Anti Contractor Tories
It is astonishing how Anti Contractor Tories have become. It looks like a tax war on contractors has been declared.
Before the Conservative Party came to power in 2010, they were making all sorts promises and winks and nods to UK contractors and contractors groups that the would abolish IR35.
Of course, they never actually said so, as such, but they were happy if the Professional Contractors Group (now IPSE), and contractors in general, thought they intended to.
Indeed, just before the 2010 election the PCG (IPSE) rushed out a press release saying that they had a concession from the Tories. They were going to ‘look at’ IR35 again if they got elected.
Abolition of IR35
It was exected that they would look at IR35 and abolish it.
Of course, this was naive.
Contractors who operate through Limited Companies pay, on average, £10,000 a year less tax. There are over 200,000 umbrella company contractors in the UK.
That’s £2bn a year that HMRC and the Treasury get extra as, previously, just about all UK contractors operated through limited companies.
Tories Kept IR35
So, the panel set up by the Government after the election did ‘look at’ IR35 and recommended that the new Government kept IR35.
They said that, if IR35 was abolished, there was a danger that UK contractors would leave their umbrella companies and go back to using limited companies.
Of course they would!
That was a great disappointment to the PCG, who had such great hopes of the Tories and who had bashed New Labour (correctly) so much for introducing IR35.
However, at least we were no worse off than before, were we?
The anti contractor Tories, in the shape of Cnacellor Osborne, said that they were going to STRENGTHEN IR35. So, he hired a 36-man hit squad to go after UK contractors for IR35 tax.
Some contractors thought that this was bad but was all he meant when he said that he would strengthen IR35.
Increase Dividend Tax for Contractors
Now, we know different from this summer budget.
The Government are going to increase dividend tax, not for everyone, but just for those using limited companies as personal service companies, where one person earns all, or the vast bulk of, the income, i.e. UK contractors.
Tax Relief on Travel and Subsistence
He is also going to stop contractors from claiming tax relief on travel and subsistence. Again, the anti contractor Tories are aiming this mainly at contractors.
It will apply to both limited company contractors and umbrella company contractors.
That’s the greatest attack on contractors since IR35 was brought in.
Indeed, it is probably greater as more contractors are affected by it.
So, is he finished with us?
Not a bit of it!
IR35 Tax Investigation
He says he is not happy with the way IR35 is working.
He is going to consult business leaders to make sure that it works better.
So, there is more to come.
It looks like the assault on contractors is to continue.
Indeed, it looks as if it will continue until UK contractors are taxed exactly the same as permanent employees.
It doesn’t look like the anti contractor Tories will stop till then.
This is despite the extra costs and risks there are to being a contractor.
The punishment will continue.
Umbrella Company Owners
Umbrella Company owners and marketing directors fondly imagined that the Tories favoured them.
After all, didn’t they turn down the abolition of IR35 because of the danger that UK contractors might dump their umbrella companies and go back to using limited companies?
Didn’t that prove that the Chancellor and the Tories liked Umbrella Companies?
It meant that HMRC only had to deal with a few hundred umbrella companeis arather than 200,000 contractors and their returns.
They also didn’t have to wait to get their tax money till after the year end.
Umbrella Companies and HMRC
The umbrella Companies were sending huge cheques to HMRC every month after deducting PAYE from their contractors who they disguised as peramenent employees.
The umbrella company owners were sure they were beloved by HMRC and looked down at those tax-avoiding contractors who used offshore umbrella companies.
They thought that the Tories and HMRC were happy for them to let contractors claim tax relief on travel and subssistence expenses.
It was the umbrella companies’ unique selling point. It was how they captured contractors caught by IR35.
Umbrella Companies Tax Avoidance
It turns out that the anti contractor Tories saw umbrella companies as tax avoidance too – and they cracked down on it in the recent budget.
The purveyors of umbrella company schemes were facilitating tax avoidance, too, according to the Chancellor.
It appears that the Tories are going to be even worse than Labour when it comes to hitting contractors in the pocket.
Contractors and the LibDems
So, where do UK Contractors go now?
What friends in high places do they have now?
Well, the LibDems seemed favourable to contractors and to the abolition of IR35.
However, they are no longer in high places and there are very few of them left.
Tories and Contractors
The Tories do favour those with money – but they don’t see UK Contractors as being ‘in the club’.
They see them as really like your run-of-the-mill permanent employees dressed up as small businessmen.
They are not to be allowed to share in the largesse when the Tories are handing money out.
Rather, they are amongst those that the Tories see as types that they take money from.
Contractors thought that the downfall of New Labour, who introduced IR35, would herald a new age for contractors.
It did – a new Dark Age!
The anti contractor Tories seemed determined to turn the screw on UK Contractors.
They reckon they’ll have forgotten it all by the next election.