Well… For the first time in my (not so) short life, we have a coalition government in the UK. On the face of it, this means that every decision made by the Government will be a compromise between the two parties. However, in reality, all decisions made by Government are compromises… it is just that this time the compromises will be very public, whereas normally they are between two opinions held within a single party and the “deals” are “done” behind the scenes.
What does this mean for freelancers in the UK?
The outgoing Labour party have been quite openly hostile to freelancers. They introduced IR35 which insultingly “deemed” freelancers as being nothing more than disguised employees of their clients. This legislation has coloured relationships between the smallest of businesses and Government for over a decade. The incoming Liberal and Conservative parties, however, have been very favourable towards freelancers.
The Liberals have spoken up in support of freelancers in the House and have led two Early Day Motions pushing for repeal of IR35. They even went so far as to table a motion to get IR35 repealed in the recent Finance Bill (it didn’t get to the reading stage). The repeal of IR35 has been a pledge of theirs for many years.
The Conservatives had also pledged to repeal IR35 since its introduction, however in recent years this pledge has become a little watered down to be a “review” rather than outright “repeal”. I suspect that this difference between the Conservatives and the Liberals is in no small part linked to their relative expectations of being in power right now, and the danger of making promises that can’t be kept.
However. They are both SHARING power. For freelancers, this is good news. The two parties have their long-standing opposition to IR35 in common, and only need to find a way to work together to get rid of it. The fact that Labour stood so firm behind it is a sign of the emotional attachment that they had to the policy. Too many people had too much “face” to lose for IR35 to be abolished during the previous administration. This “embarrassment” factor will also give the new coalition an incentive to push for its removal.
And today, already, the decision has been made to “review IR35” and to “seek to replace it”. The question remaining is “when?”. The state of the country’s finances are not healthy, and any policy that REMOVES a tax (regardless of how pitiful the tax-take has been) will have to be publicly managed very carefully. While the budget of 2011 would be great, realistically the budget of 2012 is more likely.