2017 General Election - What Should Contractors Expect?

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Ross Pounds
22nd Jun 2020 @ 07:46 am

In light of recent events in London and Manchester talking about politics seems rather redundant. But as we have heard time and again over the last few days and weeks, we must persevere. The UK moves forward scarred and damaged but defiant. At the time of writing this it appears that Thursday's General Election is very much on.

As Simon McVicker, IPSE's Director of Policy, pointed out back in April, no one outside of Mrs. May's immediate cabinet saw an election on the horizon. Back then a Conservative walkover appeared to be a formality but, 6 weeks later, it seems far from a foregone conclusion.

May's main reasoning behind calling a General Election on 8th June was, as much is these days, Brexit-related (she will likely only be able to secure a sound Brexit deal with a larger parliamentary majority than the Conservatives currently have.) But what will it mean for contractors, freelancers, and the self-employed?

The PM has already been forced to backtrack on a plan to hike NICs for the self-employed once (a concession, as McVicker noted, that would almost certainly not have happened had her party's majority been larger.) A pledge was made to defer that rise, but only during the course of this parliament. That obligation would vanish after 8th June.

The Chancellor is currently looking at a £2bn hole in his budget, and has previously stated that he will fill in that hole in this year's Autumn Budget. How? The answer seems quite clear. In the Conservative manifesto, published on 18th May, the promise not to raise National Insurance was conspicuous by its absence. That proposed rise, already postponed once, would top up the coffers by, unsurprisingly, £2bn.

And what of the forthcoming Taylor Report? Matthew Taylor's highly anticipated review of the rights of the self-employed and gig-economy workers, as chair of the independent Modern Employment Review, is due this month. It's almost certain that the report will contain a much tougher definition of self-employment.

There are now 4.8m self-employed people in the UK (around 15% of the total workforce). In the USA those in self-employment make up nearly 50% of the workforce. With many expecting the UK to reach a similar figure, it would appear that the Government is trying to get its tax rises in early before the voice of those working for themselves becomes too strong to ignore.

As Andy Chamberlain, IPSE's Deputy Director of Policy, recently noted: “It's clear there is a concern about taxation and different forms of working, and the next Government will want to address these issues one way or another.” A recent report from the Institute for Fiscal Studies notes that the Government will need to make £15bn in cuts or tax rises to clear the deficit by 2022.

How does Labour see the self-employed? Their pledge to abolish umbrella companies, as found in their manifesto, is well-meaning but ultimately misguided. Jeremy Corbyn is also proposing to change the law so it operates under the assumption that all workers will be treated as employees unless the client company can prove otherwise.

Whilst the attempt to lance obvious flaws surrounding the gig-economy is a laudable one it won't help the situation for the average contractor or freelancer.

Any contractor-focused pre-Election speculation would not be complete without mention of IR35. If they sweep the board, will the Conservatives be emboldened to roll out the recent public sector changes in the private sector too?

According to one report, after the most recent changes to IR35 in the public sector 40% of those workers who had previously operated through a limited company found themselves inside IR35 and either had to pay IR35 tax or join an umbrella company - a further example of the contractor bearing the brunt of ill-thought through changes when they are in fact spearheading the economic growth of the nation.

That figure of 40% doesn't include contractors working for the likes of the MoD and HMRC, both of whom decided that those workers were automatically inside IR35 and, as such, would have to pay the tax.

In recent months rumours have been circulating that HMRC plans to roll out the IR35 changes to the private sector in April 2018. Indeed, as Andy Chamberlain wrote recently, “a private sector roll out would be inevitable, mainly because a two-tier tax system simply doesn't make sense.” With the latest polls giving the Conservatives an 11% lead over Labour, it seems as though contractors should prepare themselves for the possibility of significant change ahead.

The self-employed, as it stands, are facing an age-old problem. Despite their constantly growing contribution to the UK's broader economic picture no party seems to truly have their needs in mind. The Liberal Democrat manifesto is altogether more positive, and they did want to abolish IR35 in the past, but the party is little more than a hollow shell of what it once was.

What does the future hold? A coalition perhaps? It seems no party has much appetite for that. Perhaps it's time for contractors, freelancers, and the self-employed to put themselves on the podium. Start now and significant ground could be made before 2022.

As always, we can only speculate about what lies ahead. Leaders change, opinion sways, and we remain susceptible to factors outside of our control. There is one certainty, however: Contractors, freelancers, and the self-employed will continue to rewrite the script and evolve as times change and demands differ – no matter who steps through the door of No. 10.

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