Non-domiciled individuals should seek the advice of a contractor accountant, as they may qualify for tax benefits.

Calculating whether or not a UK non-dom is eligible to benefit from tax planning opportunities is complicated and depends on various factors, including the length of time they have been resident in the UK.

Robin Sewell, a managing partner at chartered accountancy firm Midgley Snelling, said non-doms would be best advised to seek advice before they take up residency in the UK, but it is also worth foreign nationals checking to see if opportunities are available, even if they have been resident here for some time.

He went on to stress that careful implementation is necessary and it is vital that overseas income, gain and assets are recorded correctly.

There has been a significant drop in the number of people registering for non-dom status in the UK since an annual levy was introduced and the inheritance tax laws changed. In May it was reported that the number of registrations had dropped by 16,000 since 2008 when the £30,000 levy on non-doms living in the UK for longer than 7 years was introduced.

People who were born outside the UK, but are long-term resident here, can claim UK non-dom status. They do have to pay income tax on UK earnings, but any earnings abroad do not attract UK tax providing they remain offshore.

In his last budget, George Osborne announced that the levy on non-doms was to increase to £50,000 for people who have resided here for 12 years. The government expects that move to raise an additional £200 million over the coming years. However, the Chancellor said he wanted to encourage overseas investment and would remove the charge non-doms pay if they remit capital gains or foreign income to the UK to invest in a UK business.

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Employers might like to seek the services of a contractor accountant to sort out their PAYE paperwork after HMRC said it found a number of mistakes in 2009/10 returns.

Every year, employers are duty-bound to send HMRC details of their employees’ tax and National Insurance contributions. However, as the Revenue has revealed, this data is not always accurate and this can lead to problems for everybody concerned. In addition to costing time and money for both the employer and HMRC, employees might find the incorrect amount of income tax is deducted from their salary.

HMRC says that employee names are often entered incorrectly on year-end returns. For example, 507 individuals apparently have the name “A N Other”, 824 have the surname “Unknown” and a further 75 have the family name “Casual”. Furthermore, incorrect dates of birth meant that 40 employees were still working at the ripe old age of 200!

Jim Harra, the direct of customer operations at the Revenue, explained that most employers do complete their PAYE returns correctly. But it is imperative that they double-check their employees’ personal data in order to prevent problems occurring in the future.

Meanwhile, David Cameron has admitted that businesses have not been taking advantage of the National Insurance Holiday scheme.

When the PM first unveiled the scheme, he expected around 400,000 small firms to apply for the holiday and be exempt from paying NICs on their first ten members of staff. However, only 7,000 firms have enrolled on the scheme so far.

Ed Miliband, the leader of the Labour party, said this was further evidence that the growth policies laid out by the coalition simply weren’t working.

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Are many accountants for contractors regretting their career choice?

A lot of employees now wish they had pursued their childhood dreams rather than take up the career they did, according to a recent survey carried out by Monster.co.uk.

The poll found that 42% of the over 30s wished they had followed their childhood ambitions. A lot of these aspirations were traditional but ambitious careers, such as becoming a medical professional, a sports person or going into acting.

Actual careers were found to contrast sharply with these early dreams. 10% of respondents said they work in IT and the same percentage work in education. A further 9% said they were employed in an administrative role.

47% of people in their 40s said they wished they had followed their dreams, whilst only 31% of the over 60s felt that way. Men appear to be slightly more dissatisfied than women – 44% compared to 40%.

Michael Gentle, a spokesman for Monster UK & Ireland, said it’s perfectly normal to look back and think about might have been but people should take stock of whether they are simply feeling nostalgic or genuinely unhappy with their current position.

Today’s workers and limited company contractors have considered what jobs they would like to pursue now and 14% said they’d like a role in the arts or entertainment industry and 12% said they would opt for broadcasting, film and music.

Gentle went on to say that it may be too late to become a doctor or a professional footballer, but it’s never too late to move into a different role or industry. Whilst a job used to be for life, that idea no longer exists and many people work in a variety of fields during the course of their career.

