It seems that HMRC have found a rich new source of targets for IR35. One that has been, rather surprisingly, untapped since IR35 was first brought in but which, on the face of it, is  probably more of a target than the traditional IT contractors and engineers. And one that further illustrates the problems with using “in business” as a criterion for investigation.

It is being reported in The Stage that several “high profile” performers who work through their own limited companies have had nice letters from HMRC pointing out that they may owe many thousands in NICs, going back six years. This, needless to say, is causing some consternation among the luvvies.

Now this is interesting, to say the least. When IR35 appeared the fledgling PCG thought that the media people would be obvious targets in their own right; after all, they are supplied via agencies, and they are under the direction of their clients (literally, in many cases). And, of course, they have a much higher public presence and would have given the campaign against IR35 a serious boost.

Sadly the answer that came back was “it doesn’t apply to us”. End of discussion.

Now, however, HMRC seem to believe it does apply to them. Why now is a whole other question, but The Stage reports HMRC as saying that it “is not cracking down on actors or any other profession”.  Really?  Perhaps HMRC have only just noticed that actors exist; after all, such frivolities as the theatre and Television are not something you would normally associate with the average tax inspector. Still, not a crackdown then, more of a refocusing exercise then… Or something,

Similarly a prominent accountant is claiming that HMRC are moving the goal posts and reinterpreting existing legislation. Echoes of the Arctic case, where S660a was imaginatively applied to a situation it was never meant to cover (and, of course, S660a itself came into being as the result of an actor’s activities…). Except this time they’re not moving any goalposts, actually.  It has long been a mystery why actors, freelance journalists and assorted meeja people have escaped the predations of IR35 despite many blatant examples of them having what look like full time employments, to the extent they have claimed for unfair dismissal when those employments have ended.

So what has changed then? Clearly someone has removed a previous barrier for some reason. Perhaps it’s a pre-emptive strike to offset all those PCG members stepping away from IR35 altogether.

However, the point at issue here is what actually constitutes being in business, which HMG insist is the key separator for IR35 fodder. Is an actor in business? Apparently not, if you accept that actors are somewhat unlikely to grow and take on employees and capital assets. However, they have to bid for work against other similarly qualified people, they work through agencies, they don’t get paid if the play is cancelled and they can send in a substitute (except they call them either stand-ins or understudies).

There are also solid business reasons for working through a company. Like other contractors, they have to cover periods when they have no income, they have to cover expenses, they have to accumulate pension funds and insure themselves for illness. Just like all us other contractors, in fact.

So really the surprise is not that actors and the like are now IR35 targets, but that it’s taken so long for anyone to realise it. Still, there are 36,000 Equity members out there. That would be a nice addition to PCG’s membership…

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Image: Milton Friedman, Chicago Style by DonkeyHotey

We keep hearing about the skills shortage in IT in this country. A lot of the justification for work being outsourced and offshored, for example, is justified on the grounds that the clients can’t find the people they need in the UK, so simply have to go elsewhere for them. And as I predicted some time ago, the level of work being offshored is creeping up, not only in numbers of jobs but in the seniority as well. Helpdesks have long gone, as have standard coding roles. Now we’re seeing DBA, BA and PM work going the same way.

So why are one in six of our UK resident IT graduates out of work then? I think there may be two things at work here (unlike those graduates…)

Firstly the reason is not a lack of skills; it’s a lack of money. And, to a lesser extent, a lack of vision.

We cannot possibly have that many qualified people out of work because they can’t do the job. Also, of course, the public sector has been shedding staff at an ever-increasing rate, so the pool of experienced people is steadily growing. Finally there is a still a high number of experienced freelance IT people out there who haven’t worked for many months.

As always, the client is looking to take money off the bottom line. Outsourcing is a very good way to do this, so having made the decision to outsource a key business function – in itself a dubious and very short-term move, may I add – they look for the cheapest option. That will not be the UK-based workforce who, oddly enough, prefers to charge a living wage for their work, but an offshore operation with a much lower labour rate. QED.

Except they aren’t actually cheaper, when measured over a year or two. OK, I speak only from personal experience and some apocryphal tales from co-workers, but the story is quite consistent. Firstly what you get is not what you wanted, at least not the first time round. A huge amount has to go back to be re-worked. Plus there is often a habit of not correcting the faulty code, but re-writing it. It may be more accurate but it is also a lot slower. Then, when it does work, trivia like in-line comments, error-handling and security controls are often below par, so if a problem does occur the recovery is more complex than you may realise..

