The Conservative party has now officially signed a deal with Northern Ireland’s Democratic Unionist Party and formed a minority government.
It wasn’t the result many had expected or wanted, but thoughts will now start to turn to the future, and how the country can move forward in this time of Brexit negotiations, threat and God knows what else around the corner.
With the dust now expected to settle somewhat, Amanda Swales of SimpleTax, an accountancy firm specialising in services for contractors and freelancers, has outlined her vision for how the general election result will affect contractor finances.
In an article first published on Contractor UK¸ Swales said that the truncated Finance Bill and pledges that have been hastily discarded from the Tory manifesto means some contractors may not be affected in ways they’d anticipated.
One area Swales comments on is the Dividend Tax rise, describing it as ‘probably the most fiery proposal as far as contractors are concerned, and it does have the potential to burn some of them’. This rise, which would see some contractors who earn money via dividend payments taxed more, was met with anger from those who would be affected.
The rise was however removed from the edited Finance Bill 2017. But that might not be the end, with Swales expecting the hike to be reintroduced at some point.
Another major area for contractors is inevitably around IR35, and Swales’ words will be pleasing for those working in the private sector.
“The prospect of extending the off-payroll rules to the private sector is much less ‘strong and stable’ than if the Tories had won a big majority,” Swales said. “And also because Theresa May will need as many of her own MPs to push through what she wants, backbench critics of IR35 or other controversial tax measures will irk her by wielding more power. They’ll know she wants them to play ball. Because of that, she’ll limit what she throws at them and how often. For her, the least provocative that ball, the better. So IR35 reform in the private sector has therefore become an outside bet; at least for now.”
In the build up to the general election, Theresa May said she’d bring corporation tax down to 17%, which would be one of the lowest rates in Europe. This may have risen under a Labour leadership, but following the result, contractors who have registered with Companies House ‘can expect to pay at least the 20% base rate for the foreseeable future.’
Swales said: “Like the off-payroll rules not being positioned to move, this is something PSCs can be relatively pleased about.”
It appears that the lack of dominance the Conservative party has currently, coupled with their continued power, will be a good thing for many contractors. Any controversial changes are unlikely to be prioritised, while contractor-friendly policies from the Tories will be maintained.