IR35 Chancellor Kwasi Kwarteng Under Pressure to Quit from Conservative MPs

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IR35 poll result for contractors
IR35 poll result for contractors

Chancellor Kwasi Kwarteng Under Pressure to Quit

Why is Chancellor Kwasi Kwarteng Under Pressure?

Why do UK IT Contractors Want Kwasi Kwarteng to Stay as Chancellor?

How Did the 2021 IR35 Changes Affect Contractors?

Why Were the 2021 IR35 Changes Disastrous for Companies and Contractors?

Why Are UK IT Contractors so Useful for UK Companies and the UK Economy?

Why Is This Budget so Good for UK IT Contractors and Major UK Companies?

Why Did the 2021 IR35 Changes Badly Hurt UK Companies?

What is the Biggest IR35 Danger for IT Contractors and their Clients?

Why is Chancellor Kwasi Kwarteng Under Pressure?

New Chancellor, Kwasi Kwarteng is under severe pressure to quit from Conservative MPs after the financial pressure that the Government has come under in the past few days.

One Conservative MP told The Times “The Chancellor is obviously finished, it’s just a matter of time. I’m yet to speak to anybody who doesn’t think that’s the case”.

His Budget has been called Robin Hood in reverse, i.e. robbing the poor to pay the rich. Many Conservatives feel that this is the wrong time for tax cuts.

They are probably right. Even Margaret Thatcher got the economy on a sure footing before her tax cuts.

Why do UK IT Contractors Want Kwasi Kwarteng to Stay as Chancellor?

However, for UK IT Contractors that would be throwing the baby out with the bath water.

Chancellor Kwasi Kwarteng announced the reversal of the 2017 and 2021 IR35 changes in his budget. The 2021 changes were particularly nefarious for UK IT Contractors.

Even though IR35 has always been despised by contractors, until 2021 IT Contractors decided their own IR35 status. If they were wrong and they got caught then they had to suffer severe financial penalties.

However, the 2021 IR35 changes ended that.

How Did the 2021 IR35 Changes Affect Contractors?

From then it was the client company who would decide every contractor’s IR35 status.

The Government said that there would be financial penalties on companies who wrongly diagnosed their contractors’ IR35 statuses.

Many of the companies did not want that financial risk and so put a blanket ban on the hiring of IT Contractors.

It was a disaster for contractors too. Many had to become permanent employees.

Why Were the 2021 IR35 Changes Disastrous for Companies and Contractors?

However, this was the straw that broke the camel’s back. The Government, and HMRC, got too greedy.

Previously companies were allowed to decide what mix was best for them as regards permanent employees and IT contractors.

Each company knew what was financially best for themselves.

However, if they put a blanket ban on contractors, this would obviously severely affect their productivity and their profits.

Why Are UK IT Contractors so Useful for UK Companies and the UK Economy?

Successive Governments and Chancellors have not understood the importance of contractors to the economy – but Chancellor Kwasi Kwarteng did.

There had been obviously lobbying by the UK’s top companies on Kwasi Kwertang and Liz Truss on this matter. Added to that was pressure from UK contractors and contractors groups.

Why Is This Budget so Good for UK IT Contractors and Major UK Companies?

The recent Kwasi Kwarteng budget allows the UK’s major companies to make their own decisions on what is the best split between IT Contractors and employees.

During projects companies need a lot of contractors and employees to get those projects implemented.

However, once the project is over, the companies don’t need that level of IT workers to maintain those projects.

What they had done in the past was to take on contractors at the start of the project to work with permanent employees on it.

At the end of the project they could get rid of the contractors without having to pay them redundancy money or to give them notice especially if it was a fixed term contract or a project based contract.

Why Did the 2021 IR35 Changes Badly Hurt UK Companies?

After the 2021 IR35 changes the UK’s major companies could no longer do that. They had to use all permanent employees on their projects if they had a blanket ban – and couldn’t easily get rid of them when the projects finished.

Very often IT Contractors have much more experience than permanent employees and so are much more productive. Also they cross fertilise by letting the companies that use them know how things are done in other companies where they have freelanced.

The 2021 IR35 changes were idiotic and well done to Chancellor Kwasi Kwarteng for scrapping them.

The Government had interfered with top UK companies right to run their companies in the most efficient and profitable way they know. How dare they do that.

What is the Biggest IR35 Danger for IT Contractors and their Clients?

However, that’s all gone – provided Kwasi Kwarteng remains as Chancellor.

Many Conservative MPs, spooked by the market’s reaction to the Chancellor’s budget, want Liz Truss to get rid of the Chancellor or at least scrap this recent budget.

In other words, for contractors, the baby may get thrown out with the bath water.

According to The Guardian, “Privately, MPs went further, suggesting the financial package had been a disaster and only a reversal of Friday’s mini-budget and the sacking of the chancellor could get the party back on an even keel, while others said the damage was now irreversible.”

One MP said: “Kwasi will have to go. She won’t have any option. They are actually crashing the economy and she will need somebody to blame.”

IT Contractors will hope that Liz Truss stands her ground and holds on to her Chancellor. However, as we have seen, backbench Conservative MPs have a lot of power and if they don’t like something or someone they can get things changed. Liz Truss knows that.

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For all critical IR35 news and advice for contractors click on IR35 News.

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