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Self-employed persons

This content applies to England

The meaning of 'self-employed' for the purposes of the right to reside and access to homelessness assistance.

European Union directives and UK regulations use the term 'self-employed person'.[1] EEA nationals who are self-employed persons (and their family members) are eligible for homelessness assistance.

Defining 'self-employed'

A self-employed person is an 'independent provider of services', in contrast a worker 'performs services for and under the direction of another person in return for which s/he receives remuneration'.[2]

As in the case of workers, the self-employed activity must be 'effective and genuine' and not be on such a small scale as to be classified as 'marginal and/or ancillary'.[3] If a self-employed person is dependent on means-tested benefits, this is not relevant in determining whether her/his self-employed activities are genuine and effective.[4] See the page Workers for more information on 'genuine and effective' activity.

The definition of what constitutes economic activity is broad. It may include:

  • selling the Big Issue[5] (but note that in one case, the very low income of a Big Issue seller was relevant to the finding that her economic activity was not 'genuine and effective'[6])
  • activities carried out as a member of a community religion[7]
  • prostitution.[8]

A person who has taken preparatory steps to set up a business or provide services can qualify as self-employed.[9] However, caring for a person whose entitlement to a qualifying state benefit means that the carer receives carer's allowance is not an economic activity, nor can the receipt of carer's allowance in this situation be regarded as remuneration as there is no link between payment of the allowance and the level of caring services provided.[10]

Retaining self-employed status

A person who is no longer in self-employment retains her/his self-employed status if s/he:[11]

  • is temporarily unable to engage in activities as a self-employed person as the result of an illness or accident
  • has become involuntarily unemployed after a period of self-employment, and is registered as a jobseeker (see below).

Involuntary unemployment

The European Court of Justice (CJEU) has ruled in the case of Gusa that legislative provisions[12] which allow a worker to retain worker status after having become involuntarily unemployed and when registered as a job-seeker, also apply to a self-employed person (with effect from 24 July 2018, the UK regulations have been amended accordingly).[13] This was the case in Gusa where a self-employed plasterer could not find work because building work had dried up following a time of economic recession.

The CJEU stated that the reference in the English language version of the Citizenship Directive (which allows EU citizens to move and live freely within the EU) to a person being able to retain worker status if they are in involuntarily unemployment after having been employed must be read to include having been self-employed. The Court pointed out that this is in keeping with the aims of the Directive, and that translations of the Directive into other languages do not distinguish between employment and self-employment. This judgment will have implications for EEA nationals seeking to build up five years' lawful residence in the UK in order to acquire a permanent right to reside.

For how long the status can be retained

The rules that cover how long a worker can retain their status, including the Genuine Prospect of Work (GPOW) test, will also apply to how long a person may retain their self-employed status. See the page Workers for details.

Note that a self-employed person who is not working can also remain 'self-employed' if s/he is seeking self-employed work. How long this might continue will depend upon the individual's particular circumstances.[14]

Question of fact

A self-employed person does not need to be actively working in order to maintain self-employment. The concept of self employment 'encompasses periods of both feast and famine', and just because there is no work to do at a particular moment does not mean a person has ceased to be self-employed. Self-employment includes periods of rest, and holidays. The amount of work done is only one factor in determining whether a person has continued to be self-employed, and any other steps the person is taking in the course of self-employment - such as marketing to generate more work - are also relevant. The question can only be decided in the context of the facts at any particular time.[15]

Where self-employment ceases because of pregnancy and childbirth

There is a distinction between self employment that ceases during a period of 'maternity leave', and where it ceases because of the 'constraints' of pregnancy and childbirth:

Maternity leave

The Upper Tribunal has held that a self-employed woman who takes a period of 'maternity leave' whilst pregnant and/or following childbirth will retain her self-employed status throughout, providing she intends to resume self-employment at the end of that period.[16] The Tribunal stated that careful fact finding will be needed to determine whether the woman was in fact self-employed immediately prior to ceasing work. This may involve considering matters such as whether self-employment was 'genuine and effective', and whether measures were put in place to ensure the business was sustained throughout the period of maternity leave (eg by arranging cover).

