28th November 2019
With the Conservative Party having now finally released their 2019 Party Manifesto, we have compared the key pledges which will affect small businesses, contractors and the tax you pay.
The Liberal Democrats have pushed to restore Corporation Tax to the 2015 level of 20%. They would also seek to simplify business taxation by lowering administration time and costs for smaller companies while working towards reducing opportunities for tax avoidance.
Labour takes a similar stance, preparing to reverse cuts to CT and pledging to keep them lower than 2010 rates (small businesses 21% and large businesses 28% in 2010 versus a proposed 21% and 26% from 2022). They would also guarantee no increase in VAT. Planned quarterly reporting for business below the VAT threshold would be scrapped.
The Conservatives plan to increase the Employment Allowance (currently to £3K off an employer’s NI bill). The Greens go one better and propose an actual figure of £10K. Boris Johnson also plans to increase R&D relief and expand the scope of the definition of R&D itself to include cloud computing and other new technologies.
CT was the main aim for The Brexit Party too, as they would introduce a zero per cent rate for the first £10,000 of pre-tax profits.
The Greens looked to increase CT to 24%, in line with the Organisation for Economic Cooperation and Development (OECD) average, public country-by-country reporting and consolidated Corporate Tax across the EU to prevent profit shifting. They would also look to close down Corporation Tax loopholes by widening the definition of ‘profit’ to cover dividends, share buybacks, additions to cash holdings, payments to parent or subsidiary companies (both onshore and offshore), and other distributed income.
Amongst the Brexit bluster and pomp, the Conservatives plan to “redesign the tax system so that it boosts growth, wages and investment and limits arbitrary tax advantages for the wealthiest in society” with no actual other information. Part of this includes a review and reform of Entrepreneur’s Relief. Sir Edward Troup, the former head of HMRC, said it “gives £2bn CGT savings every year to those who have already made their gains and provides no incentive for real entrepreneurship.” 62% of all people taking advantage of this relief make gains of over £1m…not exactly for the everyman. The Tories propose raising the threshold at which NI is paid to £9,500 from the current £8,632.
The Green Party have proposed a radical plan to introduce a Universal Basic Income in lieu of the Income Tax threshold. They would also merge Employees National Insurance, Capital Gains Tax, Inheritance Tax, Dividend Tax and Income Tax into a single Consolidated Income Tax. This would result in gains and assets being taxed the same as employment income. They would also look to end the double taxation of pension funds.
Labour would ask those who earn more than £80,000 a year to pay a little more Income Tax while freezing National Insurance and income tax rates for everyone else. Non-doms foreign income also would be taxable in the UK.
The Liberal Democrats would abolish the separate Capital Gains Tax-free allowance and instead tax Gains and salaries through a single reduction. The Marriage Allowance would also be eliminated.
Every party pushes for further Anti-Tax Evasion measures. The Tories desire to introduce additional anti-avoidance measures and increases maximum jail terms for getting caught. The Greens would require banks to provide information about such companies directly to HMRC. Labour would undertake the “biggest ever crackdown on tax avoidance and evasion and reform the inefficient system of tax reliefs.”
The Siân Berry and Jonathan Bartley’s Green Party propose establishing HM Revenue & Customs as an independent agency of Government, answerable to Parliament.
The Lib Dems are proposing to take “tough action against Corporate Tax evasion and avoidance especially by international tech giants and large monopolies”. This would include setting a target for HM Revenue and Customs to reduce the tax gap, stopping large multinational companies unfairly shifting profits out of the UK, improving the Digital Sales Tax to ensure tech giants pay their fair share and building on the OECD’s proposals to require multinationals to pay a level of tax which is more closely related to their sales in every country in which they operate.
The Brexit Party have offered a token pledged to abolish Inheritance Tax, although it is charged on less than 5% of all deaths (2016/17 figures).
Jo Swinson’s Lib Dems offered a significant incentive to contractors, as they would look to end controversial retrospective tax changes like the ongoing Loan Charge saga and review recent changes the IR35 rules. There would also be the introduction of a new ‘dependent contractor’ employment status in between employment and self-employment, with entitlements to fundamental rights such as minimum earnings levels, sick pay and holiday entitlement. They also propose wide-ranging policies to review tax and NI statuses of employees to ensure fair and comparable treatment for contractors and freelancers.
Labour, whilst not explicitly mentioning IR35 takes a very different route and would look to end “bogus self-employment and creating a single status of ‘worker’ for everyone apart from those genuinely self-employed in business on their own account so that employers cannot evade workers’ rights; and banning overseas-only recruitment practices.”
Neither the Greens, Tories or Brexit Party mention IR35.
Pay & Employment
The Lib Dems would like to establish an independent review to consult on how to set a genuine Living Wage across all sectors. This would start by paying the Living Wage in all central Government departments and their agencies and encourage other public sector employers to do likewise.
Labour has committed to the introduction of a “Real Living Wage” of at least £10 per hour for all workers aged 16 and over. Profit-sharing schemes would see workers given a stake in companies they work for. Jeremy Corbyn explores other innovative ways of responding to low pay, including a pilot of Universal Basic Income.
The Tories would offer an increase in the National Living Wage to two-thirds of average earnings, currently forecast at £10.50 an hour, and widen its reach to everyone over 21. They would also look at introducing legislation to protect pension pots.
The Greens would look to increase the Living Wage to £12 and extending it to workers aged between 16 and 21. A legislation would be proposed to ensure the maximum wage paid to any member of staff in an organisation should not exceed ten times that paid (pro-rata) to the lowest-paid worker in the same organisation. Labour suggested a similar scheme but capped at twenty-times.
Every party offers viable benefits for voting for them (bar The Brexit Part of course, which may as well instructions on how to build a time machine to the 1950s).
Regardless of who you support, ensure your voice is heard and vote in one of the most critical elections in our lifetime.
You can check out the full manifestos via the links below: