Tag Archive | "IR35"

Accountancy Lacks Diversity, Who Knew?

The accountancy sector has been going through a tough time of late. Under the spotlight for auditing issues, IR35 a topic on everyone’s tongues, and now, it’s a matter of diversity. And we don’t mean that dance crew. 

For the large accountancy firms, it seems, are dominated by white men in the senior roles, pushing women and those of ethnic minorities down the ranks and into either client-side roles or within smaller businesses, such as our good friends here at Contractor Accountants.

The UK accounting regulator, the Financial Reporting Council, has accused the industry of significantly lagging behind their other-industry counterparts. In fact, women and Black, Asian and Minority Ethnicities (BAME), make up just 17% of partners at accounting firms, compared with 30% in other FTSE 100 companies. 

Meanwhile, smaller accountancy firms were doing a better job of promoting women, with over 50% of managers being female at companies with less that 200 employees, but still there were only a disappointing 11% who made it to partner level.

The pay gap is still problematic too, with the big four firms reporting a gender pay gap of anything from 28% (KPMG) to a slightly less poor Deloitte’s, with a 14% gap. In this day and age, we are beyond incredulous that this is still allowed to happen, yet happen it does. 

While women have it bad, it’s an even bleaker picture if you’re BAME and work in the big four accounting firms – EY is the best here, with an appalling 10% BAME members making up the board. That’s the best. While on the flip side, it may be argued that there simply isn’t the volume of BAME applicants to fill the roles, at some point the chicken/egg conundrum has to be challenged to wonder why, in as diverse a society as ours, whether the lack of very senior BAME accountants is due to a lack of people, or a lack of promotion and opportunity.

With all this lack of diversity and the raft of scandals the big accounting firms are currently suffering, it’s little wonder that more and more businesses are turning to the smaller companies, the good guys who keep the SMEs running and aren’t out to overcharge you or only hire the type of people who fit their outdated ideals. 

Do yourself a favour; take a look at our partners here on our website, request a quotethat could literally save you thousands, and find yourself a reputable accounting firm who will ensure the work gets done, without you being bled dry. And be sure to ask for a female account manager, while you’re at it. 

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Lorraine Fought The HMRC…And Lorraine Won

Usually when people fight the HMRC in court then HMRC win. No contest. End of discussion “Pay us now,” say the HMRC.

Step forward Lorraine Kelly, the television royalty on the same level as superstars such as Jeremy Kyle, Jamie Oliver and Ross Kemp.

Lorraine is a favourite of the nation, there is no doubt about that, and when faced with the power of HMRC she decided to FIGHT THE POWER, and guess what? She won.

That’s right. Lorraine fought the HMRC…and Lorraine won…and now she has the right to call herself a bonafide contractor and reject the moniker of employee.

The HMRC wanted to label her as an employee. They claimed she was hired by ITV in a “employer/employee” relationship, which meant she would be subjected to the whole IR35 madness.

In short, the HMRC slapped Lorraine with a £1.2 million tax bill.

They were expecting a cheque from the the TV superstar, but were left stunned at HMRC HQ when Lorraine issued a challenge…

“I will see you in court,” were the words that came from the mouth of Lorraine Kelly.

Fighting words no doubt, and Lorraine Kelly was determined to take on the HMRC and let a judge rule over her case. She wasn’t writing out any cheques, just yet.

And so Lorraine Kelly VS HMRC came to court, and on the breezy but sunny morning of the court case there was television cameras and paparazzi photographers waiting outside the courthouse just waiting to get snaps of Lorraine turning up to the court.

Kind of like a court red carpet. Some say she even posed for snaps before the court was in session, while others noted that her superstar friends such as Mr Kyle, Mr Oliver, and Mr Kemp were there to offer support and offer a character witness.

Well it seems to have worked because a judge slammed down that trusty hammer and ruled that Lorraine Kelly was NOT employed by ITV and that she WAS a contractor who works for herself.

Long story short…she could say goodbye to HMRC and their £1.2 million tax bill, and close the door on this whole IR35 madness.

She was a free woman, and some witnesses report that as she left the courtroom she held her hand up in celebration and defiance.

You know, something tells me that Lorraine could have avoided this situation if she had a trustworthy contractor accountant in her corner.

Our best contractor accountants are trained to help you pay less tax while keeping you out of trouble with HMRC.

They fight on your behalf, and they always win. You can hire a contractor accountant right now.

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BREAKING: Hammond Strikes Again, “More Tax For Contractors”

I told all contractors to put today on their calenders. “Today is the day of the budget,” I told you all. “Contractors beware!” I added.

And beware you should have been, because as expected our notorious chancellor “Hammond the Henchman” has gone after contractors with a vengeance

“Hammond the Tax Hound,” is what contractors around the country are saying right now after hearing the chancellor speak at his yearly budget.

If you read this blog on a weekly basis then you will have known all about Hammond and his cronies. If you don’t read this blog, then you now know to READ THIS BLOG. It is the place to be for contractors to get all of the insider news and tips.

Back to Hammond and his budget and it seems he caught the scent of contractors in the private sector.

As you may be aware, contractors in the public sector have already been hit up for more tax and National Insurance. IR35 it was called.

Well, now Philip Hammond is calling for all private sector contractors to follow suit, which basically means…yes, you guessed it…more tax and National Insurance.

He is hitting YOU in the pocket and raiding YOUR bank account. There is nothing you can do about it but “grin and bear.”

Well actually there is something you can do. Something very simple and very effective and something that Mr Hammond would prefer you didn’t do.

What you should do is hire a contractor accountant. Hammond hates that. He dislikes contractor accountants very much.

Do you know why? Because contractor accountants save you money and help you pay less tax (legally of course).

This means less cash in the bank for Hammond and his overlords. He wants you to avoid contractor accountants at all costs so you are ripe for the picking.

There is nothing Hammond likes better than a fresh and juicy apple just plucked from the tax tree.

“That tastes good,” he says, before going back to counting the money he is raking in from you the innocent contractor who is just trying to make an honest living and be treated fairly.

At this point I think you have reached a crossroads. Its obvious that Philip Hammond is going to keep on taxing you left, right, and centre, year after year, until you barely have enough money to pay for a Big Mac.

So now you have a decision. Go left and forget about the whole matter. Keep on paying the “Hammond Tax” and hope you can send your kids to the best university.

Or turn your attention to the right side of the page. Look right right now and turn right. There are the best contractor accountants in the UK. They are right there. Click on one and fight back against this tax madness.

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More People Self Employed than on Minimum Wage

While the exact figures on self employment in the UK are not known, it is estimated to be around 5 million people…more than on minimum wage.

Compare this to 10 years ago where around 3.5 million were self employed, but nearly 5 million were on minimum wage. It just goes to show that working for yourself is the place to be, rather than putting up with some stupid boss and getting paid barely anything.

They are even saying that by 2021 there will be more people self employed than working in the public sector, which doesn’t surprise me at all when you consider how the government treat many of their workers.

Despite all of these encouraging statistics and the fact that many self employed people are taking to the internet to say how great it is…the government are not that convinced, and instead, they are now saying that many people that go into self employment are “reluctant” to do so.

Yes you read that right. Here we are in a day and age where your average man or woman can wake up, go to their kitchen table and turn on their laptop and then spend a few hours “working” before going to mow the lawn or have a session down the gym, but according to the experts in the government this is wrong and more should be done to get people back into employment, and back on minimum wage no doubt.

You know, I just think some of these MPs and government workers have it in for the self employed. Maybe they are jealous? Who knows what the reason is.

Firstly, they punish their own self employed contractors, bringing in the IR35 changes that meant public sector workers ended up paying more tax.

