2017 Election Result
So, what will the 2017 election result mean for contractors and other self employed persons?
How will the fact that the Conservatives have to rely on DUP support have an effect on contractors.
We know what Theresa May and the Conservatives intended.
VAT Increase for Self Employed
Firstly, it is pretty clear that they intend to increase VAT for the self employed.
They tried to do this in the last budget. However, backbenchers rebelled and it was taken out.
However, they didn’t rebel because they didn’t like the idea. They rebelled because there was a specific promise in their manifesto not to raise National Insurance.
They knew how ignoring manifesto promises hit the LibDems so badly over tuition fees.
No National Insurance Promise in Manifesto
This time around the promise not to raise National Insurance for the self employed was missing from the manifesto.
Taking out the NI rise made a £2bn hole in the Chancellor’s budget. He said that he would fill this in his Autumn Budget.
The simplest way to fill this hole is to restore the NI rise which caused the hole in the budget in the first place.
And there is now no manifesto promise to stop them.
So, it is a racing certainty that they will re-impose the National Insurance rise.
As it is a budget issue the DUP are unlikely to oppose this.
The only chance of it being stopped is if backbenchers revolt over this.
However, as I said above, they didn’t rebel because they disagreed with the tax rise.
So, the 2017 election result won’t change anything here.
Matthew Taylor Report
Theresa May commissioned the Matthew Taylor Report on Self Employment.
It is due to report in June.
That National Insurance rise was recommended by Matthew Taylor and was an early instalment and pointer to his thinking.
According to reports this report is likely to have a much more strict definition of self employment. The 2017 election result won’t change anything here.
Contractors Using Limited Companies
So, one would expect that there will be a lot fewer contractors able to use limited companies after the report is published.
Remember that, when they imposed the NI rise that Chancellor Hammond and Theresa May said “Why should a self employed person earning £100,000 a year pay less tax and NI than an employee earning £100,000 a year.
One problem for contractors is that all those people legislating on the self employed are all employees themselves. They have to pay the full whack of tax.
So, they don’t see why others shouldn’t.
Of course, we all know that comparing freelancers and permanent employees earning £100,000 a year is not comparing like with like.
However, it appears to be in their eyes – and they make the laws.
So, will this legislation pass?
DUP Views on Self Employment
It is not known what the DUP think about this. However, as it is a budget measure and they won’t vote down budgets they are unlikely to interfere.
Labour have similar views on self employment. They said that if the country elected them they would abolish umbrella companies. They also said that they would make the default for all workers that they are permanent employees unless a company can prove otherwise.
So, Labour and the Conservatives policies towards the self employed are not too dissimilar.
No Party for Self Employed
The problem for contractors is that there is the party of big business and the party of the workers. There is no party that represents the self employed who now number 4.8m and 15% of the working population.
So, they get kicked around by both major parties.
The SNP oppose most anti-contractor legislation.
However, they are not country wide.
Rolling Out Public Sector IR35 Changes to Private Sector
As we all know, the Government made major IR35 changes for contractors in the public sector.
Whereas previously contractor determined their own IR35 status this was no longer true.
It would be ecided for them by the company or organisation that they worked for.
And there would be financial penalties for the organisation if they got it wrong.
HMRC also produced an online IR35 Employment Status Test to help them.
From Limited Companies to Umbrella Companies
This resulted in a mass exodus out of limited companies and into umbrella companies by contractors working in the public sector.
One agency said that 40% of their limited company contractors failed the test.
That agency, who have people in at HMRC, said that they had heard form one contractor that he was working on a plan to roll this out in the private sector in 12 months time.
That would result in devastation for private sector contractors.
There’s no party who are likely to oppose this bar the SNP and maybe LibDems if they chose to go forward with this.
The only ones who might vote against would be a few Conservative backbenchers.
So, the coming year looks a bit bleak for the self employed in the UK.
Let’s hope that something turns up to stop some of this happening.
However, one cannot see what that would be.
The 2017 election result doesn’t appear to have changed anything for contractors.
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