Tag Archive | "accountants for contractors"

Contractors are Finding it Easier to get a Mortgage


A new study has found that contractors and the self employed community at large are now starting to get accepted for mortgages a bit easier than in the past.

It was only a few years ago that being a contractor meant you got declined before you even applied, but now things are definitely changing for the better, and so they should, as millions of people in the UK are classified as self employed with many of them being contractors.

The mortgage companies simply cannot ignore this, and that is why they are changing their attitudes to how they treat potential customers who are self employed.

However, although it is “easier” than before to get a mortgage, that doesn’t mean it is easy. As thousands of contractors are finding out each month, there is still a lot of paperwork to be submitted and quite a number of hoops to jump through if they want to be successful in their application.

A lot of these stricter measures are not necessarily only for the self employed, as they have tightened up their lending across the board after the financial crisis of a few years ago. In other words, they want to put an end to reckless borrowing, which all in all is a good thing.

Typically, a contractor will be asked to show around 3 years worth of earnings, as well as giving the lenders access to other documents such as accounts and tax returns.

It might seem a bit too much at times, but you have to remember they are about to lend you a significant amount of money to buy a house, which means they have to be 100% certain about your eligibility.

Obviously, the main problem a lot of self employed contractors run into is the fact their earnings may be unpredictable at the best of times, with some months being slow and other months having more work than they know what to do with.

Luckily, many lenders will work out the average income, and as long as this average stacks up over the 3 years of earnings then you have a good chance of being accepted.

I am often asked about what steps contractors should be taking in order to ensure they have the best chance possible of getting a mortgage on favourable terms. My number one piece of advice? Make sure you hire a certified or chartered accountant to do your books, as this makes everything look more professional and it gives you credibility with the lenders.

Also, make sure you save up a large enough deposit to show that you are serious about getting a mortgage and not just expecting the lender to come up with all the cash. Do these things and you really do have the best chance possible of being accepted with very low interest rates.

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Switzerland now classes as an EU state for Social Security purposes


It’s possible that accountants for contractors might have some clients who work in Switzerland. They should therefore be aware that HMRC now treats Switzerland as an EU member state for the purposes of Social Security.

The new rules came into force on the first of April 2012 and apply to anyone who goes to work or live in Switzerland. It will depend on your employment circumstances whether you continue paying UK NICs or pay the Swiss equivalent instead. Swiss employers with UK based staff might also have to pay UK employers’ national insurance contributions.

The new regulations also apply to freelancers and other self-employed people who move between Switzerland and the UK.

Transitional arrangements have been put in place to deal with circumstances where the new rules change the nation that affected individuals pay their contributions to. Under these arrangements it may be possible to continue paying as you were until your circumstances change.

HMRC has advised people who are unsure of how these new regulations will affect them to contact it for advice.

The new rules are similar to those introduced in May 2010 to cover workers who move around the EEA. The UK had originally opted out of the Treaty of Amsterdam and said it would not apply the rules to people coming from or going to Iceland, Norway, Switzerland and Liechtenstein.

The Revenue’s website will soon be updated to reflect the new guidance but in the interim people can phone the NIC&EO International Caseworker helpline on 0845 915 4811 if they need advice.

© 2012 All rights reserved. Reproduction in whole or in part without permission is prohibited.

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Are contractor accountants providing online services?


Accountants for contractors might want to brush up their online skills after Sage reported that online services will be the biggest growth area over the coming 12 months.

41% of the accountants who took part in Sage’s research said they will be focusing on online services for the rest of this year and nearly 75% said their working practices would change over the next three years.

It would appear that only 29% of accountants carry out the majority of their work in the office and now that around 60% of accountants are using devices such as tablets and smart phones, clients are becoming increasingly interested in online collaborative reporting.

However there is a difference in opinion over what services should be available using mobile apps. SMEs think business planning advice, final accounts and financial services should be offered whereas accountants say mobile technology is best suited to bookkeeping, compliance services and tax planning apps.

Jim Scott, the MD of Sage Accountants Division, said that sharing financial information online is a natural progression for entrepreneurs who have been brought up with Apple, Facebook and Google and accountants should take advantage of the opportunities available.

Online accountants need to demonstrate that they understand collaborative working practices and are able to provide them if requested. Not every business is suited to online accounting so accountants and clients must be able to choose the way in which they access data.

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Unemployed accountants for contractors can turn to CABA for help job seeking


The Chartered Accountants Benevolent Association launched two new services last week to provide support and advice for unemployed contractor accountants.

We now have an unemployment rate of 8.4% in the UK after another 48,000 people lost their job in the final quarter of 2011. Unemployment is now at its highest for 16 years.

