The Conservative Government should show support for business by scrapping IR35 plans

• 13 Sep 2018

The Conservatives like to see themselves as the friend of small business. Friendship requires some sense of mutual understanding and trust though – concepts many self-employed people will be struggling with at the moment. The Government’s proposed changes to IR35 will very likely result in contractors paying more tax than they legally should and will heap a huge burden onto the businesses that engage those contractors.

And it doesn’t stop with IR35. Last year the Chancellor Philip Hammond attempted to hit the self-employed with a hike in the rate of National Insurance paid by sole traders. The Government was forced to row back on this measure after pressure from IPSE, other business groups and backbench Conservative MPs. However the Government’s intention was clear enough.

Rather than looking to support and nurture the UK’s 4.8 million strong self-employed community, the Government at the moment seems to see them as a cash cow to be milked for all they’re worth. In the last 18 months, we have also seen the Government cut the dividend tax allowance, tacitly moot the lowering the VAT threshold and just this week u-turn on scrapping Class 2 National Insurance payments, which will cost self-employed sole traders around £150 each year.

This is not to say the Conservatives have done nothing good since they came into office (with the Liberal Democrats) back in 2010. The UK remains one of the simplest places to start a business, especially compared with our European neighbours and competitive rates of Corporation Tax continue to spur innovation and drive the UK economy forward. The Conservative Government has also taken strong action to tackle the scourge of late payment – introducing a Small Business Commissioner in 2017 to bear down on this pernicious practice.

Sadly, the mood-music seems to have changed of late, and the Conservatives seem to lack the nerve to properly recognise and speak up on the central and positive role that businesses play in all our lives. Encapsulated by Boris Johnson’s ‘f*** business’ remark in June, the Conservatives seem to be turning away from business just when we need our flexible economy more than ever – as we negotiate the uncertainty of Brexit.

And then we come to the debacle that is IR35, and the chaos that their current proposals will unleash in the private sector. In the current context, this actually presents an opportunity for the Government. They could offer an olive branch to business by abandoning this misguided policy. Chancellor Hammond could say, ‘We’ve listened to business, and read your consultation responses. It’s clear business doesn’t want this, so we’re scrapping it.’

Perhaps this is unlikely, given that the Government to date has been resolute in its belief that introducing the measure will net them an addition £1.2bn in tax, a figure they have yet to justify. But IPSE is still fighting to get the Conservatives to rediscover their support for the UK’s smallest businesses and the engine of our economy. We would encourage IPSE members to write to their MP to highlight their strong concerns about this proposal. 

We would also encourage the Conservative Party to look at itself in the mirror and consider what it can do to regain the trust and friendship of the UK’s 4.8 million self-employed. As we look to grow our economy post-Brexit, we cannot afford to jeopardise the future of our hardworking freelancers, independent professionals and the self-employed.