The Conservative party has announced plans to reform tax systems for the self employed. One option which they are currently considering is to give those individuals who work via a one person company, the right to opt out of employment. In real terms this means that those individuals would lose their entitlement to maternity pay, statutory redundancy pay and jobseeekrs allowance. They  also be liable for Class 2 NICs at £2.40 per week as opposed to Class 1 NICs.

Shadow Business Minister, Mark Prisk, spoke to The Telegraph about the current tax system, stating that it was unfair for people who worked outwith the traditional employment model. In particular he made reference to IR35. This legislation required contractors to prove their  independence and if they are unable to, they are required to pay NICs alongside their ’employer’.

Mr Prisk said: “The current government has treated the self-employed disgracefully. More often than not they have treated them as if they are on the fiddle, which is wholly unacceptable. We want to reform the system.”

As the Tories set out plans for reform, they have been working alongside the PCG. Their head of public affairs, Simon McVicker, said: “”We have been talking to them about reforms and getting rid of IR35 and have been looking at some options. All we know is that they are sympathetic to the position, as are the Lib Dems. Opting out of NICs would be a large step.”

He concluded: “We are not trying to avoid taxation, we are looking for a fairer, more transparent system.”

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  • chris

    The best test for IR35.

    Does the contractor bill more the £50k pro-rata with any individual contract?

    If yes – leave alone as even if they are pushing expenses to the max they will probably be paying more tax and or making an economic impact greater than if they were salaried. The clue is they would not be getting >£50k plus if they were salaried so why would IR35 look to tax and NI on > £50k.

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