Tag Archive | "OTS"

FSB welcomes new OTS recommendations

The Federation of Small Businesses has come out swinging in support of new tax recommendations made by the Office of Tax Simplification.

Contractors, freelancers, accountancy experts, and pretty much anyone who runs their own business and has less than 10 employees do not have much in the way of nice things to say about the Government. This is due in no small part to how SMEs and sole traders are more or less put through the wringer – look at the new “supervision direction and control” SDC rules going into effect on 6 April if you want to kick over that particular beehive. However, sometimes the Government gets it right, or at least takes some steps in the right direction – and the FSB wants everyone to know that the OTS just took one of those baby steps.

Well, the FSB would have liked what it called a “broader approach” taken by the government entity, but the trade industry body isn’t discounting the fact that the OTS stepped up to the plate for small business owners. There’s simply a dire need to reduce administrative burden and simplify the tax system, FSB representatives said, and the organisation was mightily encouraged to see a recent OTS report recommend additional research into the development of a consolidated tax model for any company that employs 9 workers or less. Such a plan would allow turnover to be factored in as a basis for tax.

The OTS recommendations say that the current tax system, one that treats multinational mega-corporations the same as infinitely smaller companies, is simply “disproportionate.” The FSB is onboard, remarking that a more personalised and simplistic system needs to be implemented that focuses around each firm and each claim. Such an approach, which would be much more ‘tax-payer centric,’ would also be much more recognisant of how companies of different sizes can and cannot face compliance costs.

If the FSB was in charge, it would be implementing a single-payment solution for small firms that incorporated several separate taxes into one. This would potentially reduce tax complexity for small companies by a massive margin, the trade industry body said. With more people choosing self-employment – and with the taxation pitfalls that brings – these issues are growing increasingly important today, don’t you think?

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OTS says tax in UK will never be completely simplified

The truth is out after the Office of Tax Simplification admits they’ll never actually be able to simplify the UK tax code completely, though none were surprised.

John Whiting, head of the OTS, recently granted an interview, remarking that while his government department has been tasked with driving all complexity out of UK taxation, he believed that there will never be a way to create a tax system that will be completely simple to each and every taxpayer. Instead the best hope for the millions of taxpayers in the UK is taxes that are ‘simpler’ than they are now, in the words of Mr Whiting, and will be where his office will focus its efforts on going forward.

However, the 61 year old Mr Whiting was quick to caution that clarifying the nation’s tax laws could not always be accomplished without even more verbiage being added to our tax code, despite the broad aim of the OTS to shorten the code as much as humanly possible. The OTS chief, which took office in 2010, has already taken steps to pare down in excess of 100 pages of superfluous tax law, to his credit – and the credit of his office.

Much of this activity has been with the OTS and its efforts to streamline IR35 and other contractor issues. Despite this, Mr Whiting reiterated the fact that the simplification task of the OTS is far from complete.

The current focus of the Coffice, after already addressing taxation and employee share schemes for pensioners, is to develop a more than 20 issue shortlist.  VAT and business interest payment tax treatment are understood to be considered for these new issues.

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Should the UK have a single 30% rate of income tax?

The Institute of Directors and the TaxPayers’ Alliance have published a joint report calling on the government to replace eight taxes with a single income tax rate of 30%.

The call for a radical overhaul of the current system of taxation is part of the 2020 Tax Commission project, which is a joint collaboration between the two organisations. The proposals include cutting taxes to a third on national income, raising personal allowances to £10,000 and introducing a single tax on capital income and labour.

The pressure group wants the government to abolish employers’ and employees’ NICS, capital gains tax, corporation tax, inheritance tax and stamp duty on shares and land. Furthermore, it says it would abolish air passenger duty and reduce fuel duty by 5p per litre. Local authorities would also need to raise 50% of the money they spend from local taxes.

Allister Heath, the chairman of the Commission, said that although the proposals are far-reaching, they are practical. The reforms would lead to a simpler, more transparent tax system and result in significant growth. He went on to explain that if the government adopted the proposals by 2020, GDP would increase by 9.3% within a decade.