Another survey, this time by the CMI, discovered that 42% of employees have not progressed as far in their career as they would have liked. 22% think their company has not been able to afford to give them a pay-rise or promotion in the last 12 months. A further 19% admit they either lack experience or the right qualifications to progress.

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The Low Income Tax Reform Group has warned that this month may not be as quiet in the tax world as people would expect.

The January 31st deadline for filing online self-assessment tax returns has now passed and many taxpayers will be sitting back and relaxing. However, HMRC will start issuing penalties this month to taxpayers who missed the deadline.

Anybody who receives such a demand from the Revenue might want to seek the professional advice of a contractor accountant after the LITRG said that a fine could be overturned on appeal.

The penalty for late filing is £100 but there are instances where a fine could have been inappropriately issued, a spokesman from the Group explained. If you believe that you met the 2009 – 10 filing deadline and receive a penalty notice, you only have 30 days in which to lodge an appeal. It is also possible that an appeal might be successful if you had a reasonable excuse for missing the deadline.

The Revenue is currently under a lot of pressure to collect as much money as possible. As we have seen in recent months, its systems are not infallible, and the department has been in hot water due to the coding error debacles and more recently the ‘loss’ of employee PAYE contributions.

If you have any doubts relating to correspondence received from the department, including penalty and coding notices, it is in your best interests to get professional advice as soon as possible.

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Freelancers should take note that HMRC is stressing the importance of filing online tax returns by the deadline date of the 31st January. Failure to comply with this will result in a penalty of £100.

The Revenue has advised people who are struggling to sort out their affairs to seek the advice of a specialist contractor accountant, tax adviser or contact the department for assistance.

All outstanding tax returns for the 2009 – 10 financial year must be filed by midnight on the 31st of January, a Revenue spokesman explained. People who have not used online filing before are also reminded that they need to leave plenty of time to complete the registration process.

Once you register online you receive a User ID and an Activation Code will be sent by mail within 7 working days. It will therefore be necessary to register no later than the 21st of January to make sure the Activation Code is received on time.

Leonie Kerswill, a tax partner at PwC, said that people tend to push their tax return down the priority list during the festive season but after over spending at Christmas it would be unwise to incur the £100 late-filing fine. She also reminded taxpayers that they need to pay the tax due on January 31st as well as filing the form.

Meanwhile, the PCG is organising a tax planning event in Manchester on February 2nd. The event will take place at the Mint Hotel and will deal with the importance of tax returns and record keeping as well as the changing IR35 landscape.

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Image: I have a burning hot love letter 4 U by Nina Matthews Photography(away all of Jan)

A recent report on ITV’s Meridian Tonight has given an interesting insight into how freelancers and contractors are thriving in the traditional new media hotspot of Brighton & Hove.

At present, 16% of the city’s workforce is self-employed – twice the national average – and the numbers are increasing in the location, which has become a hub for new media start-ups.

Darren Fell, MD of Brighton-based contractor accountant‘s Crunch.co.uk has experienced first hand the surge in freelancer and contractors.

He told ITV: “It is flourishing out there, and people are saying ‘no’ to the corporates, ‘no’ to ordinary work and ‘yes’ to freelancing.”

Crunch.co.uk has outgrown its current surroundings and is set to move into new offices as the business expands to cater for the ever-growing freelance workforce.

The regional ITV programme was screened to mark the second National Freelancers Day which has been more successful in gaining wider recognition than the inaugural event last year. Even Prime Minister David Cameron has leapt atop the bandwagon with a letter to the Professional Contractors Group (PCG) outlining his appreciation of the crucial role that freelancers and contractors play in the UK economy.

The freelance workforce is already thriving on the south coast, but with supportive governmental policies (particularly in regards to IR35 which is currently under review), Brighton may just prove a microcosm of what’s in store for the UK as a whole.

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Basic administrative tasks relating to bookkeeping, invoicing and billing and filling out timesheets take the average worker in the UK 37 days every year, according to Keboko, the cloud service provider.

The cost of all this red tape amounts to more than £100 billion and could encourage freelancers to get help from a contractor accountant in a bid to reduce the amount of time they spend carrying out administrative duties.

