IR35 reform must go after General Election 2024, not least because more-of-the-same is only a big biz vote winner

Based on the Conservatives’ plans for a “secure future” and Labour’s “Secureonomics” the main parties look determined to show investors and businesses that they’ll have the steadiest hand in government.

This is a rational strategy for any party with serious hopes of winning the July 4th general election, especially after the tumult of the past few years and undoubtedly, employers will like the reassurance.

Recognising there’s no single business community would be a start

But the business world’s ‘95% club’ – that’s the self-employed – need bold and, dare I say exciting new ideas from political hopefuls if they’re to be convinced that their lot will improve under the next government.

Helpfully for the parties, our organisation has gifted them a head start in their thinking with a manifesto dedicated to the self-employed, writes Andy Chamberlain, director of policy at the Association of Independent Professionals and the Self-Employed (IPSE).

What do freelancers have to get excited about this election?

The answer (at this stage) certainly isn’t tax cuts.

Neither the Conservatives nor Labour have offered to cut the main rates of income tax or National Insurance.

In fact, both have pledged to keep personal tax thresholds frozen until 2028 – an effective tax rise.

Reform UK and the Lib Dems have IR35 in the crosshairs; sort of

So far, the only noteworthy tax pledge has come from comments made by Liberal Democrat candidate for St Albans Daisy Cooper – the party’s deputy leader.

Appearing on BBC1’s Questions Time, Cooper expressed support for a review of the off-payroll working rules.

Going further, albeit going back to way before the election date was announced on May 26th, the Reform Party has offered to scrap them altogether. In its manifesto, Reform says it would “Abolish IR35 Rules to Support Sole Traders.”

[Editor’s Note: ContractorUK has invited Reform UK to specify whether the party is referring to IR35 of 2000, or the OPW rules of 2017/2021. Now under Nigel Farage’s leadership, Reform UK has also been invited to comment on how either framework affects sole traders or whether it is referring to sole-person companies].

Whether either Reform or the Lib Dems will ultimately wield enough influence in parliament to make their IR35 pledges happen is another matter.

That said, we at IPSE would certainly throw our weight behind the efforts of supportive MPs across the political divide.

With the up for grabs contractor vote, Labour currently has the edge

At the time of writing, the most promising lead is Labour’s plan to unearth the time capsule that is our employment status rules.

The focus of their ire is with the different degree of protections that come with the status of ‘Worker’ and ‘Employee’, with plans to roll the two into a single status of Worker “for all but the genuinely self-employed” -- that’s the part our organisation is interested in.

Politics has the power to end squabbling over status

In the UK, our vague and outdated employment status rules have lead to never-ending arguments over whether people are receiving the appropriate protections in work. For freelancers, the rules have triggered accusations and HMRC investigations over whether the right tax is being paid. And they’ve lead to a paradoxical world where those who want rights are denied them, while those who want to work for themselves are prevented from doing so!

Freelancers, recruitment agencies, end-clients – and especially the taxman – would benefit from a clearer legal understanding of what it means to be self-employed. That’s one of many calls which our manifesto (entitled ‘The Courage Economy’) unashamedly makes. In the document, we call on the political parties to back the brave, and reignite the UK’s natural passion for self-employment with meaningful, positive policies.

And if, as the polls indicate, Labour claim victory on July 5th, we’ll be lobbying hard for their foray into reform of employment rules to make life easier for the self-employed. By modernising our understanding of what it means to ‘work’, contractors might just be able to retire from arguing about ‘mutuality of obligation’ and spend more time being productive.

No matter what, the IR35 off-payroll rules don’t work and never will

Regardless of the victor of general election 2024, it’s clear that the off-payroll rules need to go. As we say in The Courage Economy, the next government must scrap the rules and work constructively with industry to find a way to tax work more fairly than IR35 allows.

Over the years, IPSE has devised numerous alternatives we believe worthy of consideration. This includes a form of ‘Engager’s National Insurance’, or creating a new type of company structure exclusively for freelancers that proves their status as independent businesses.

With the off-payroll rules still keeping one in 10 contractors out of work in the midst of a workforce crisis, the next government needs to hit the brakes on its approach to the contractor sector and embrace the freelance way of working as something we need more of, not less.

Such a transformation in our treatment of contractors could even tempt some of those who retired in the wake of the IR35 reforms to bring their valuable skills and expertise back into the labour market.

Politicians must come out of their shells before July 4th polling day

There are still so many more areas in which the self-employed are desperate to see renewal.

Clients are still able to get away with dragging their heels on paying freelancers who haven’t yet mastered their bureaucratic invoicing procedures. Key benefits for new parents like Adoption Pay, Shared Parental Leave and the first six weeks of Maternity Pay are inexplicably still not available to self-employed parents. And successive governments have just watched, as the self-employed pensions problem has grown into a crisis.

Keeping inflation low and our currency stable are fine aims – but the self-employed can and should demand bolder, more innovative thinking from political parties.

Meaningful action by policymakers to address even some of the challenges I’ve discussed in this piece would make a world of difference for freelancers in all income brackets. It’ll be a big difference they can see and feel in their day-to-day lives as a business owner – much more than any small tinkering they’ll get from an abundance of caution by wary politicians.