The second most likely reason for chartered accountants contacting CABA last year was unemployment and these latest services have been designed to create a structured approach when it comes to providing help.

The first service is called Workfriend and it’s an interactive online system for career management. It operates 24/7 and includes audio and video, written materials and a variety of other tools. Users can also speak to an individual career coach over the phone for a period of three months. Workfriend aims to help those who have recently lost their job and want to refresh their job seeking skills.

For those accountants who have been out of work for a while, CABA has launched Career Coaching. Although this is a face-to-face service, there are also learning events and online support. Each participant will be allocated a professional career coach who will provide bespoke guidance over a period of between three and six months. The coach will also be able to help job seekers with government agency advice.

CABA’s head of operations, Helena Coxshall, said that calls from unemployed accountants come through almost daily. The majority of them want help and support and it doesn’t look as if the number of calls is likely to reduce in the immediate future. CABA therefore decided it was time to offer dedicated services to help unemployed accountants.

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Contractor accountants should prepare for online VAT filing


Now that the January 31st online self-assessment filing date has passed, accountants for contractors can turn their minds to online VAT filing.

HMRC recently reminded businesses that are registered for VAT that paper returns are about to become a thing of the past. As from this spring, all VAT returns have to be submitted online.

At the moment only newly registered firms and businesses with a turnover in excess of £100,000 have had to submit their VAT return online and pay electronically. All other VAT registered companies have been allowed to submit a paper return.

However, online filing will be essential for accounting periods that start on or after the first of April this year. This means that the 1.9 million UK businesses that are registered for VAT will have to enrol on HMRC’s website to use the VAT Online Service.

The Revenue will be sending letters to all traders this month advising them of what action they need to take.

There are various benefits to be gained from online filing. You will get an automatic acknowledgement as soon as your return has been received. The system includes a sum checker and probably most importantly, an email will be sent to alert you of when your next VAT return is due to be filed.

There is various information available on HMRC’s website to help businesses move from paper to online filing. The Revenue also has a VAT Online Services Helpdesk that can be contacted Monday to Friday, between the hours of 8am and 6pm, on 0845 010 8500.

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How many taxpayers will miss the self-assessment filing deadline?


Accountants for contractors may want to remind their clients that the deadline for filing self-assessment income tax returns is fast approaching.

Last week, HMRC said it had received 1.8 million paper returns by the 31st October and a further 4.5 million online self-assessment returns. However, that left around 3 million people who still need to submit or receive an automatic £100 penalty for missing the deadline.

Even if there is no tax owing, HMRC must receive a return from the taxpayer by the 31st of January. In addition to the automatic late filing penalty, further charges will be levied the longer the process is delayed.

An HMRC spokesman recently said that about 10% of taxpayers miss the filing deadline. This could generate £10 million for the Revenue from late filing fines alone. Add to that a potential £1,600 from each taxpayer who delays filing for 12 months and the Treasury coffers would swell significantly.

Taxpayers who are having problems filing their returns may want to contact an accountant for help after Revenue staff announced they would be holding regular 30-minute walkouts.

Members of the PCS union believe HMRC is trying to privatise jobs by bringing in two private sector firms to man call centres. The Revenue disputes the claim, saying the move is designed to improve working processes.

An HMRC spokesman said the department was trying to find ways to improve the service it provides to customers, but PCS general secretary Mark Serwotka says it was wrong to outsource work when so many civil servants were losing their jobs.

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Tackling tax avoidance is high on the government’s agenda


Accountants for contractors might like to know that both PM David Cameron and his deputy Nick Clegg have indicated that a general anti-avoidance rule will probably be included in this year’s budget.

Nick Clegg, the Deputy Prime Minister, said in a recent BBC interview that the government has received a report from Graham Aaronson QC pointing out that a GAAR is feasible. He also attacked the rich elite who spend a fortune employing an army of accountants to help them avoid paying tax.

Clegg was also quick to point out that normal taxpayers, who are struggling to make ends meet, are becoming increasingly angry and frustrated with large companies that avoid paying their fair share of tax. A GAAR would lead to a simpler, more transparent tax system that is not open to abuse.

David Cameron recently explained that HMRC collects taxes in a fair, business-friendly manner. However, the government needs to take a tougher approach with companies that practice tax avoidance with the help of fancy corporate lawyers. Lawyers and tax accountants know that the current legal and taxation systems are complex and they try to capitalise on this to lower their client’s tax bills.

The government is pushing on with its plan to reduce the rate of corporation tax that businesses need to pay. But the fact remains that they have to pay rather than avoid the tax, Cameron added.

© 2012 All rights reserved. Reproduction in whole or in part without permission is prohibited.