Then Philip Hammond went on the attack against every self employed person in the UK, demanding more tax and National Insurance payments, before back tracking only a few days later after massive outrage from just about everybody in the country.

Now, it appears that many in the government want to get the self employed back into traditional employment after they have decided that most people are “reluctant.”

Yes I’m sure they are very reluctant to earn more than minimum wage while setting their own hours. Very reluctant indeed.

Every time I read one of these new news items, reports, or statistics from the government I generally give it a quick glance over before chucking it directly into my bin.

Why can’t we hear good stories about self employment, instead of the usual rubbish? I doubt anything is going to change though.

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Contractors Told – “Contact Your MP”

If you work as a contractor in the public sector, then now is the time to contact your MP about the new IR35 proposals.

I’ve spoken before about how these changes are going to make a huge difference to the public sector in general, mainly because if they do go through then we can expect many contractors to start looking at moving to other industries.

Basically, there are a few main things that are going to happen should the IR35 changes take effect.

The first is that contractors in the public sector won’t be able to decide if they require the IR35 status or not…this decision will move elsewhere.

After that, if they decide that IR35 is not relevant, then any contractor will have to pay tax like an employee, as well as things like National Insurance.

In other words, you end up being treated like an employee but don’t get any of the benefits, such as holiday pay and pension entitlements.

If you’ve been reading the news on this site recently, then you are no doubt aware what I think of this whole thing.

Does it make any sense? Not really. It’s almost as if the public sector are trying to get rid of all the skilled contractors in the industry, even though they rely on them so much.

What are they going to do when thousands decide to go elsewhere, because let’s face it, there is not many contractors who are going to stay if they don’t have that IR35.

In fact, a new survey that was released in the last few weeks gives up the answer we need. Of the thousands interviewed, over half said they would definitely leave the public sector under the new rules, with a lot more saying they were undecided.

Anyway, what should you do if you are a contractor in the public sector and you disagree with the new changes? It’s simple…contact your local MP and let them know what is going on. If enough people do that it is only a matter of time before the issue gets mentioned in Parliament, and once this happens there may just be a chance something will done.

At the end of the day, if you don’t try then nothing will get done and the IR35 changes are going to pass through without opposition.

Please note that even if you are a contractor that doesn’t work in the public sector then you may still want to contact your MP. Who knows what changes they will be making next, and it could be in your industry.

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HMRC Confirm IR35 Rule Change to Go Ahead

In a move that has sparked outrage among many contractors throughout the UK, it has been confirmed that HMRC are changing the way the IR35 is policed within the public sector.

This has been on the horizon for a few months now, with many experts predicting they wouldn’t actually go through with it. It seems like they were wrong though, with the new rule change expected to be enforced very shortly.

It was first announced during the 2016 budget by George Osborne, as he outlined his intention to clean up the public sector and catch out “contractors” who should really be classified as employees, and in turn pay more tax. However, many people are arguing that what will really happen is that innocent contractors will get wrongly and unfairly classified as employees, leading to them being taxed extra in the process.

A representative of HMRC by the name of Philip Horswill recently stated that 400 million pounds was lost last year due to around 90% of contractors in the public sector not paying the correct tax, although he defended the new IR35 rule changes, saying it was “not a tax grab.”

So what are we to make of all this? In my own personal opinion I can see both sides of the story. Yes there will be contractors who end up paying too much tax and lose a lot of the benefits they currently enjoy, while at the same time it goes a long way in helping to clean up the public sector and stop a lot of people cheating the system. Let’s face it, £400 million a year is no joke, and if this really is the kind of money that is being held back from HMRC then something needs to be done.

On a side note, there had been some reports that HMRC have been planning to roll out similar measures in the private sector over the next few months. However, Philip Horswill claimed this is not the case at all, and there are no plans in the future for more rule changes. I think this is the right move, as the public sector is quite a unique scenario in regards to IR35.