Charlie Cowan, the CEO of Keboko, commented that companies should be trying to rebuild after the recession but instead many workers are finding it hard to do this as they are bogged down with tasks such as data input and updating reports. UK businesses are basically throwing the money spent on these tasks down the drain.

The burden of dealing with the taxman is also costing businesses dear, the IoD reported earlier this week. The Institute surveyed its members and discovered that there is still considerable room for reform to reduce the administrative burden surrounding taxes. The survey also discovered that 30% of businessmen would actually advise someone not to start up their own business because of the weight of the tax burden.

An overwhelming number of directors want to see the regulations concerning PAYE and National Insurance simplified. Business people sometimes struggle to understand the tax rules and have difficulty finding out the correct information when they contact HMRC. Only 15% of respondents said it was easy to get the right information when they called the HMRC helpline while a third said it was very or fairly difficult.

HMRC’s website does not fair any better either. 16% said they could find the information they needed easily but again 33% struggled to find what they needed to know.

Since the PAYE coding errors earlier this year, businesses have found it increasingly difficult to get through to the Revenue’s helpline. 37% of the directors who did manage it feel that the majority of HMRC officials have a poor understanding of the nature of their business.

Half of the directors surveyed said they want the OTS to simplify the PAYE and NI system and 28% said the taxation of employee benefits was the area most in need of simplification.

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Credit managers are expecting to see a rise in business insolvencies of over 10% within the next year.

Graydon UK, a commercial credit reference agency, conducted a survey which showed that 64% of credit professionals are expecting to see business failure rates in excess of 10%, and 13% of those are predicting insolvencies to exceed 20%.

Despite the prospect of increased company failures, just under 50% of the credit managers surveyed agreed that a rise in insolvencies is a price worth paying if the result leads to the future economic stability of the UK.

The MD of Graydon UK, Martin Williams, said that despite warnings from credit professionals, only a third of businesses are monitoring their clients’ public sector exposure.

The entire supply chain could be affected if a key customer or supplier, who relies heavily on government contracts, goes insolvent. HMRC has also been turning down requests under the Time to Pay scheme and 79% of credit managers say this will contribute to the rise in insolvencies.

A lot of businesses are struggling to settle other obligations and if they were expecting to defer tax liabilities they could well find themselves in serious difficulties.

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Good to see the Coalition coming good on their promise of reviewing IR35. The announcement of the creation of the Office for Tax Simplification was rapidly followed by the publishing of its Terms of Reference. This made really good reading since they contained a specific statement of IR35 as a prime target for their review.

Needless to say this has prompted an immediate flurry of speculation about how IR35 would be replaced with something more draconian. For example, the new head of the OTS, John Whiting, mentioned 80/20 when talking about their proposed plan of action, which some have immediately translated into meaning the OTS would resurrect the failed and discredited Australian idea that to be a real freelance, no more than 80% of your income should come from a single client. Heigh ho…

As I’ve said before, there is a real difficulty distinguishing between genuine one-man companies and those who use a Limited Company purely as an artificial tax avoidance vehicle. But however the OTS suggests we square that particular circle, I’m fairly sure the 80/20 rule will not be part of it.

Meanwhile this whole (and rather premature!) debate has prompted some other thoughts.

Key to any resolution to the IR35 question is defining a freelance worker. While the traditional model in UK economics defines everyone as either employer or employee, in reality there is a third category of “none of the above”. If that third way was properly enshrined as a working model, consider the many areas where things would become much clearer.

Firstly, there is the vexed question of business expenses. As we know, travel and subsistence expenses for a temporary workplace cease after two years. While this makes perfect sense for a permanent long-term employee, it is nonsense for someone like me who takes work wherever it may be found. Why should I personally be penalised if my company’s client base happens to be based in the same approximate geographical area?

Secondly ID checking and the right to work in the UK, while important, is the responsibility of the employer. My clients are not my employers; in fact most of my contracts go to great lengths to prove they are not. If we allow me to be an independent worker, that checking becomes unnecessary since my company can make the necessary declarations and accept legal responsibility for their accuracy.

