Tax & admin · 3 December 2018

Could self-employed “tax grab” swing an imminent election? The 40 MPs under threat

IR35
Anna Soubry and Zac Goldsmith are among MPs at risk of losing their seat if they fail to back self-employed constituents

Will Britain’s self-employed determine the result of the next general election? New research has revealed as many as 85 MPs could lose their seat if they back the introduction of IR35 into the private sector.

If Theresa May fails to get her Brexit Withdrawal Agreement through the House of Commons, a general election is one potential outcome. Although the idea of another public vote seemed out of the question just a year ago, MPs are running out of options.

An election would likely be dominated by the terms of Brexit, but, as seen in 2017 when Labour framed the election around cuts and austerity, other issues can have a surprising influence.

The Off-Payroll rules being ushered into the private sector by the government could be decisive. Using data from the Office for National Statistics (ONS), ContractorCalculator found that 49% of self-employed constituents would vote against their local MP at the next election if they backed Off-Payroll rules proposed by the Treasury.

What is IR35?

IR35 was first introduced in 2000 as a way to combat tax avoidance through “disguised employment”. It dictates how freelancers and contractors are taxed when working for a client.

The rules allow HMRC to “look through” an intermediary, such as a Personal Service Company (PSC), and consider whether it is appropriate for the individual to operate in PAYE and pay National Insurance contributions (NICs).

Following a lengthy consultation period, chancellor Philip Hammond confirmed in his Autumn Budget that IR35 – the so-called “tax grab” on freelancers – would be introduced to the private sector. Hammond hinted that the rollout would “exempt small business”, but the question remains – how small is small?

The latest research revealed that 85 MPs are at risk of losing their seat if they fail to back calls from the self-employed to scrap extension of IR35.

Commenting on the threat to MPs’ seats if they support the private sector roll-out, Dave Chaplin, CEO and founder of ContractorCalculator said: “Failure to secure the self-employed vote would prove catastrophic for all parties involved.  There is also potentially a lot to gain for some, but those in precarious positions will have to act swiftly and earnestly to win over contractors’ trust.

“Of the vulnerable MPs, there are 40 Conservative and 24 Labour politicians and the Conservatives appear to have a lot more to lose than Labour. The recent Off-Payroll announcement, and multiple draconian measures before it, won’t have done those vulnerable Tory MPs any favours, as they now face an uphill task if they want to save their seats.”

Read more about IR35:

Chaplin explained that while Labour had many vulnerable seats, IR35 posed a “massive opportunity” to make ground on a government criticised for targeting vulnerable individuals with its tax policies.

He added: “For MPs who are prepared to back up Labour’s arguments by opposing the draconian Off-Payroll regime, any potential general election caused from a collapse in government from Brexit could prove very fruitful.”

“Self-employment is on the rise and the self-employed vote will prove crucial to either party’s fortunes at the next election. I would suggest that no party ignores the needs of these important voters.”

The 49% against IR35 was applied to the number of expected self-employed voters in each constituency to reflect the number of critical votes; a sum which exceeds the majority margin by which 85 MPs claimed their seats in 2017 – in many cases significantly so. 

Top 20 Conservative IR35 political casualties

MP Constituency Parliamentary majority Number of shifting self-employed voters
Zac Goldsmith Richmond Park 45 9,263
Royston Smith Southampton, Itchen 31 2,460
Derek Thomas St Ives 312 5,421
Stephen Kerr Stirling 148 2,330
Theresa Villiers Chipping Barnet 353 5,137
Amber Rudd Hastings and Rye 346 4,007
Jackie Doyle-Price Thurrock 345 3,345
Stephen Crabb Preseli Pembrokeshire 314 3,003
Matthew Offord Hendon 1,072 6,349
Stuart Andrew Pudsey 331 1,820
Chloe Smith Norwich North 507 2,521
Craig Whittaker Calder Valley 609 2,697
Justine Greening Putney 1,554 5,264
Mike Freer Finchley and Golders Green 1,657 5,143
Bob Blackman Harrow East 1,757 5,246
Jack Brereton Stoke-on-Trent South 663 3,912
Michael Ellis Northampton North 807 2,286
Guto Bebb Aberconwy 635 1,705
Anna Soubry Broxtowe 863 2,315
Chris Green Bolton West 936 2,473
Mark Field Cities of London and Westminster 3,148 6,339

Top 20 Labour IR35 political casualties

MP Constituency Parliamentary majority Number of shifting self-employed voters
Emma Dent Coad Kensington 20 4,939
Laura Smith Crewe and Nantwich 48 2,903
Ian Austin Dudley North 22 1,045
Paul Farrelly Newcastle-under-Lyme 30 949
Rosie Duffield Canterbury 187 3,883
John Grogan Keighley 239 3,264
David Drew Stroud 687 4,452
Gerard Killen Rutherglen and Hamilton West 265 1,525
John Woodcock Barrow and Furness 209 1,074
Thelma Walker Colne Valley 915 4,245
Gloria de Piero Ashfield 441 1,882
Paul Sweeney Glasgow North East 242 935
Lesley Laird Kirkcaldy and Cowdenbeath 259 996
Fiona Onasanya Peterborough 607 2,288
Matt Western Warwick and Leamington 1,206 3,960
Sandy Martin Ipswich 836 2,584
Mohammed Yasin Bedford 789 2,348
Helen Goodman Bishop Auckland 502 1,411
Paul Williams Stockton South 888 2,093
Angela Smith Penistone and Stocksbridge 1,322 4,677

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ITV

 

ITV star pursued by HMRC for unpaid tax bill worth £2m

The legal wrangle relates to the presenter’s earnings as a freelancer, which HMRC claims have unpaid taxes dating back seven years.

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ABOUT THE EXPERT

Simon Caldwell is deputy editor at Business Advice. He has a BA in politics and communications from the University of Liverpool, and has previously worked as a content editor in local government and the ecommerce industry.

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