Labour Umbrella Company Ban
There will be a Labour umbrella company ban if they win the election, according to their Manifesto.
All current umbrella company contractors will be assumed to be permanent employees and taxed as such in the future.
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.
However, there are dozens of legal entitlements that permanent employees currently get.
Labour is not planning to have a test to see if contractors should use an umbrella company.
Ban Umbrella Companies for Good
They are going to shut down all umbrella companies and ban them for good.
That’s because they reckon that umbrella companies are exploitative.
They reckon that unscrupulous companies and agencies force contractors into them.
While that may be true of some lower paid workers, e.g. in the construction industry it is not true of, for example, IT workers.
Umbrella Company Contractors Inside IR35
If contractors are inside IR35 they would prefer to be in umbrella companies than pay tax as employees under IR35.
As you can imagine, the owners of umbrella companies, as well as contractors using them, in the UK are pretty apprehensive.
However, they know that is is extreme unlikely that Labour and Jeremy Corbyn will win in 2017.
However, this may remain Labour policy afterwards – and Labour won’t lose every election.
So, a sword of Damocles is now hanging over the industry.
Conservatives Umbrella Company Policy
It’s not as if the Conservatives have been friends of contractors.
The Conservatives under Cameron and May have proved that they are not the party of business, as they claim, but the party of big business.
They would far rather take the views of the big consultancies than those who represent the self employed.
Indeed the see the self-employed, those who incorporate and those who use umbrella companies as tax avoiders.
Multinational Tax Dodgers
Meanwhile the real tax dodgers, the multinationals and hedge funds are able to continue to pay a minimum of tax – if they pay any at all.
It was the Conservatives who stopped umbrella company contractors from being able to offset travel and subsistence against tax.
It looks as if those in self employment, who now number 4.8m, and 15% of the working population, will suffer.
There’s the party of big business and the party of the workers.
And those in self employment are piggy in the middle.
Freelancers Attacked by Both Major Parties
They get representation by no one and both major political parties attack them.
In America, those in self employment are now 50% of the working population.
The UK is expect to go that way.
However, by the time they get there they are likely to find themselves paying tax to the hilt.
Party of the Self Employed
Perhaps they should start a party for those Self Employment.
Or maybe the LibDems could evolve into this.
We will have to wait and see their Manifesto.
They have been sympathetic in the past over IR35.
However, that’s a far cry from being pro those in self employment.
New Labour Umbrella Company Ban
We do know now that there will be a Labour Umbrella Company ban if they get elected.
However, we also know that the Conservatives are highly likely to re-instate the rise in National Insurance that they had to pull. There was a promise in the last Manifesto not to do so.
There will be no promise not to do so this time.
Because he pulled this rise there is a £2bn hole in the Chancellor’s budget which he said he would plug in the Autumn Budget.
If he simply re-instated it (and he didn’t want it pulled in the first place), that would plug that hole nicely.
Matthew Taylor Report on Self Employment
The Conservatives are also awaiting the publication of the Matthew Taylor Report on Self Employment. This will conveniently come out just after the election in June.
It is expected to contain a much stricter definition of self employment.
Both Theresa May and Philip Hammond said “Why should a self employed person who earns £100,000 a year pay less in tax and national insurance than a permanent employee earning £100,000 a year”?
They are not comparing like with like.
Not Looking Good for Contractors
However, I think that we can see from this which direction they are going.
And they are likely to have the power to implement this.
It’s mot looking good for the contracting profession from either of the main parties.
It’s not looking like a great future for contracting in the UK.
Let’s have your comments please.
The Manifesto actually says :-
“Banning payroll companies, sometimes known as umbrella companies, which create a false structure to limit employers’ tax liabilities and limit workers’ rights.”
This could be interpreted two ways:-
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