Higher Contractor Tax
The long awaited Mathew Taylor Report on Self Employment is out today and recommends higher Contractor tax.
Firstly, it says that Chancellor Hammond was right to raise National Insurance for contractors in the last Budget.
That was removed after a week because there was a specific manifesto commitment not to raise National Insurance.
However, it was not in the manifesto at the last election.
So, presumably this has given Chancellor Hammond the green light to raise national insurance for contractors in his next Budget.
Because he took this out of the Budget, the Chancellor has a £2bn hole in his budget.
He said that they would correct this in the autumn.
What better way to do this than to re-insert it in his Autumn budget.
Taxing Contractors
Secondly, he tells the Government that the current method of taxing contractors and others in self employment is unsustainable.
He doesn’t recommend explicit measures but said that the Government should look at ways of making the taxation of those in self employment versus those in full time employment fairer.
I think we all know what that means.
Both Chancellor Hammond and Prime Minister Theresa May have said that it is not fair that a contractor earning £100,000 a year pays less tax than an employee earning £100,000 a year.
We all know that this is not comparing like with like.
However, the Chancellor and Prime Minister appear to believe that it is.
Dependent Contractors
Thirdly, Taylor is recommending a new type of worker.
He is calling this the Dependent Contractor as opposed to the Independent Contractor.
These Dependent Contractors would get more rights but be taxed like a permanent employee.
Although he is mainly looking at the low wage gig economy here, his definition of a Dependent Contractor is one who works for only predominantly one employer at a time.
That brings 90% of IT contractors, for example, into it.
We will see what the Government make of this and what they will implement.
However, contractors representatives, like IPSE should be lobbying hard to make sure that higher wage contractors are not classified as Dependent Contractors.
And I mean proper lobbying and not just rushing out yet another Press Release which substitutes for real action.
Higher contractor tax is something we want to avoid.
We have umbrella company contractors, limited company contractors and it looks like Dependent Contractors now.
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