With all that being said, it’s expected that many contractors will challenge the decision once all the rule changes go ahead, with many experts predicting this may end up costing the HMRC a lot of time and money in contesting cases and appearing in court.

While this probably will end up being the case to some degree, there is no denying that HMRC needs to move forward in some capacity regarding the public sector and IR35. One thing we can all agree on…it’s certainly going to be interesting to see what happens.

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Industry bodies condemn new IR35 reform consultation

A new IR35 reform consultation published by Her Majesty’s Revenue & Customs has been roundly condemned by trade industry bodies since it went public.

It’s been a bit more than a “chilly reception” when it comes to the HMRC’s new IR35 reform consultation. In fact, I’d characterise it closer to “withering hail of condemnation” than anything else, as organisations have come out of the woodwork to tell the taxman how absolutely horrid its plans are for reforming the way personal service companies working in the public sector handle disguised employment issues.

One such organisation, contractor accountant and insurance specialist Qdos, characterised the whole mess as inherently unfair. The organisation’s reasoning is that with contracting for state bodies being what it is, the questions asked to personal service company contractors to see if IR35 applies will always come up as yes – which would more or less catch every PSC contractor as under IR35, regardless of whether they actually should be or not.

The results of this new IR35 reform, should it actually go forward unchanged (and heaven knows how much HMRC loves to ignore any sort of constructive criticism) is likely going to result in freelancers and contractors will desert the public sector in groves, according to the Association of Independent Professionals and the Self-Employed. IPSE says the UK as a whole will be the losers here; there may be large consultancies that will be drafted in to fill the sudden public sector void, but those will likely be the only winners in this scenario.

Meanwhile, the Freelancer and Contractor Services Asociation says that it’s bewildered that these new proposals are even being tabled by HMRC. The FCSA expressed disappointment that the tax authority seems to be focusing its efforts on how to implement this new legislation instead of whether it should be put into place at all. The new framework is so fundamentally wrong, as well as unethical and unfair, according to Julia Kermode, chief executive of FCSA, that it’s practically a moral imperative to challenge this mess. IPSE chief executive Chris Bryce tacitly agreed, saying that the new IR35 reforms are more or less proposals to tax contractors as full employees without providing any of the statutory rights that you get as an employee.

What a bloody mess. I can only hope that somehow this complete abortion of tax legislation ends up being tossed out with the rest of the rubbish before it’s too late!

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IR35 reform plans questioned by contracting bodies

The Government’s IR35 reform plans have fallen under fire from contracting bodies after a recent report contradicted official compliance data.

A new report from a Public Accounts Committee says that the tax compliance figures that Her Majesty’s Revenue & Customs are wildly inaccurate. In fact, compliance among freelancers and contractors is likely much higher than HMRC’s suggestions, the PAC report says – in fact, the report’s findings say that an overwhelming 90 per cent of temporary workers in the public sectors are tax compliant! That’s not an insignificant figure, especially since the PAC report gathered figures from a wide variety of Government departments.

Meanwhile, the compliance rate as formerly believed before the Budget 2016 was a paltry 10 per cent. Based on this (obviously massively erroneous) figure, HMRC estimated that the new IR35 reforms would rake in some additional £400 million in tax revenue. Treasury officials and representatives from the tax authority maintained their belief in this ridiculously low figure at a compliance seminar recently, though when they were pressed on the matter they didn’t exactly come forward with any more information. Normally when something like that happens, most people will begin to look a bit askance on an organisation that won’t back up their claim with valid statistics and official figures.

Listen, no one is saying that non-compliance is nonexistent. It happens, of course. People either make mistakes or are trying purposefully to get one over on HMRC. But for pity’s sake, the difference between only 10 per cent of public sector contractors being in compliance with tax regulations and 90 per cent being in compliance is not within the standard margin of error! Either HMRC has gone completely around the bend or this recent PAC report is completely fabricated – and my money is on the taxman being complete rubbish.

