Contractors IR35 2017 Election Opportunity
There is a contractors IR35 2017 election opportunity to put their views across to politicians if they want their votes.
Contractors only get this opportunity once every few years.
Contractors representatives, IPSE, should take this opportunity to get whatever promises they can.
They must make sure these guarantees are cast iron this time.
UK Contractors future may depend on it.
IPSE Fooled Before 2010 Election
Just prior to the 2010 election they rushed out a press release announcing, with delight, that the Conservatives had promised to ‘look at IR35 again’.
They believed that their lobbying efforts had succeeded.
The Conservatives were true to their word to IPSE (then PCG) and they did ‘look at IR35 again’ – and decided to keep it.
Osborne Strenthened IR35
Furthermore, Chancellor Osborne said they would strengthen IR35 and they have kept their word on that ever since.
Only recently, Prime Minister Theresa May and Chancellor Hammond strengthened IR35 even more in the public sector.
Contractors no longer can decide their own IR35 status in the public sector.
The Government department now does this.
IR35 Employment Status Test
HMRC have created a new IR35 Employment Status Test to help them decide this.
However, major Government departments have panicked and declared all their contract jobs inside IR35 from now on.
They have been advised to do this from their gurus, the major Consultancies, ‘just to be on the safe side’.
However, these consultancies stand to benefit if companies need extra bodies but they can’t get so many contractors any more.
Blanket IR35 Ban on Contractors
Among those who have put a blanket ban on contractors operating outside IR35 are the NHS, HMRC and the MoD.
This means that many contractors, whom the test can show are outside IR35 are having to pay a tax that they shouldn’t be paying.
Many Locum Doctors, who are obviously in business on their own account, are having to pay an extra 30% of their income in tax and NI. That’s a massive difference to their income.
Yet, that’s when most of them are actually outside IR35.
That’s like having to pay Death Duties when you are still alive.
Will Conservatives Strengthen IR35 Further?
So, do the Conservatives have any more IR35 Strengthening measures.
Yes they do.
Prime Minister May has commissioned Matthew Taylor to prepare a report on Self Employment.
That will be out in June -probably after the election I would imagine.
Newspapers are saying that it will make the definition of self employment far more strict.
That’s sure to make far more contractors pay the IR35 tax.
Raising National Insurance for Contractors
It was Matthew Taylor’s idea for Chancellor Hammond to raise National Insurance for Contractors in the last Budget.
He said that he was disappointed when May and Hammond backtracked on that as it was not in their manifesto.
I wonder if it will be in it this time – or the promise not to raise national insurance simply left out.
IPSE should monitor this.
Contractors Should Pay More Tax
Prime Minister May and Chancellor Hammond often say that it is an anomaly that a freelancer who earns £100,000 a year pays less tax and National Insurance than an employee earning £100,000 a year.
That was the reason he used for sticking up National Insurance before he had to pull it.
One has to say that one can’t truly compare a freelancer and a permanent employee earning the same amount of money.
It doesn’t take into account perks the permanent employee gets like holidays, sick pay, maternity pay, pensions, etc.
It also doesn’t take into account the expenses incurred buy freelancers in their businesses.
However, as the Prime Minister and Chancellor believe that this is unfair and is an anomaly one must presume that they intend to fix this anomaly.
How could they do this?
Reinstate National Insurance Changes
Well, once this election is over, they can reinstate this National Insurance rise in the Autumn budget. That’s provided they have no promise in their manifesto to not raise National Insurance.
Withdrawing the NI rise has made a £2bn hole in the Chancellor’s budget which he says he will fill in the Autumn Budget.
It appears to be a virtual certainty that the Conservatives, if re-elected, will do this.
Freelancers Tax Anomaly
So, how else could he Conservatives ‘fix’ this what they see as the unfair anomaly of freelancers paying less tax than employees?
I think we have a clue from the public sector.
The Government were easily able to introduce these new IR35 rules in the public sector as they are the employer there.
They can hire who they want under whatever conditions they want.
Rolling IR35 Changes Out to Private Sector
So will they roll this out in the private sector too?
Will they make client companies now decide the IR35 status of contractors – with financial penalties if they get it wrong?
To answer that you have to ask his question.
Why would the Government think that freelancers paying less tax than employees is wrong in the public sector but it is not wrong in the private sector?
That just wouldn’t make sense.
Changing the IR35 Laws
Of course, if the Government was to change this in the private sector they would have to amend the laws.
However, with a whacking majority that should not be too hard.
So, do the Conservatives intend rolling this out these IR35 changes in the private sector too?
HMRC Working on IR35 Changes
The MD of an agency who has contractors working at HMRC says he knows of a contractor there who is already working on a HMRC plan to roll the IR35 changes out to the private sector in 12 months time.
That may form part of the Matthew Taylor Report which conveniently will come out in June – but after the election.
Contractors, contractors groups and accountants should join forces to ask the Conservatives, and the other parties what their policies are as regards contractors.
And IPSE should not be fooled as easily as they were in 2010 by the Conservatives.
Any promises must be cast iron.
No Plans to Raise National Insurance
Here’s a hint for them. If a party says that “we have no plans to increase National Insurance” or we have no plans to roll out IR35 changes in the private sector” that means that they almost definitely will do this.
This is the time to extract promises from politicians – when their jobs are at stake.
After all there are now 4.8 million freelancers in the UK.
That’s a lot of votes.
Surely contractors’ representatives can leverage that to get promises from the politicians.
There’s a contractors IR35 2017 election opportunity here. They must take it or the consequences may be pretty grim.
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