Taking a closer look at the main parties’ manifestos

Taking a closer look at the main parties’ manifestos

With just over two weeks until the general election, leading contractor accountant Kate Cottrell takes a look at the main parties’ manifestos, and in particular any promises for contractors and IR35.

We have had a couple of weeks of side announcements from the main parties including numerous plans to cut IT projects, cut contracts, cut recruitment and to curb the use of consultants in the public sector. We have also seen “landmark commitments” to “review” IR35 but what do the main parties manifestos say?

Labour

Labour has of course given us a limited insight into their future plans with their budget last month which contained little for contractors. On 14 April they also published a “Tax Framework for Business” in which they have set out how they will work to understand and respond to the views of business. In their drive for a sustainable tax base they have 5 stated principles, competitiveness, fairness, minimising distortions, simplicity and stability and certainity. Of these principles perhaps stability and certainty could hold a promise for contractors and IR35.

However the document goes on to explain that this principle means they would avoid unnecessary changes to tax legislation and where a change is necessary they will try to adhere to a tax-policy making process. The document also clearly states that they will also explain their reasons if they cannot adhere to this process! Labour’s manfesto talks of “creating a shareholding society” along John Lewis lines by reviewing barriers and widening share ownership which is directed clearly at employees. Labour will also consider the construction industry again by extending the Gangmasters Licencing Authority to this sector. Finally Labour are committed to enacting the Agency Workers Directive in full. All in all little for contractors and no mention of IR35.

Liberal Democrat

There is more detail in this manifesto in terms of the figures but again little gain for contractors apart from the proposed increase in the tax threshold to 10K which would impact mainly low earners. The LD’s are calling for a level playing field for business with a promise to review regulations and red tape and in particular a committment to “one in one out” for new legislation and to consult on everything.

We must not forget that it was the liberal democrats who tabled an early day motion for the repeal of IR35 but I understand that many of those who signed and their researchers are considering this again in light of the significant deterrent effect of IR35 and the large sums currently generated from umbrella companies. A more worrying point in this manifesto is a committment to further new powers for HMRC to tackle tax avoidance and tax evasion. As many will know HMRC has been given unprecedented powers and penalty provisions under the current government and the suggestion of more to come is surprising.

Conservative

The Conservative’s manifesto is very business focused and if elected we will quickly see an emergency budget with the removal of the NIC increase. Commitments on small business rates, reductions in corporation tax, moving some of the unemployed to self-employed and cutting costs for bidding for government contracts are all mentioned, as is the introduction of a new Office of Tax Simplification. Apart from the removal of the NIC hike it seems that we will have to await the publication in the first budget of the Conservatives “5 Year Road Map” for timescales on all the other issues and in particular the new Simplification Office tasked with the job of reform.

The Conservatives also commit to giving the public the opprtunity to force the worst regulations to be repealed. The manifesto does not mention IR35 but a committment to review it was given in a side letter. However it seems likely that this will, if taken forward, be a job for the new Simplification Office so could be a long way off.

In summary we have lots of pledges to reform and review from all the parties. Whoever is elected any reforms will of course all come down to the state of the public finances which would suggest that there is a lot of pain to come. None of the manifestos mention IR35 and if we do eventually see lower tax rates and the repeal of IR35 then we can also be certain that contractors will be paying a lot more tax under some other initiative introduced under the banner of fairness and simplification.

Kate Cotterell is Managing Director of Bauer & Cotterell.
© 2009 All rights reserved. Reproduction in whole or in part without permission is prohibited.

Image: Using a Magnifying Glass and Driving by Mike “Dakinewavamon” Kline

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