So by the time you get a robust working product you have spent a large chunk of the money you were hoping to save. This is a bit of a shame. I mean, it’s almost like the business driver for the outsourcing company is to maximise their revenue, not service the client’s requirements. Surely not.

The other reason is the one I mentioned last week. If you only look inside your own industry for staff, regardless of how relevant that industry experience is to the job in hand, then obviously you will be looking at a much smaller pool of candidates. Even within apparent monoliths such as banking, you get the same apartheid; you may have five years in Investment Banking but we deal with Derivatives so sorry, you’re simply not qualified.

So combine the two and the much heralded but completely mythical UK Skills Shortage is actually a self-inflicted wound. And not only self-inflicted but self-perpetuating, since we don’t have the people coming in at the bottom to fill these roles who, in five to ten years, would be the ones in the middle management positions making it work. Damn, we’ll have to outsource them as well…

So clearly there is a skills shortage. Sadly it lies not with the workers, but with the management.

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Image: push-pin-tack_yellow by Public Domain Photos

Specialist IT contractor accountants may consider relocating if they’re struggling to secure a decent remuneration. But before you make that decision, you should read the results of a new study.

A recent report from CV Screen shows there is now a very clear north-south divide in the IT market, with the south-east and the capital proving to be the most lucrative. IT professionals working in London earn 14% over and above the national average, whilst employees in the south-east benefit by an extra 10.1%.

However, the study also shows that a number of technology companies moving their offices away from London and setting up in other areas of the country. The MD of CV Screen, Matthew Iveson, commenting on the results said that in the last few years he has noticed that candidates show less inclination to look towards the capital for opportunities.

He also pointed out that the expansion of online recruitment has meant candidates can find local employment much easier, and as many technology companies are now avoiding London, the market has definitely shifted.

Meanwhile, the Ashdown Group Jobs Index for September showed that placement availability for professionals in the IT sector increased by just over 5%. The adoption of PHP software is strengthening the market for skilled contractors and web developers are still in big demand.

In more good news, 86% of IT managers intend to continue spending on IT despite the spending review cuts and the continuing threat of a double-dip recession, according to research from City Lifeline. Roger Keenan, City Lifeline’s MD said it was really encouraging to see a positive attitude with regards to IT spending for 2011.

Managers seem to recognise that investing in the latest IT technologies will ensure they remain competitive during these difficult times, he added.

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Image: Dividing Line by Andrew Morrell Photography

You have to feel sorry for the poor recruitment industry. I mean, after several years of being beaten up by the bean counters who run their business these days to improve throughput and efficiency, they finally get to the point where the process is as effortless as it’s going to get.

Preferred Supplier Lists mean they get first sight of any new work. Keyword searches mean they don’t actually have to talk to candidates, but simply send in the first few CVs with the right keywords. Write-only answer phones mean they can’t be contacted. Back Office systems and so called “self-billing” arrangements (which aren’t but let’s not quibble) mean payment processes are self maintaining. Life is simple and efficient.

Then Primark got prosecuted for using illegal workers…

Let’s remember that agencies’ main concern is the avoidance of risk. That’s why the contracts are usually so complex; it’s mostly to ensure the agency doesn’t get caught for the mistakes of the contractors it supplies nor for any taxes or other costs the contractor or client may incur for any reason whatsoever. So naturally their reaction to Primark was typically understated.

It used to be that you could go for a job with only a cursory check on your actual existence. Of course, having actually spoken to you – or even met you in person – the agent could be reasonably sure you were who you said you were. These days, as I’ve said before, the agent would much prefer not to talk to you, much less take time away from the telesales work actually to go and meet you.

When the need to demonstrate you had checked the candidate’s ID first cropped up, this got extended to you sending a bastardised copy of your passport – not that that’s a proof if ID, of course – and maybe a utility bill or similar to prove you had a real address (none of which, needless to say, can possibly be faked).

However Primark made them realise they could be prosecuted for a whole new range of things. As a result half of the agency’s time is now taken up with people running around looking at candidates holding passports, paying other agencies to run ID checks and doing a whole host of credit checks and other activities. All this, note, before you get sent for the interview.