The data in the PAC report is all there right in front of us, for anyone to read and understand. Yet HMRC hasn’t exactly publicised their own data that led them to their now obviously outrageous claim. Honestly if you ask me the fig leaf of “ending tax avoidance” has been snatched away from the tax authority’s grand plan when it comes to their IR35 reforms, laying bare for all the Government’s blatant plan to grab as much cash from public sector contractors as humanly possible. Honestly hasn’t anyone ever told them that you can’t get blood from a stone?


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New IR35 rules likely to catch everyone, experts say

Now that 6 April has come and gone and industry boffins have had a chance to ruminate over the changes, the consensus is we’re all doomed.

The new IR35 rules that were published in the March Budget announcement are, for lack of a better word, deliberately targeted at contractors who work through personal service companies (PSCs) or limited companies. In a move that’s ostensibly designed to clamp down on tax avoidance, the new regulations are so broad that contractor accountants, tax experts, and contracting trade industry bodies have all come out of the woodwork to condemn and criticise – and honestly I can’t blame them one whit.

In fact, many experts simply assume that when it comes to the public sector, contractors working through PSCs are simply going to be assumed to be within IR35 without any sort of even cursory examination. These experts feel that this places an undue burden on contractors themselves to prove otherwise – and that it sets the bar so high to prove they’re not subject to IR35 that it’s effectively impossible to do so.

Recruitment organisations in particular are up in arms, as the burden it places on them to engage contractors to make the IR35 determination themselves is particularly onerous. The Association of Professional Staffing Companies (APSCo) has been quite vociferous in its condemnation of the new regulations. With the possibility that these new IR35 rules will eventually be applied to the private sector as well sometime in the future, almost everyone is alarmed and concerned. To its credit, Her Majesty’s Revenue & Customs says there’s no plans on the part of the Government to broaden the new rules to the private sector, though I’m sure most individuals and companies are taking HMRC’s statements with a very large grain of salt.

For now, there is some respite. Since the umbrella company model is PAYE, and thus exempt from IR35, PSC contractors can go that route if they want to avoid having to muck about with all that. Of course, if you became a PSC contractor to get a break on your taxes, going PAYE isn’t going to help you out in that regard. However, if the writing on the wall ever becomes a reality, we’re all going to end up under PAYE before long as the Government seeks to eliminate one of the many advantages of working for yourself instead of as a traditional employee. What else is new?

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Hope you’re ready for tax changes this week!

New changes to the way HM Revenue & Customs taxes contract workers go into effect this week – you had better be ready for the new taxation landscape!

It doesn’t matter if you’re a small business that outsources its tax preparation to a freelancer or if you’re a contractor accountant yourself – you’re going to feel the burn from 6 April when the new regulations in the latest Finance Bill go into effect. Don’t act like you didn’t know this was coming, either ;these changes were announced in the 2015 July Budget, so you’ve got no excuses whatsoever besides your own laziness or ineptitude.

Of course you could be forgiven if you simply didn’t have enough time and energy to get prepared – especially if you’re a freelancer or some other kind of sole trader yourself. The vicissitudes of being a small business owner often lead to things falling through the cracks after all, so if you knew these changes were coming up but simply didn’t have the resources to prepare, you do have at least a modicum of my sympathy. Then again, if you work in the accountancy or financial services sector – and you’re a contract worker yourself – you’re deep in the weeds, my friend.

So what’s going into effect? Well there are quite a few changes, but the mot important one for small firms and freelance personnel is that certain types of contractors, such as those working through umbrella companies or a personal service company are going to find it a lot harder to claim their travel and subsistence expenses on their taxes. That’s right, HMRC in its infinite wisdom has decided to close the T&S tax relief loophole for all of us engaging in the practice – as if we’re all nothing but tax avoiders trying to deprive the taxman of its rightful share of our hard-earned cash.

