Conservatives stomp to victory at General Election 2019, helped by contractors
The Conservatives have convincingly won General Election 2019, granting Boris Johnson a five-year contract extension as PM but with a new stronger mandate to “get Brexit done.”
In fact, despite policies like IR35 ruling contractor voters’ hearts, it was Leave constituencies deserting Labour that has handed Mr Johnson’s Tories their largest majority since the 1980s.
It is the opposite for Labour, whose leader Jeremy Corbyn says he will step down following their worst performance since the 1930s. The Liberal Democrats have lost their leader too.
But for contractors, Jo Swinson’s defeat (she failed to hold onto her seat) probably represents a victory, as Loan Charge critic Sir Ed Davey will replace her as joint-caretaker leader.
No first mover advantage for Lib Dems
His party won just 11 seats (the Tories won 364, Labour 203), suggesting that the good grace the Lib Dems won from contractors by being first to vow an IR35 reform review came to nothing.
Even an accountant to freelance contractors, FreeAgent, hinted that it is Brexit ‘what won it.’
“Now that the Tories have won the election, it’s vital for them to at last provide some clarity over the final stages of their Brexit strategy,” says its CEO Ed Molyneux, a former freelancer himself.
“Small businesses have been kept in the dark for too long, and the economic uncertainty and anxiety over this issue has already created unnecessary damage on the sector.
“Providing a crystal clear picture over what small businesses can expect over the coming years will be the most valuable thing the prime minister can provide.”
'Contractors can't hang hopes on IR35 reform review'
Carolyn Walsh, of contractor services provider CWC Solutions, also says Brexit swung it.
“I’ve always said that Brexit would be the [key to winning this general election]. Clearing the way for our trade deals with the US and others is vital, even for small contractor businesses.”
The ex-tax inspector recognises, however, that such businesses will be more eagerly looking to the Tories to run a review of IR35 reform, even if Labour and the Lib Dems had to promise it first.
“Assuming that the Tories’ promise is kept, contractors still shouldn’t hang their hopes on a review,” she cautioned.
“Look at this from the government’s point of view. The rules are designed to increase revenue and this will be achieved so any review will find this as evidence of the rules being effective.
“And yes, there will be an impact on UK business but if this is down to hirers turning away from engaging individuals as PSCS, or other self-employed contractors, there is no mechanism or drive to stop this behaviour, and will also be seen as evidence that the off-payroll working rules are doing their job.”
'Contractors remain sceptical'
Also speaking this morning, Qdos reminded that chancellor Sajid Javid’s pledge of an IR35 reform review did not mean anything more than an agreement to look at the April 2020 proposals.
“The government has an opportunity to finally deliver for the self-employed who, after years of neglect, remain sceptical of the Conservative Party’s commitment to them,” the status advisory said.
“The likelihood is, many freelancers and contractors will have voted Conservative based on the party’s IR35 promise. The government now has a responsibility to honour its pledge to hold a genuine review of reform.”
'IR35 review should mean an IR35 delay'
Former Brexit Secretary Dominic Raab clarified that promise on the eve of yesterday’s election, by Tweeting that his Tory party’s vow to review changes to IR35 was an “important commitment.”
Raab, who held onto his constituency seat despite an upswing for the Lib Dems, said this morning that the convincing win for the Tories represented a “vindication” of the party’s messages during the campaign.
But Neil Carberry, chief executive of recruitment body the REC is among those who wants more than assurance of a review into the off-payroll rules.
“A review should mean a delay,” he said. “Anything else is empty sloganeering. [Too] swift [a] reform will lead to workers and compliant businesses losing out.”
Chris Bryce, CEO of IPSE agrees. “If [the promised review is] to be meaningful in any way HMG must….immediately suspend the rollout of Chapter 10 and undertake that their ‘review’ be real, in-depth and sensible”.
He added: “As the Bank of England has [recognised], [the review should similarly recognise that] self-employment and agile working is now a structural part of the UK economy. It could form part of an overall review of business taxation”.
A general election 2019 analysis by Tortoise, an independent news outlet, shows that during the campaign, six major “untruths” were told in relation to taxation, with the Tories being the worst offender.
'Dividend dent of £5k for contractors, had Labour won'
But Labour’s proposals on dividend taxation – excluded from their manifesto but contained in an accompanying funding document – would have dented annual contractor take-home pay by an average of about £5,000, says Intouch Accounting.
Having run some calculations exclusively for ContractorUK, the contractor accountancy firm’s Patrick Gribben said: “It is difficult to judge the net effect on a contractor’s income without fully understanding how all of Labour’s tax plans were expected to interlink [including a new corporation tax rate of 21%].
“But if we assume that Mr or Mrs Contractor intends to draw an income up to around the basic rate threshold, and that the profit made by his or her company is just enough to provide that threshold then, under Labour’s proposed dividend plan, that average contractor could have been up to £5,000 a year worse off.”
'It's now wait and see until Budget 2020'
Another tax adviser to contractors, AR Tax Accountants, says that with the election now out of the way, the contractor industry will want to crunch some specific numbers.
“We [now] have to wait and see….how the review into IR35 goes, and how end clients will react to the February Budget,” the adviser said.
Contractor Philip Ross, who wrote a report recommending Labour introduce a fairer alternative to IR35, hopes that the review makes at least some revisions to the incoming framework.
Without them, he fears the “outcome” will be a “downturn in economic activity, [a reduced flow] of freelancers…[and] the equivalent of a 'recession' on projects.”
'Contractors need to take their futures into their own hands, as the Budget will be too late'
However it is the ‘client reaction’ spoken of by AR Tax that bothers another accountancy firm, Andraste Accounting, where Ms Walsh is managing director.
She pointed out that the scheduled date of the Tory’s 2020 Budget – “in February” will come too late for many contractors, as their engagers will have already banned them or their PSCs by then.
“So contractors need to take their futures into their own hands, and change direction to operate on a more business-like basis,” the former tax official advises.
“Or otherwise [contractors should] organise their working life to reduce the impact that the move to working under PAYE will have on their livelihoods. The off payroll working rules are contentious with multiple views of its application, but this issue [and the timing of the Budget] is being overtaken by the blanket decisions currently being made by big businesses.”
'A crippling effect, and contractors already considering closing'
John Bell, co-founder of insolvency specialists Clarke Bell, said: "We need a review into IR35 as a matter of urgency as the uncertainty is having a crippling effect on the livelihoods of many contractors as well as impeding hiring decisions by firms.
"We are already seeing an increase in the number of contractors turning to us for advice on closing down their limited companies faced with the concerns that the legislation will have on their work and careers. Decisive action not platitudes is what is needed now.”
Julia Kermode, CEO of the FCSA, who is preparing an exclusive viewpoint piece for ContractorUK on what the Tories' win means for UK contracting, enforced:
"The budget is now being planned for February/March which is simply too late for the off-payroll legislation to be properly implemented.
"Many businesses have already invested heavily in preparing for the changes, and given the legal requirement for reasonable care it is unrealistic to press pause for a potentially meaningless review to take place. If the government wants to avoid utter chaos and shambles, businesses need clarity NOW."