As an aside, there are also concerns about what happens to all this data once it’s in the agency’s hands. A typical contractor might well supply half a dozen copies of some fairly personal data in a year, and I’m pretty damned sure not too many agencies will have paid to be ISO27001 compliant.

Thing is, of course, 99% of this is totally unnecessary, since it applies to employees, not contractors. Since the agency goes to enormous lengths to demonstrate that legally you are not their employee, nor the client’s, why does this whole scenario apply at all?

Perhaps if we ever get IR35 sorted out and have a clear test for whether or not you are a supplier or an employed temporary worker, then we can stop all this pointless activity.

Meanwhile, can anyone explain why my Company Secretary can’t sign a letter asserting all my company’s staff, be they employees or directors, are allowed to work here and accepting full responsibility should that prove to be untrue?

Do that and the agencies can go back to their usual state of happy indolence again.

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Image: Vintage ITT Telephone Handset by mightyohm

The client’s Head of IT asked me to comment on a paper he’d received from another part of the Group recently, talking about outsourcing their back office functions to save money.

Fascinating read, and clearly someone has been taken in by the sales pitch. For one thing, they’re planning on moving all the staff across, leaving no local management in house. That seems a touch suicidal for a start. Then they say the staff, protected by TUPE rules, will retain their current pay and conditions, including no redundancy and already agreed annual increases for three years.

So where, exactly, do the savings come from?

Also looking at the two providers in question, and having worked with both at various times… Let’s just say I could think of only one who could possibly be a worse choice. Needless to say the comments were less than flattering with a strong suggestion that my client does not ever consider taking the same route – or if they do, to do it properly!

Then I read that Siemens are balloting “contractors” over strike action. Surely some mistake – they aren’t contractors, they’re employees supporting an outsourced arrangement and being threatened with a pay freeze. I can think of quite a few people who would welcome a pay packet to be frozen, much less whine about it not going up.

That big network contract is still unsigned as well, with an absolute deadline that turned out not to be one. I’ve lost the will to live on this one, to be honest. If you can’t trust the sales team to come up with an accurate and supportable deal, what chance have you got? More meetings tomorrow to discuss the options, but I’m getting to the point where I suggest the client walks away and starts again. At least they have a fully worked design for next time round.

And finally got some workable numbers back from the new project time recording work. Oh look, time spent on projects that aren’t due, no time spent on things that are supposed to be urgent, variations between estimate and actuals of up to 1600% (seriously…). The Project Managers weren’t a bit fazed, though. Early days, not sure the guys are logging time properly yet, give it some time…

Having worked at quite a few client sites over the years, some good, some bad, one (naming no names!) absolutely awful, I’ve long been conscious that UK’s middle management isn’t quite at the leading edge these days. On the evidence of the week just gone it looks like I’m slowly being proven right.

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Image: dockheads by [phil h]

In 2000 people said (and keep on saying) that the Millennium bug was a myth and we just wasted £4.5bn fixing something that didn’t happen. Well OK, but if we hadn’t spent the £4.5bn they would still be recovering from the damage.

Then we had two years of absolutely no work, partly because everyone had upgraded in time for the non-existent millennium bug, and partly because the DotCom bubble had burst.

Then we had five years of steady growth, until some smart alec worked out that using non-EU coders was cheaper (they weren’t then and aren’t now, but heigh ho) and the bottom end work disappeared in a welter of Tier 2 visas. So we got the Tier2 visa issue sorted out and all of a sudden we get 30,000 ICTs coming into the country instead of the usual 4000 or so. Then the banks let go and there was no work for anyone.

Bring on the 2010s, says, I. They could hardly be worse than the noughties.

Anyway, enough with the nostalgia (which isn’t what it used to be, you know). This blog is about the world as it is today. It’s not going to be too heavy, it will try to comment on the week gone by in a mocking but kind of informative way, or it will poke gentle fun at my clients if doing so raises an interesting point or two.

I’m an IT guy by trade, a retired geek who saw the light and moved into interim management. I’ve been around a while, I’ve worked for some interesting (and some deadly boring) clients and have been a freelance for 15 years, well before the nonsense of IR35 and the all-out war on the contractor community. So I hope I have something interesting to say.

So right now we are at the start of an interesting year. Forgetting the election (for now, at least!) nobody has done any serious development work for nearly two years now. Assuming UK PLC has any money left to spend, there just has to be new work coming along the pipeline. Fingers crossed, everyone…

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Image: Geeky Smurf by nicholasjon