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HMRC to conduct strategic review of business record checks scheme


Accountants for contractors might be pleased to learn that HMRC is to review the way it conducts business records checks after MPs and small business groups criticised the initiative.

As part of the initiative, the Revenue will inspect the records of as many as 20,000 small businesses. Any that are found to be keeping inadequate records could be fined up to £3,000.

John Walker, the chairman of the FSB, has criticised the scheme saying that HMRC is still intending to proceed despite worsening economic prospects. He explained that he has expressed his concerns to HMRC on a number of occasions, but although the government says it wants to help small firms, the reality appears very different.

The scheme has also been criticised by Tory MP Priti Patel who said it was persecuting small businesses at a time when they are fighting for survival. She says HMRC is acting diabolically towards small firms when they blatantly let large organisations off paying millions of pounds.

Backbench Tory Anne-Marie Morris pointed out that HMRC used to take a sympathetic view of minor errors, but the ethos has now completely changed and businesses are treated the same regardless of size and resources.

A spokesman for the Revenue has now admitted that the project has caused a lot of concern within the tax profession and would have benefited from more detailed input from tax professionals. HMRC will now have a strategic review of the business records checks scheme, in consultation with representative and professional bodies, he added.

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What do accountants for contractors think about online self-assessment filing?


The National Audit Office has praised HMRC for persuading people to file their tax returns online, but says it is not clear whether the system provides value for money.

The NAO says that more than 11.5 million people a year now use online filing. However, some users have complained about access to HMRC’s website at busy times and the Low Incomes Tax Reform Group is calling on the Revenue to offer other alternatives to people who do not have Internet access.

Online filing has reduced processing costs, as well as postal, stationery and storage costs. Cumulative savings by the end of this financial year are expected to be £220 million and the drive to persuade people to file online is on time and within budget.

However, the NAO says HMRC is not able to draw a comparison between the costs of paper and online filing. It is therefore impossible to conclude that the benefits of online filing are being maximised and the system has been successful in delivering value for money.

Robin Williamson from the LITRG said that it should not be made mandatory to use the Internet to conduct dealings with HMRC and robust, well-advertised options must be made available to people who cannot transact online.

It’s both reasonable and sensible to encourage businesses to use digital channels to communicate with the Revenue but the government department should not forget that some individuals do not have access to the Internet or the capability to cope with online filing, he added.

Some professional organisations have also questioned whether it is cost effective to file corporation tax and VAT returns online.

© 2011 All rights reserved. Reproduction in whole or in part without permission is prohibited.

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Are Scottish scrap metal dealers guilty of tax evasion?


Accountants for contractors may be interested to learn that HMRC has launched a new taskforce to tackle tax evasion in the scrap metal industry.

The taskforce will target scrap metal dealers north of the border. The Revenue believes that this is an industry where the risk of tax evasion is high.

Last week, HMRC announced that it had set up five new tax evasion taskforces. In addition to targeting Scottish scrap metal dealers, self-employed construction traders in North Wales and the North West of England will come under the spotlight.

Another taskforce will investigate taxpayers in the South East who fail to submit Corporation Tax, VAT, PAYE and self-assessment returns. A further taskforce will investigate Scottish fast food outlets suspected of falsifying records.

Finally, landlords in North Wales and the North West, who have at least three properties and are suspected of evading taxes, could find a taskforce inspector knocking at their door.

The Exchequer Secretary to the Treasury, David Gauke, said the government does not tolerate lawbreakers. HMRC can and will track down tax evaders, no matter who they are. They will receive heavy fines and criminal prosecution could be a possibility.

In last year’s spending review, the government allocated £917 million to combat tax crime. It hopes this funding will raise an additional £7 billion per year by 2014-15.

HMRC intends to have 12 taskforces in place by the end of this financial year and says more will follow in 2012-13.

The Revenue has also set up a Tax Evasion Hotline where members of the public can phone and report anyone suspected of tax evasion.

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Company insolvencies increase but personal ones decrease


The number of companies going insolvent is on the increase, something that could potentially also harm the fortunes of accountants for contractors.

Latest government statistics show a 0.1% quarter-on-quarter increase to 4,242 company insolvencies in the third quarter of this year. Whilst this increase is marginal, it is 6.5% up on the corresponding period last year when only 3,974 firms were declared insolvent.

206 firms applied for Company Voluntary Arrangements in Q3, compared to 187 in the second quarter. In the third quarter of 2010, only 159 companies chose to go down this route. Voluntary liquidations also recorded a 3.1% quarter-on-quarter increase.

Although the number of companies going into administration decreased by 22 on a quarter to quarter basis, 673 represents a rise of 31 on 2010’s Q3 figure.

Whilst company insolvencies are increasing, the number of personal insolvencies continues to decline.

