Lib Dems IR35 Contractor Policy
The main Lib Dems IR35 contractor policy is to implement the Matthew Taylor Report on Self Employment. The Conservative Government commissioned this report to see how self employment should be brought into the modern age. All three major major parties, the Conservatives, Labour and Liberal Democrats want to implement this report to varying degrees.
Questions on Lib Dems IR35 Contractor Policy
- What is in the Matthew Taylor Report that Lib Dems Want to Implement?
- What are the new legal tests for determining employment status?
- Why do the Lib Dems want to re-define self employment?
- How do the Lib Dems want to change Corporation Tax to help contractors?
- Is the Lib Dems IR35 Contractor Policy good for freelancers?
What is in the Matthew Taylor Report that Lib Dems Want to Implement
The main thrust of the Matthew Taylor Report is that workers should be divided into three categories where there were just two before. They are:-
- Permanent Employees
- Dependent Contractors
- Independent Contractors
Independent Contractors would operate very much like current personal service company contractors do now.
The real difference is the introduction of Dependent Contractors. These would be what HMRC call off-payroll workers. These Dependent Contractors would be told on a project what to do and how to do it.
A typical Dependent Contractor would be an extra body on an IT project who would be indistinguishable from the permanent employees on the project. They would operate in much the same way.
What are the New Legal Tests for Determining Employment Status
The Liberal Democrats have proposed new legal tests for determining a freelancer’s employment status.
They believe it should be based on two things:-
- The degree of control by the employer
- Thresholds on income and hours
The test would then decide if a contractor is above or below those thresholds. This would determine a contractor’s employment status.
Why do the Lib Dems want to define self employment
This is what contractors themselves have been asking for There is too much uncertainty. If there is an exact definition of what self employment means then there will be more certainty for contractors.
The Lib Dems, like contractors, are expressing scepticism about the accuracy of HMRC’s IR35 test, Check Employment Status for Tax (CEST).
They want to update the current legal definition of self employment to bring it up to date with the 21st century.
They want to implement many of the recommendations of the Matthew Taylor Report. For instance, like Labour, and unlike the Conservatives, they want to give Dependent Contractors many of the benefits that permanent employees get, like sick pay and paid holidays.
How do the Lib Dems want to change Corporation Tax to help contractors
The Liberal Democrats want to reform Corporation Tax to benefit smaller companies more. They want smaller companies to pay a lesser rate of Corporation Tax. This would be based on a company’s turnover.
Is the Lib Dems IR35 Contractor Policy good for freelancers
Well, it depends on how they implement the Matthew Taylor Report. Contractors are not keen on having two levels of contractor, Dependent Contractors and Independent Contractors. That’s especially as the Dependent contractors would be taxed like employees.
Also, it is likely that most contractors would be considered Dependent Contractors.
All three major parties support the conclusions of the Matthew Taylor Report. However, Labour and the Lib Dems also back his recommendation that those Dependent Contractors should be given employee benefits like sick pay and paid holidays.
The Conservatives are not going to implement that part of it.
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