How will the Conservatives' General Election victory impact contractors?

Friday 8 May 2015

The Conservative Party's victory in the 2015 General Election has defied predictions and looks set to see the rollout of plans highlighted in the Budget, Autumn Statement and party manifesto.

In Chancellor George Osborne's March Budget, he outlined a number of positives for contractors and the self employed, though the headlines were dominated by the announcement that travel and subsistence relief would be restricted for contractors who are under the supervision, direction and control of the end user.

There was initial uncertainty over the move and how it would affect contractors, many of whom are still awaiting a consultation to find out how this will be put into force.

On a more positive note, the Budget was very much targeted towards small business owners and self employed people, and the changes announced will now be pushed through, after a second term was secured.

This includes the Chancellor's promise to scrap self assessment, which he described as "complex, costly and time-consuming", with a new replacement system introduced.

Information that HM Revenue and Customs requires for relevant individuals is instead being uploaded into digital tax accounts automatically, with those who have the most complex tax affairs having the ability to manage them through their online account.

The Conservatives say that such a measure is intended to make it seem like people are paying a single business tax and the information will be automatically received.

It represents a change from the lengthy task of attempting to complete a self assessment tax return accurately using records stored over a long period of time.

The new approach, which will be introduced from 2016, will be accompanied by the scrapping of the Class 2 National Insurance Contributions - a pledge that many speculated was an attempt to sway self-employed voters who were undecided before the Election.

While the potential for such a move to become reality is still being questioned, it promises to be useful to sole traders and contractors as a means of simplifying tax if the new regime rolls it out.

"To support five million people who are self-employed, and to make their tax affairs simpler, in the next Parliament we will abolish Class 2 National Insurance contributions for the self-employed entirely," Mr Osborne vowed.

Previously, those who have had to pay Class 2 were also required to pay Class 4, which can not only be confusing for the self employed to understand, but also time-consuming and costly.

The new government has also vowed to conduct a review of employment status, which has historically been a contentious issue among contractors and the self employed.

However, the Coalition has instructed the Office of Tax Simplification to work on this, and efforts will be accelerated under a solely Conservative government along with Michael Jack and John Whiting.

The recommendations set out in their review will be a priority in the next Parliament, according to the Conservatives, who have pledged to continue limiting the bureaucracy that has hamstrung many contractors in recent years.

The challenge for the new administration will be ensuring that its previous promises complement the intentions set out in its manifesto, which includes a pledge to create two million new jobs with the aim of achieving "full employment".

Businesses are set be offered the most competitive taxes of any major economy, while a major business rates review will help smaller firms.
Support is also set to be offered to provide three million new apprenticeships as part of the government's aim to enhance the entire job sector and boost the long-term economy.

By Victoria McDonnell

Get in touch

Please select your type of enquiry:

Brookson on Twitter