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Hello, Conservative Government. Farewell, Unfair Building Tax

Ian Anfield | 19th May 2015

Without wanting to nail my political colours too firmly to the mast, I was surprised and relieved in equal measure when the British public decided to give the Conservatives a spell in office on their own, rather than choosing the increasingly anti-business Miliband/Sturgeon partnership.

Of greatest concern to Hudson Contract was that Labour had pledged to resurrect ‘deeming’ - an idea that’s been around since the time of Tony Blair and would see most labour-only subbies robbed of their right to be self-employed.

The only get-outs for deeming were to be for those who provided all the materials they used, major items of plant, or additional workers. Unless they did that, they would be deemed to be employees, and treated like employees for tax.

Quite apart from the fundamental entitlement to self-employment that applies to workers in every other occupation – from cab drivers to barristers – most in construction agreed that the real impact of deeming would be higher prices rather than a higher national tax revenue and the concept soon became known as the Unfair Building Tax.

Labour’s union paymasters, meanwhile, championed deeming as it would take self-employed people nearer to employment and therefore nearer to union membership.

Happily, the idea quietly died a death under the coalition.

Fast-forward to this year, and Labour’s Shadow Work and Pensions Minister Rachel Reeves not only resurrected deeming, but announced it was top of her agenda once Ed Miliband had unpacked at No 10.

According to Ms Reeves, the new law would raise hundreds of millions of pounds. In fact, enough to pay for scrapping the ‘bedroom tax’.

(You might remember Hudson Contract had some pre-election fun, highlighting the irony of linking the issues: it would have meant private homeowners paying builders to build them extra bedrooms… and the builders, who would have needed to put up their prices, would therefore effectively be paying for those in social housing to have spare bedrooms for free…)

Further reasons for construction to be cheerful

As the countdown to the election approached, Labour also made noises that some planned infrastructure projects would have to be reconsidered due to ‘environmental concerns’ – a strategy that blighted the industry last time they were in power.

And analysts observed that other Labour policies would damage construction: e.g. cutting tuition fees would curb investment by universities, while the proposed energy price freeze for utility companies would tighten up investment in energy generation and distribution.

By contrast, the coalition had made progress in these areas with reformed planning laws, a more balanced view of our needs set against environmental impact, and encouraging private and foreign investment in infrastructure projects.

Labour had also promised to remove employment tribunal fees (which when introduced by the coalition saw cases drop by 70%), to give unfair dismissal rights after twelve months rather than twenty-four, and to outlaw zero-hours contracts. With construction needing the ability to react to the feast and famine of contract awards, these anti-flexibility laws would have hit the industry hard.

It will be interesting to see if George Osborne adds anything new when he announces his post-election budget in the summer. I think it possible he might bring forward the removal of pay and expense schemes run by umbrella companies. But he has already signalled that Labour’s deeming will stay where it belongs. . . filed in the ‘crap ideas’ cabinet.

As for Hudson Contract, our firm policy is to continue to work with our advisors to ensure that whatever the legislation, our clients are assured of certainty of cost through our tax-compliant engagement models. On that, you have our unbreakable word.