Thirdly, liability for payment of taxes could go down to the individual and not, as at present under S44-47, up to the intermediary company (which in most cases would otherwise be the agency). That would step around a huge amount of contractual debate of who is an employee of whom, which incidentally would only help resolve the IR35 “problem”.

Finally there are a raft of current and future issues with the Agency Workers Directive and the Agency Regulations that would cease to be of any relevance. For example, we have to go through the nonsense of opting out of the Agency Regulations when, as any fool knows, the way this is routinely done means you are in fact opted in anyway.

And, looking a bit further over the horizon, it is clear that the EU has no concept of the UK model for the freelancer worker. If we can establish our legitimacy up front right now, we would avoid a whole new set of problems.

The UK Freelance is a hugely valuable factor in the UK economy. There are around 4.8 million of us. Why is it so hard to get that fact recognised in law?

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Ambition, the international finance and accounting recruiter, believes that contractor accountants and finance staff working in the public sector will be badly hit by cuts in public spending.

There are currently around 140,000 permanent employees, freelancers and contractors in the public sector and Ambition predicts that around 11.5% will lose their jobs and many of those will be unable to find work in the private sector.

In total, it is thought that as many as three quarters of a million jobs will be lost in the coalition’s bid to reduce public spending by £6.2bn this year.

The MD of Ambition in the UK, Tim Gilbert, pointed out that the majority of public sector finance professionals do not have the cut and thrust attitude required by the banks and City financial institutions. Those candidates with commercial acumen will be quickly snapped up but many will fall by the wayside.

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Carrington Accountancy have come up with a novel way to keep their contractors abreast with the latest changes in legislation and tax planning.

From the start of the new tax year, they will be publishing a “Question of the Month” and providing a detailed explanation on their blog. The question will be based on a subject that is relevant to the limited company contractor, as well as the most common queries that their accountants have received over the previous month.

Commenting on the new service, Operations Manager Mary McDonald said:

“We are always looking at proactive and innovative ways to help educate our clients and help them become more “tax savvy”. Our clients love the idea and look forward to a convenient, quick blog on a useful topic each month which they can retweet to interested colleagues and friends via our Twitter Page”

This is not the first time that online accountants have used the web to provide free advice in a questions and answers format. AccountingWeb have already implemented an online discussion group where readers can ask a tax or accounting related question under their ‘Any Answers’ category. According to the website, there are as many as 90,000 members willing to answer the daily feed of questions, and the addition of the Q&A service has been largely responsible for a surge of new visitors to their site.

Carrington’s first question of the month was about the use of limited company dividends and how these can be used as a tax efficient means of remuneration. Since the majority of their clients are working in the freelance marketplace, they anticipate that the subject IR35 will feature prominently over the coming months, particularly since the Tories announcement to review the legislation if they win the election.

Carrington’s next question of the month – “Why am I not paying any National Insurance in April? You must have made a mistake.” can be found on their blog.

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According to a recent study by accountancy software company E-conomic, nearly 50% of contractor accountants are planning on changing careers at some point in the next five years.

Why? Because they believe that the regulations surrounding tax and financial reporting will become tougher, which in turn will lead to an increasingly stressful workload.

The accountancy profession is already at breaking point following a surge of onerous and complex regulations brought in by the current government to control inflation and to give greater powers to HMRC.

Of the people that took part in the survey, most said that they were looking forward to retirement from the profession in the next five years.

Slightly less than 90% of respondents said that it was becoming increasingly more difficult to keep abreast of financial reporting and taxation requirements, while 57% believe that HMRC will soon enjoy much more of a direct involvement in areas such as compliance.

More than 25% of accountants said that they are keen to explore the possibility of outsourcing, with 75 per cent suggesting that their roles will change beyond recognition over the coming years.

According to the study, accountants feel that they will be used in an advisory capacity in the future with over 80% believing that this will be an integral part of the services they provide to clients.

Over 33% think  that a paperless office will become the norm over the next five years and slightly less than 50% see themselves accessing clients’ records via cloud based systems and working remotely.

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