In the third quarter of 2010, there were 33,935 personal insolvencies. Last quarter the figure had dropped to 30,219. Over the same period, there has also been a 31% decrease in bankruptcies.

The number of people taking out individual Voluntary Arrangements was up to 13,048, a quarter-on-quarter increase of 905.

The number of Debt Relief Orders reached an all time high of 7,257 in Q3. This represented a 7.6% increase on Q2 for the method that was introduced in April 2010.

Debt Relief Orders are for people with debts of less than £15,000 and assets of no more than £300. The Insolvency Service changed the rules this year for DROs, IVAs and bankruptcies to exclude pension pots when calculating an individual’s assets.

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Will UK Uncut launch High Court legal action against HMRC?


Accountants for contractors might be interested to learn that last Friday, UK Uncut, the anti-austerity action group, threatened to take legal action over the deal HMRC came to with Goldman Sachs over the investment bank’s unpaid National Insurance contributions.

After recently calling for the resignation of Dave Hartnett, the permanent secretary for tax, the group has now said it is considering applying to the High Court for a ruling on the NI deal. UK Uncut says HMRC acted unlawfully by departing from the procedures set down for governance.

Goldman Sachs, along with a number of other companies, set up employee benefit trusts to provide loans to their employees. The loans do not need to be repaid, but in 2005 the courts ruled that National Insurance had to be paid on these loans. 21 companies settled up, but Goldman Sachs challenged the ruling. The bank was told that interest would be levied on the overdue amount while the dispute continued.

At the end of last year, Hartnett made a deal with the bank that meant it was not liable for the interest. According to Amyas Morse, the head of the National Audit Office, the loss of revenue cost the Treasury as much as £8 million. Hartnett defended his actions by saying HMRC had mistakenly believed it would not be able to recoup the full balance.

UK Uncut has posted a blog saying that if the mistake was genuine, it can be put right and Goldman Sachs should settle the bill. The Group says it expects to see this happen within a couple of weeks or it will take the matter to court. Dave Hartnett acted unlawfully when he made the handshake agreement because he didn’t follow the procedures laid down by HMRC, the blog concluded.

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Do online accountants understand social media?


Nearly half of the UK’s B2B businesses, including accountants for contractors, are not utilising social media to their best advantage, according to research conducted by PricewaterhouseCooper.

The survey found that although companies are investing money in social media, they are not laying down clear usage strategies or investing in the necessary human resources to make it effective. In fact, less than one in eight B2B companies have a dedicated full-time social media team.

Sean Mahdi, from PwC, explained that social media is transforming the way we work and communicate with each other. Businesses have to adapt to a new way of engaging with customers, who increasingly put more trust in their peers.

B2C companies appear to be exploiting social media with much more success than B2B organisations, he added.

Social media is not only used to drive sales. It can be used to create loyalty to a particular brand, demonstrate that a company is being transparent and responsible and used to create two way dialogue. It is therefore essential for businesses to draw up a strong social media strategy in order to interact successfully with customers.

Network security professionals agree that using social media in the workplace can be good for business, but that it can create risks that companies lack the tools to address.

The Ponemon Institute questioned 4,640 IT practitioners and contractors in twelve countries, including the UK and Hong Kong, and 63% of respondents said that social media usage put their organisation at risk. 52% said their business suffered more malware and virus attacks now that their employees used social media.

Even though the majority of companies allow their employees to use social media at work, 89% of respondents felt it diminished productivity.

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High street banks are frightening off small businesses


A lot of small businesses and accountants for contractors are too scared to approach their bank for a loan and instead they are hoarding money that could be put to use growing their business, according to a new report from the Bank of England.

The BoE study found that small firms are worried in case their bank cuts their overdraft facility and are sitting on reserves. Entrepreneurs worry that asking for a loan will mean their existing borrowings will be reviewed and their overdraft may be withdrawn. Experts said the results show that small companies are still suffering financial nightmares more than four years after the start of the recession.

Lending is not so much of an issue for larger organisations, but start-ups and small businesses are still finding it difficult to access credit. And the study shows that if they manage to secure a loan they face elevated fees and a long drawn out application process.

Another survey, this time from Syscap, found that 75% of SMEs think the lending margins charged on loans are too high.

Only 8% of the respondents to the Syscap survey said it was now easier for them to access a bank loan. 33% said the situation had got worse over the last year and another 12% said it had worsened in the last three months.

50% of small business owners use credit cards, personal loans or savings to fund their business, rather than approaching their bank for help. Of the firms which have asked for finance from their bank in the last 12 months, more than 33% were refused first time around.

The high street banks say they accept around 80% of applications from SMEs but this figure does not take into consideration the large amount that are put off applying.

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