If you’re outside IR35 you’ll have nothing to worry about. Of course it’s going to be easier to fall inside IR35 than before, thanks to the new “supervision, direction or control” test, which is much less forgiving when it comes to determining if you’re going to fall victim to the disguised employment rule. SDC is rather horrid, and people have been complaining about it for more than six months. Not that this changed the minds of the Government, as it routinely ignores the pleas of those who owe it money.

So there you have it: hold on to your bums, as we’re going to be in for a bumpy ride!

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Is IR35 going the way of the dodo?

New rumors are swirling that IR35 finally may getting tossed out in the street – but are we throwing the baby out with the bathwater?

I can’t believe I’m saying this, but the newest rumor coming out of Westminster right now that IR35 regulations might be getting dismantled might not be the best news for the contractor community. While disguised employment has been a right pain for all too many of us, and the idea of it going away for good should seem like cause for celebration, the problem here isn’t that it’s going away but what’s rumored to take its place.

So what fresh hell is this that we’re in for? Hold on to your knickers: the new rumor is that, in place of IR35 tests to determine if you’re an employee or not, you’ll simply be made into an employee after a certain amount of time spent working for a particular client. While it seems like more than a bit of over-reaching when it comes to the Government determining your employment status for you, in some situations this could be appropriate, such as when you’ve been working for the same client exclusively for a year or more. But that’s not what’s being planned, according to the rumors coming out of the Treasury – apparently the Chancellor of the Exchequer wants to set the threshold at a single month.

Yes, you read that right. George Osborne in his infinite wisdom wants to forcibly convert you from contractor to an employee if you work for any client for a month or more. Do you feel gutted right now? Because I know I do. So yes, you’re going to have to be responsible for paying National Insurance if you work 32 days or more for the same client, because the Treasury is bleeding money and it needs to plug up the holes with as much cash as possible.

The Government says it’ll make around £400 million more a year in revenues from this “brilliant” plan, and will throw out IR35 regulation as a result, since it won’t be needed anymore since contracting will effectively be a thing of the past. Sure, I suppose you can continue to work for clients as a freelancer as long as you never take a project that lasts more than a month, but that’s no way to live, is it? Honestly, for what it’s worth, I’m tired of the Government making our lives more complex and complicated just in the search for more money for it to mismanage and misspend.

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CIOT tells HMRC to change its approach to IR35

The Chartered Institute of Taxation (CIOT) has had it with Her Majesty’s Revenue & Customs when it comes to the approach the tax authority takes to IR35 rules.

HMRC simply has to call greater attention to these disguised employment rules, says the CIOT, and it needs to do so by showing how contractors and other types of temporary workers can fall under the IR35 rule by specifically pointing out cases that were actually decided against contract workers. Disguised employment regulations are designed to target anyone trying to engage in tax avoidance by masquerading as an employee of a company while still operating like a contract worker by “working” for their own limited companies, even though they’re really operating like a regular employee; this tax avoidance process has been in the press everywhere over the last few years as some high-profile agency workers in the public sector were found to be pulling the wool over everyone’s eyes. Now, HMRC has IR35 violators squarely in its sights in an attempt to regain some respectability.

The tax authority is in the middle of considering changes to IR35 rules in order to make them more effective, and CIOT recently commented on the possible changes that HMRC has been considering. One, which is to transfer the obligation away from the individual but the organisation he or she is working for is likely to be an abject failure according to the trade industry body, as it’s unlikely to make non-compliance any less nor is it going to make administration of the rule any easier.  Meanwhile, the CIOT says that the new “supervision, direction, control” test to determine if agency workers are indeed masquerading as employees or not is flawed to the point where genuine workers might end up being called on the carpet when they actually haven’t done anything wrong.

So what’s the professional taxation industry body suggesting instead? Well it would like to see an annual reporting obligation that would be shared between organisations and the freelancers and contractors they hire in order to see if IR35 would apply on a case-by-case basis. The CIOT says that HMRC could target the organisation if it wilfully misled the taxman when it came to non-compliance.

