Contractor accountants should be aware that HMRC is cracking down on individuals who defraud the system by wrongfully claiming tax credits.

In its latest initiative to catch fraudsters, the Revenue has written to 12,000 self-employed people warning them that it intends to investigate their claim. Recipients of these letters should contact HMRC and produce evidence to substantiate their claim.

Failure to inform HMRC of any change in income can result in an overpayment which claimants are obliged to repay. Failure to do so can lead to a fine, and if the deception is found to be deliberate, the claimant could face criminal charges and imprisonment.

David Gauke, the Exchequer secretary to the Treasury, said that HMRC is determined to adopt a tough stance when it comes to targeting tax credit fraud. Last year the coalition launched proposals to cut down on the billions lost to fraud each year. The Revenue has confirmed that it will use data matching and credit reference agencies to check for fraudulent patterns if it suspects an individual’s tax credit claim to be fake or inaccurate.

HMRC is also scrutinising the tax status of company vans due to concerns that National Insurance and tax contributions are being underpaid.

According to KPMG, the Revenue has been sending detailed questionnaires to some firms asking how they keep track of private usage of company vehicles. The employer is asked to define its definition of insignificant private usage, provide information regarding the last three year’s van policies and state whether the vehicles have mileage tracker devices fitted.

Employees using company vans for their own personal use should pay tax on a flat-rate £3,000 value for the vehicle and £500 for subsidised or free fuel.

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The government has promised to help 40,000 new businesses start up during the course of the next 3 years.

Last week, David Cameron announced that the government run Business Link service is to be overhauled in order to provide more support to British entrepreneurs, a move that could also benefit accountants for contractors.

The Government currently provides various online resources to support businesses but there have been complaints that it’s time consuming to trawl through different websites looking for information. 170 publicly-funded websites will now be condensed into a single Government business resource site.

The new Business Link website will allow companies to register online, sort out their tax affairs through the business tax dashboard, search for public sector contracts and find information on legislation and training.

The news came as the coalition looks for additional ways to stimulate job creation and boost economic growth.

The Prime Minister said that during 2011 and beyond, the government will focus on driving job creation and supporting growth. In order to transform the economy and create many thousands of new job opportunities, the government must help new firms start up and SMEs grow.

The government also intends to offer grants and loans, under the New Enterprise Allowance scheme, to help 20,000 unemployed people start their own business if they can demonstrate a robust business plan. Back in October, the coalition said it would offer this help to 10,000 individuals but it has now doubled the figure.

Under the scheme, people wanting to become self-employed will receive £1,725 in allowances over a six month period. They will also be paired with a volunteer mentor who will examine their business plan and if it is robust, the individual will receive a loan from Jobcentre Plus, up to a total of £1,000, to cover business start up costs.

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There are nearly 11 million workers aged between 35 and 49 in the UK and yet they have missed out on the 350,000 new job opportunities created in 2010.

There are now 2.9% fewer Britons in this age bracket who are in work compared to the start of the credit crisis in the spring of 2008, according to recently published figures from the CIPD.

Dr John Philpott, who authored the report, said it was unclear why this group has been bypassed and it could simply be that they have received less support from the people who make the policies. However, this demographic group still has reasonably high employment rates and therefore is not a cause for social concern. Another possibility is that this middle age group is at the pinnacle of their career earnings and therefore employers may find their salary expectations less appealing than workers who expect less salary.

The Work Audit from the CIPD also found that, out of the 350,000 new jobs created between quarter one and quarter three, 63% went to employees, 30% were created by the self-employed and freelancers, 6% were accounted for by unpaid workers in family businesses and 1% by government job schemes.

However, 95% of those additional workers in employment are working in part-time roles and around 33% of roles are on a temporary basis only. Permanent full-time jobs for employees have not experienced a recovery this year. Women have not really benefited from the additional jobs as 289,000 of all the newly created jobs went to men! This could be because more women than men work in the public sector and it increased in size slightly during the recession whilst the private sector was making redundancies.

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Contractor accountants and other freelancers are becoming more enterprising and creating opportunities for themselves according to figures released by the CIPD.

Data from the Institute shows that an extra 350,000 jobs have been created this year and 30% of these can be attributed to the self-employed. Two thirds of these new jobs went to people in the under 35 age group and the remaining third to people over 50.

However, this job creation seems to have completely bypassed those aged between 35 and 50. The author of the report, Dr John Philpott, said that it is easy to see why many people are still unconvinced that the economy is recovering when a core element of the workforce has not benefited from the recovery in the jobs market.

Once more permanent full-time opportunities become available, the middle age group should start to feel the benefits but this could take time as growth is likely to slow down somewhat in 2011.

The government is keen to encourage people to set up their own business. Mark Prisk, the business and enterprise minister, recently laid out measures to encourage micro-lending to small enterprises and called on Brits to display their spirit of entrepreneurship.

The Enterprise Finance Guarantee Scheme is to be reformed to increase community development finance institutions access to funding. Prisk said that he wanted to encourage everybody to start their own enterprise, regardless of their previous background and CDFIs give vital support to businesses in depressed communities.

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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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People who have just become self-employed will have to wait up to 8 weeks for their registration to be processed says HMRC.

The Revenue has explained that it has had to redeploy tax officials to more high priority work and so processing time for paper applications of form 64-8 and self-assessment registrations will also be affected.

This will not affect Internet authorisations but HMRC warns that further delays may incur if tax agents submit the 64-8 form online after previously submitting it on paper.

One personal tax adviser commented that a delay of 8 weeks for registering newly self employed freelancers sounds as if HMRC wants to put people off paying tax altogether!

Meanwhile, HMRC is likely to suffer more job losses when the results of the Comprehensive Spending Review are released in October. The Association of Revenue and Customs however points out that this is not necessarily a sensible move as HMRC does generate revenue for the government.

The president of the ARC, Graham Black, said it was ridiculous to cut more jobs at HMRC. He suggests increasing staffing levels to bring in more tax and catch tax evaders and he will outline his case to MPs on September 8th at Westminster.

Since 2006-07, the amount of money collected by HMRC has dropped by £25bn and the amount spent on dealing with the tax gap has almost halved from £3.6bn to £1.9bn. Every pound the government spends on dealing with tax evasion will reap 30 times that amount, or even more. Any logical person would jump at such an investment opportunity, Black remarked.

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