PSCs and the MIF
I am looking into the position of our union members who have claimed UC and operate via PSCs (personal service companies):
SE guidance H4374 states as follows:
H4374 Where H4360 applies to a company which is carrying on a trade
1. the income of the company or the person’s share of that income has to be treated as the claimants S/E income and calculated in the same way as S/E earnings and
2. the person has to be treated as in gainful self-employment (see H4020 et seq) if their activities in the course of the trade are their main employment.
1: the S/E earnings in 1. are in addition to any earnings the claimant may have received in their position as a director or employee of the company
2 . 1 UC Regs, reg 77(3)(b) & (c); 2 reg 77(4)
The relevant part of the UC Regs i.e. Reg 77 (3) (c) states:
(c) where the person’s activities in the course of the trade are their main employment, the person is to be treated as if they were in gainful self-employment and, accordingly, regulation 62 (minimum income floor) applies in relation to any assessment period where the amount of the person’s earned income is below the minimum income floor specified in paragraph (2) of that regulation.
The wording seems to imply that if the company is trading and that is the claimant’s main employment then GSE is assumed i.e. all limbs of the GSE are met.
The MIF is of course under temporary suspension during COVID so I’m looking at their potential position post 13th November when as things stand that discretionary suspension is lifted.
Have anyone come across this issue before?
I’m not sure what you’re worried about? Is it simply about cases where the PSC does not satisfy the regular conditions of GSE? The only condition which could possibly make a difference is Reg 64(c), and to be honest I would be surprised if someone went to the effort of running a PSC where that condition was not satisfied.
Thanks for the response - the issue here for us is more that the person i.e. in this case sole director, is deemed to be GSE without an examination of the position in Reg 64 even though they effectively treat a claimant who is the sole director of a company as though they were a self-employed sole trader for income purposes.
I agree there is a logic in this approach if the company is trading in normal conditions but these are not normal conditions and we may well want to argue that someone is not GSE during this period even if they are operating through a company structure.
I’ve always thought that the rationale behind the MIF and concept of GSE was that it stops people from avoiding work search requirements if they’re not genuinely SE. I think if you are arguing that you are not GSE then you need to be looking for employed work. In normal times this is hard on somebody who is SE and is spending a lot of time and effort trying to get work, but perhaps at the moment it’s less complicated? I hope that’s not too insensitive.
I think you’re right that there are two questions: is the PSC trading, and is it their main employment? Whether they make the PSC dormant or not, I think the key is to ask UC to help them find employment, and actively ask for work search requirements on the basis that their SE is not enough to be considered their main employment at the moment. Although I haven’t had any PSC cases, the work coaches in our local JCPs have been pretty good at accepting the logic of the trade off between GSE and work searching requirements.
Thanks Timothy for that interesting response - certainly arguing that PAYE work should be viewed as the main employment is a tactic we are employing in the short-term. Longer term we think the MIF is simply radically unsuited in its current form to any self-employed group with variable and unpredictable income as it leads to cliff edges in months where there is little or no income. There is a lot of activity around that argument now which includes the TUC, other unions, CAB, etc. so we will see.