So is this approach by CIOT actually a good one? Is it something we should look into adopting? Damned if I know. IR35 has been such a mess for years that it seems almost impossible to unravel the massive snarled rat’s nest that it’s become. At this case we might need to deal with it the way Alexander the Great dealt with the Gordian Knot – just cut it to ribbons and move on.

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Budget 2015: contractors must feel stabbed in the back

Let’s call it, because everyone else is being polite about it. George Osborne has plunged a dagger into the heart of the self-employed community with his ’emergency’ budget. Contractors’ contributions to the UK’s economic recovery this last two years? The Chancellor has all but forgotten them, based on today’s evidence.

And those now-familiar rallying cries from the Conservatives, saying they’re behind ‘hard working families’? Looks like that herald excludes households whose breadwinner operates through a Limited Company. Not that there’s anything wrong with ’employed’ working families getting their just rewards. Far from it.

The issue is this: setting up and creating a limited company takes balls, courage and commitment. It’s not like clocking on or playing on a level field with staff, which this budget seems intent on promoting.

As a limited company contractor, you:

  • sacrifice the luxuries of maternity, sickness and holiday pay;
  • pay accountants out of your own pocket (rather than have payroll administer it);
  • market your service or skill in the market without a brand (other than the one you create) behind you;
  • move Hell and high water to get to clients sites to provide the specialist skills that they neither have nor are willing to train their staff for.

It’s this ‘can-do’ attitude of contractors and their willingness to help kickstart the UK economy that’s helped bring about the beginning of the end of recession. And this budget is the thanks for it?

The recent drafting in of outside help in order that the government can understand self-employment better? They need it more than anyone could have conceived.

Biting the hand that feeds you

For months and months, self-employment buoyed the country’s employment figures. Since taking power, we’ve heard Tories announce (at every opportunity) that there are more people in work than ever.

But they seem to have overlooked one key factor. There are also more self-employed people in work than ever, many of them contractors. There are:

  • IT Contractors building the frameworks in order that employers can bring in more staff;
  • doctors and nurses contracting to myriad NHS Trusts, actions that have helped prevent the health service collapsing under the weight of the UK’s largest population ever;
  • civil engineers lending their expertise to companies on an ad hoc basis all over the country;
  • oil and gas contractors working hard and long to end our dependence on Russia for fossil fuels.

It’s all these gutsy, self-employed limited company owners, and more, who are returning Britain to the forefront of technology and recovery once more.

It’s not about the money, money, money (ka-ching, ching)

Many, many of these key operatives contract through their own Personal Service Company. What Mr Osborne doesn’t seem to understand is that choosing to work this way is about so much more than the money. Yet that’s what this budget has focused the world’s eyes on.

The ensuing policies all but say: “if you’re a single-employee limited company owner, you’re in it to save on your tax bill.” That’s not only wrong, it’s tantamount to slander. What limited company contracting is about is:

  • individual contractors striving to build a brand, as well as provide a service;
  • creating the right impression – home and abroad – with a Ltd. after that brand name;

    • (this, in turn, opens doors to tenders that sole traders, freelancers and foreigners cannot);
  • separating you, the entity, from any debt your company accrues, otherwise risking being thrown on the mercy of the State, should your business falter.

Money is often the furthest thing from an individual’s mind when they start up for themselves. They become successful because they fulfil a need, and this country has been needy this last few years.

Yet how has the Chancellor repaid the very people to whom he, and the country, owes so much? A double-pincer attack, that’s how. Let’s introduce this as Crowded House once did:

Four Seasons in One Day

Spring: it’s (up) in the air

Dividends: A tax-free allowance of £5,000 will take the place of the tax credit limited company owners claim against dividends.

