Labour to Abolish Contracting Profession
Labour hasn’t said that much on IR35 over the past couple of years, so we will refer to what 2017 Manifesto. We want to show where all the major parties stand on contractor issues like IR35.
There is a provision in their 2017 manifesto for Labour to abolish contracting profession if they win the election.
According to the Manifesto the default position is that all people who work for a company are deemed to be employees of that company.
That’s unless the company can prove that the person is not an employee.
So, presumably, the contractor’s client company will now be the decision maker in terms of the contractor’s IR35 status.
Their clients (or now employers) or their agencies will have to extract their PAYE Tax and National Insurance before paying them.
Labour propose to give them the benefits that employees get according to the Manifesto.
They don’t flesh this out as to how the employer would go about doing this.
Conservatives Public Sector IR35 Changes
However, a working example is how the Conservatives did it in the public sector.
The Conservatives changed the way IR35 operates there.
Contractors would no longer decide their own IR35 status.
The Government department would do that for them.
IR35 Employment Status Test
In conjunction with this, HMRC devised an IR35 Employment Status Test. According to one agency, 40% of their contractors who used ltd companies were now inside IR35.
They either had to pay IR35 or use umbrellas. Most of them decided to use umbrellas.
However, some departments, including the NHS, MoD and HMRC decided that all of their contractors were now inside IR35.
So, whoever filled those positions were now inside IR35 too.
That’s even if they passed the IR35 test and were really outside IR35.
That was on the advice of the big consultancies who told them that it was safer to do this.
Of course those Consultancies stand to gain if Labour to abolish contracting profession.
Conservatives to Roll Out IR35 Changes in Private Sector
The Conservatives now intend to roll this out in the private sector next year too.
Theresa May and Philip Hammond said “Why should a self employed person earning £100,000 a year pay less tax and National Insurance than an employee earning £100,000 a year.
As they believe this why would people think that they only believed it applied in the public sector.
The sensible thing to believe is that it should apply to all contractors, in their minds.
Labour’s IR35 Proposals
So, Labour’s proposal looks to be similar to what the Conservatives have already done in the public sector.
It looks as if Labour want to apply this to all contractors.
The default with Labour is that every worker will be deemed an employee unless their employer can prove otherwise.
They want anyone employing them to prove that they are contractors rather than employees.
This is a similar position that contractors will be in when the Conservatives roll out their changes to the private sector too. They are likely to do that.
So, the main parties have similar positions on bashing contractors.
After Election Labour to Abolish Contracting Profession
With Labour, there is an extra bit.
They are going to abolish umbrella companies too.
So, what is the future for contractors?
Two Types of Employee
It looks likely that there will be two types of employee.
There will be full time employees and temporary employees.
Both will be taxed at the same rate. Employees will pay PAYE and NI through their employers.
Temporary Employees will be pay PAYE and NI through their temporary employer or their agency.
Oh, and there will be a few, what the politicians deem to be real freelancers.
However, their numbers will be a fraction of what they are now.
Matthew Taylor Report
There is one major difference between the Conservatives and Labour. The Conservatives commissioned the Matthew Taylor Report to look at self employment. This has not been implemented yet
Matthew Taylor recommends that there be three types of worker:-
Independent Contractors would carry on as current contractors do now. They would continue to operate via their personal service companies.
Typical Dependent Contractors would be IT Contractors who work as extra bodies on an IT project.
An Independent Contractor may have experience in some area that the permanent employees don’t have.
The vast majority of contractors would be Dependent Contractors.
Dependent Employees would have to pay tax like a permanent employee.
Where Labour and the Conservatives Differ
There is one area, however, where Labour and the Conservatives differ.
Matthew Taylor recommended that Dependent Contractors should be given the benefits of permanent employees if they are taxed like them.
They would get sick pay, holiday pay etc.
However, the Conservatives dropped this part of it. They want Dependent Contractors to be only disguised employees for tax purposes only.
Labour have agreed with Matthew Taylor that Dependent Contractors should get employee benefits if they are to be taxed as employees.
Party of Big Business
There is the party of big business and the party of the worker.
Neither are friendly to those in self employment.
There is no party of those in Self Employment.
Good luck with your election choice!
To see our article on the Conservatives and Contractors click on Conservative Party IR35 Policy – Contractors Face Tory Wipeout
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