Boris Johnson and the Conservative Party won last night’s pivotal election by a considerable majority and, as in the aftermath of every general election, the media has flooded the internet with speculation on what the country is in for over the next four years. It’s highly likely that the 5 million or so self-employed people currently in the UK contributed heavily towards the Tory win, so what might our flexible workforce expect from Johnson’s government? We take a look at two critical contractor concerns: the IR35 reform and Brexit.
Conservatives promised a review of IR35 – will it happen?
The Tories are traditionally known as the ‘business party’, though their recent reform to IR35 saw that status somewhat tarnished. When other major parties – namely the LibDems and Labour – pledged to review IR35 in the final week of campaigning, many contractors were disappointed that the Conservatives were not readily jumping aboard the bandwagon to retain a large portion of their usual support. They finally caught on, however, and used BBC Radio 4’s Moneybox (which you can listen to here) as a stage to make their promises about the off-payroll rules. Genuine policy or grab for votes? Best to take it with a pinch of salt.
Sajid Javid promises an IR35 review
Chancellor Sajid Javid said the anticipated private sector IR35 changes would be reviewed should the Tories retain their government, and that he wanted to ensure the reforms were ‘appropriate’ before being rolled out.
Despite reassuring listeners that the Conservatives were batting for the self-employed, Javid didn’t sound too committed when pressed for an answer on if the Tories would consider scrapping the off-payroll rules altogether. He instead asserted that the legislation would be included as part of a ‘wider investigation’, as promised in the Tory manifesto, that will ‘look into how new policies could help freelancers’.
“One thing, in particular, I want to look at is the proposed changes to IR35, these are the tax rules that apply to many self-employed people, particularly those that work as consultants,” Javid said while speaking to Moneybox host Paul Lewis. “I want to make sure that the proposed changes are right to take forward so we will be having a review of those proposals and changes as part of our wider self-employment review.”
Will IR35 review be announced quick enough by Tory government to make a difference?
The potential for a backlash felt by contractors has been overlooked with these hasty, vague promises of an off-payroll review, however.
Preparing for the IR35 reform calls for planning, communication, and a fair amount of time if the correct approach is taken. A change to the legislation this close to the deadline could not only waste business owners’ money but could cause mass blanketing of status determinations as seen in the last-minute 2017 public sector reform. Financial-sector corporations have already beaten a path for rash reactions to the off-payroll rules that other companies wouldn’t find difficult to follow - in fact, GSK joined the ranks of IR35 risk-aversion just yesterday after months of speculation.
This promised IR35 legislative review, if genuine, will have to be turned around at breakneck speed to be completed before the 6th April 2020 rollout date, which has been set since 2018. With the 2019 Autumn Budget cancelled and the Spring Statement too close to the deadline to hold any meaningful IR35 changes, the Tories will have to announce something well before the end of January to give businesses and contractors enough time to prepare.
How might Boris’ Brexit affect UK contractors?
The fact is that nothing is certain at the moment, including how contractors will be affected by the plethora of avenues the Brexit deal-or-no-deal game could go down. What we do know is that the implications could be far-reaching, whichever way the relationship with the EU swings.
Contractors working in the EU may be impacted by a Conservative hard Brexit
Nearly 45,000 contractors that live and pay taxes in the UK work mostly in the EU on long-term contracts, while thousands more rely on short-term jobs or commute. The likelihood that these contractors will enjoy the same flexibility of work between the UK and the EU isn’t high; after all, they’re only eligible to work in Europe because Britain is a part of the EU.
If a deal is achieved, a transition period is specified in the withdrawal agreement that allows businesses and individuals to make arrangements until a given deadline – currently, 31st December 2020. Contractors will still reap the benefits of free movement during this time to complete long-term jobs and get future UK-based work lined up.
However, this won’t stand if we exit sans-deal. It would most likely impact tariffs on trade severely and would throw the rights of British workers in the EU (and EU workers in Britain) into uncertainty. With no trade agreements in place, the UK would probably have to rely on the World Trade Organisation rules until new trade deals are forged. Europe-based contractors may have to return to Britain permanently if this is the case.
UK contractor demand may grow under Boris' proposed Brexit
Once again, it’s unclear whether the UK will remain in the single market and how either eventuality will reflect in trade and service prices.
However, within the UK itself, the self-employed added almost £300 billion into the economy over the last 12 months. This is a great indication of how in-demand contractors are and that abundance of work isn’t likely to diminish, at least for now. Employers will probably not want to invest in permanent hires with so much market uncertainty, leading to the use of contractors instead. New projects, system updates and business consultancy will still go on, presenting a wealth of opportunities for the self-employed.
Conversely, this doesn’t spell mass-dismissal for contractors as soon as the post-Brexit dust settles; rather, it could change the landscape of the UK job market as we know it. Self-employment is already on the rise, despite IR35 - Brexit could simply present a catalyst for the inevitable.
Contracting has survived IR35 and Brexit so far under Conservative rule
All in all, it's a case of wait-and-see. Contractors are tenacious though and have survived - even thrived, with self-employed numbers growing year on year - so far despite the IR35 reform and the will-they-wont-they Brexit negotiations.
If you're concerned about IR35, Larsen Howie offers a range of contract and working practices reviews – you can find out which option would be best for you here. We also offer IR35 investigation insurance with representation from our Head of Tax, IR35 specialist and Jensal Software defence Andy Vessey ATT, should it go to tribunal. We also offer a range of niche contractor insurances, including Professional Indemnity, Public Liability, and Energy Sector Combined.
For any further information or advice, please call us on 01163 800 400 or drop us an email. Alternatively, take a look around our Knowledge Hub for more IR35 advice, industry news and contractor guides.