Constraints of pregnancy and/or childbirth

The CJEU has held that a woman who ceases employment as a result of the physical constraints of pregnancy and the aftermath of childbirth retains her worker status provided that she starts working again (or re-enters the labour market) within a 'reasonable period' of giving birth. This is known as the ‘St Prix’ ruling (details can be found on the Workers page). The CJEU ruling in Gusa (above) means that the St Prix ruling may also apply to a self-employed woman who has had to cease self-employment following pregnancy/childbirth.

In April 2018 the Upper Tribunal referred to the CJEU the question of whether a woman who gives up self-employment due to the physical constraints of pregnancy/childbirth, and returns to work (or rejoins the labour market) within a 'reasonable period' of giving birth, will retain her self-employed status in line with the ruling in St Prix.[17] This is significant because, if the St Prix argument can be applied successfully, a woman could retain her right to reside in circumstances where she may otherwise lose it, for example, where previously genuine and effective self-employment has, because of the physical constraints of pregnancy, become marginal immediately prior to taking 'maternity leave'.

Children in education

The primary carer of a child of a formerly self-employed worker who is in full time education does not acquire a right to reside, in contrast to the position of the primary carer of the child of a worker who is not classed as self-employed.[18] See the page Family of workers and self-employed.

Wales

The legislative references and the footnotes on this page reflect the law in England. In Wales, very similar rules made under Welsh legislation apply, but the references may be different. Contact Shelter Cymru for more information about the law in Wales.

[1] Article 7(1) Directive 2004/58/EC (also known as the Citizenship Directive); reg 4 Immigration (European Economic Area) Regulations 2016 SI 2016/1052.

[2] Allonby v Accrington and Rossendale College [2004] EUECJ C-256/01; Tilianu v Secretary of State for Work and Pensions [2010] EWCA Civ 1397.

[3] Levin v Staatssecretaris van Justitie [1982] EUECJ R-53/81; HMRC v IT (CTC) [2016] UKUT 252 (AAC).

[4] Kempf v Staatssecretaris van Justitie [1986] EUECJ R-139/85.

[5] Bristol CC v FV (HB) [2011] UKUT 494 (AAC); HMRC v IT (CTC) [2016] UKUT 252 (AAC).

[6] DV v SSWP [2017] UKUT 155 (AAC).

[7] Steymann v Staatssecretaris van Justitie [1988] EUECJ R-196/87.

[8] Jany v Staatssecretaris van Justitie, [2001] EUECJ C-268/99.

[9] F v HMRC (TC) [2017] UKUT 334 (AAC); Social Security Commissioners' decision CIS/3559/1997.

[10] JR v SSWP (IS); JR v Leeds CC and another (HB) [2014] UKUT 0154 (AAC).

[11] reg 6(4) Immigration (European Economic Area) Regulations 2016 SI 2016/1052, as amended by Immigration (European Economic Area) (Amendment) Regulations 2018 SI 2018/801. See also DMG Memo 15/18.

[12] Article 7(3)(b)-(c) Directive 2004/58/EC; reg. 6(2)(b)-(c) Immigration (European Economic Area) Regulations 2016 SI 2016/1052.

[13] Gusa v Minister for Social Protection (Ireland) Case C-442/16 [2017]; reg 6(4) Immigration (European Economic Area) Regulations 2016 SI 2016/1052, as amended by Immigration (European Economic Area) (Amendment) Regulations 2018 SI 2018/801. See also DMG Memo 15/18.

[14] Secretary of State for Work and Pensions v AL (JSA) [2010] UKUT 451 (AAC); Secretary of State for Work and Pensions v JB (JSA) [2011] UKUT 96 (AAC). See also DMG Memo 15/18.

[15] SSWP v JS (IS) [2010] UKUT 240 (AAC).

[16] HMRC v GP [2017] UKUT 11 (AAC).

[17] HMRC v HD [2018] UKUT 148 (AAC).

[18] Secretary of State for Work and Pensions v (1) Czop (2) Punakova [2012] EUECJ C-147/11 and C-148/11; RM v Secretary of State for Work and Pensions (IS) [2014] UKUT 401 AAC; Hrabkova v Secretary of State for Work and Pensions [2017] EWCA Civ 794.

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