2) are to be set so that the net monthly earnings of an individual specified in subsection (2) do not fall below (i) 80 per cent of their monthly net earnings, averaged over the last three years, or (ii) £2,917 whichever is lower.”

The legislation comes as the latest Purchasing Managers Index (PMI) — a snapshot of economic trends in the manufacturing and service sectors — painted a devastating picture of the pandemic’s economic impact in the UK.

Today’s IHS Markit / CIPS Flash UK Composite PM signalled the fastest downturn in private sector business activity since the series began in January 1998.

Chris Williamson, Chief Business Economist at IHS Markit, said: “A recession of a scale we have not seen in modern history is looking increasingly likely.

“Historical comparisons indicate that the March survey reading is consistent with GDP falling at a quarterly rate of 1.5-2.0 percent, a decline which is sufficiently large to push the economy into a contraction in the first quarter.

“However, this decline will likely be the tip of the iceberg and dwarfed by what we will see in the second quarter as further virus containment measures take their toll and the downturn escalates. Any growth was confined to small pockets of the economy such as food manufacturing, pharmaceuticals and healthcare.”

For the self-employed, some form of help does appear to be on its way. How much money that will amount to, what pitfalls await for those claiming it, and how bad the bottlenecks will be remain open questions.

Read this: New Global Internet Outages Map Shows a“Concerning” Rise in ISP Outages

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