The office for tax simplification may have a word or two about this, as all manner of convolution springs to mind at the thought. That’s not to mention the high-earning contractor, who’ll feel the pinch over the fiscal year.

Summer: (time) Blues

Employment Allowance: In an attempt to focus Employment Allowance “on businesses and charities that support employment”, where a contractor is the “sole employee” of a limited company, they “will no longer be able to claim”.

That’s another cool £2,000 down the Old Kent Road.

Autumn: (what the) State meant:

Umbrella (open) season: As we expected, discussions have now begun in earnest, re: scrapping of travel and subsistence for umbrella employees.

Yes, the new term is those under supervision, direction and control. But anyone offering their service through a PSC or umbrella company may want to consider their payment structure.

Winter: to summarise dis content

IR35: We heard that the taxman was investigating fewer cases of IR35. We wondered whether SDC would replace it. HMRC‘s lack of comment, however, did also cause us concern.

We were right to be worried. The government will publish a new discussion document about IR35 once the dust has settled from this summer emergency budget.

Once again, limited company contractors will be beholden to their accountants. Their accountants, come next Spring when many of the measures kick in, will be charging more because of the extra work this budget has created. This extra work the budget has created is so counter productive to the Tory philosophy of rewarding hard working families, it’s scary that Osborne has got it soooooooooo wrong.

What you give is what you get

The whole ethos of creating a Limited Company says a lot about the individual behind the brand. They believe that their skills set them apart from the pack. They believe that by taking on the extra responsibilities outlined above, they deserve more reward. And so they should.

But, based on this budget, the government looks set to pursue the single-employee limited company in a ruthless manner. The fear is that many people who could otherwise aid recovery and the government’s plans for long term growth will choose not to.

We said above that it’s not about the money. But what about when the costs of running your business outweigh that of just turning up and working for the man? On this basis, there’s going to be a fine line in the financial reward between contractors and employees.

Who then, in their right mind, is going to put themselves out like contractors do now, just so that we can [be] in it together? My vote? Ozzy Osbourne could have made a better job of this emergency budget than his namesake. Or is that just too Paranoid?

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HMRC’s diminished capacity wreaks havoc with IR35

Diminished capacity at Her Majesty’s Revenue & Customs has been wreaking havoc lately with the tax authority’s ability to enforce IR35 and other matters.

Apparently HMRC can only deal with around 350 cases of disguised employment, according to the minutes of a February 11th IR35 Forum meeting. Not only that, but according to discussions in that very same meeting, it became apparent that the number of enquiries the taxman took up in the 2012/13 tax year increase thanks to new approaches to IR35 compliance – and that the compliance yield in a particular year simply won’t match up with the number of enquiries opened.

It’s obviously questionable whether HRMC can indeed enforce any IR35 legislation effectively, especially if there’s a 250 case limit that doesn’t look it will be able to be exceeded any time soon. Still, there seem to be no plans to do away with the rules at the moment despite the sluggish pace of the tax authority according to the IR35 Forum minutes.

A revelation like this drives me absolutely mad. Why in the world is disguised employment being pursued with such gusto – or at least given so much lip service when it comes to efforts to stamp it out – when the main entity tasked with rooting out IR35 issues practically crippled in this instance? It seems like a waste of time, energy and resources – especially since those resources just happen to be taxpayer funds in the first place.

And what exactly is causing this capacity problem? Is it a lack of trained staff? If so why won’t the taxman expand its IR35 staff members and step up its investigations if it’s so concerned about tax revenues slipping through its fingers thanks to disguised employment? Is it a funding issue in that HMRC can’t afford to bring more staff aboard? In that case IR35 doesn’t seem to be so important to warrant a larger budget for the tax authority. If that’s the case it seems like politicians are more interested in seeming like they care about such an issue without actually doing anything proactive about it.

Honestly if you ask me we should just get rid of IR35 altogether and let HMRC go after larger firms. There are bigger fish to fry out there, don’t you agree?

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