PwC’s Alex Henderson said these are radical proposals but he pointed out that the OTS has already suggested merging income tax and NICs, reviewing the regulations surrounding inheritance tax and suspending some tax rules. Assessing whether legislation devised 25 years ago is still justified would also help simplify the tax system, he added.

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Give IR35 tests a chance says OTS tax director

There has been a lot of angry reaction to the new IR35 business entity tests ever since they appeared on HMRC’s website last Wednesday.

John Whiting, the tax director at the Office of Tax Simplification, has now urged taxpayers to give them a chance. He welcomed the fact that they were drawn up in collaboration with members of the IR35 Forum and said it was important for the Forum to monitor the results of the pilot scheme in order to make an informed decision on whether the system should be abolished or retained.

Kate Cottrell, a member of the Forum, agreed with Whiting saying the tests have been blown out of proportion. They only play a minor part in the improvements HMRC is making to IR35 administration. She did however say the tests add further complexity to IR35, and that is not helpful.

In addition to the tests, HMRC is setting up three specialist teams based in Croydon, Edinburgh and Salford. When these teams select a case to investigate, they will take into consideration the reasons why a contractor feels they are outwith the scope of IR35.

The Revenue is also increasing the size of its helpline and review service, which will be staffed by employees that specialise in IR35.

These moves are likely to lead to more IR35 investigations but HMRC argues that the risk assessment tests should mean that the majority of contractors get their tax affairs in order and only those who abuse the system will be investigated.

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Budget 2012 – the new utopia of a modern Britain

One of the few advantages of resting between contracts is that you can go off on holiday without that nagging feeling that you’re throwing away lots of earnings to do so. And yes, I know my rate is annualised to cover such things, but it always niggles. Still, no time like the present so She Who Must Be Obeyed and I are off to far-flung places for a few weeks. Well, some friends are getting married over in Napier and it would be rude not to attend, wouldn’t it?

I will miss a few things though (no, not daytime television). I’m here long enough to see Wales grind England in the mud at Twickenham but I’ll miss the triumphant finale over France (hey, I’m Welsh, we’re natural optimists). I’ll miss the start of the Formula 1 season. And, most importantly, I’ll miss the Budget.

Now the Budget might not seem to be high on most people’s list of desirable things to witness first hand, but this one might actually do something for small business like mine; certainly the last two haven’t so it must be our turn.

It will be interesting to see if the Office of Tax Simplification – remember them? – comes up with anything. More importantly, will the IR35 Forum actually deliver something substantive? Looking at the minutes of recent meetings they seem to be in classic Sir Humphrey mode, failing to take any suggestion forward to a workable proposal. Since they have to report in time for the Budget, I’m guessing that they may have actually had to produce something this time round. They might even manage to work out how to distinguish between a business and an employee, something that is as obvious as the difference between a walrus and a walnut to most of us, but this is a body staffed by people who work in the civil Service so they can’t be expected to understand non-employees.

There is also a faint chance that Cameron and Osborne can agree what they want to do to support UK businesses. Or even that they together will decide that St Vince of Cable is wrong (he is, of course, but it’s worrying they haven’t spotted it yet).

Still, I’ll have my smartphone with me, so I’ll be able to keep up with things from the other side of the globe. Providing I’m not spotted doing so by the management; for some reason she is of the opinion that you don’t do work stuff when you’re on holiday. Most odd…

Ah yes, smartphones. Someone in HMRC has reached the 21st Century at last, and they have realised that a smartphone is not a PDA (remember PDAs – like smartphones that couldn’t make phone calls). As a result they have decided that having a business-owned smartphone can be taxed the same way as a business-owned mobile phone. It’s a small step, but we ought to encourage them; one day they might think of something really worthwhile.

Anyway, you will be spared my ramblings for the next few weeks. When I return it will be to the new utopia of a modern Britain with a growing economy, which recognises freelance contractors as the heroes they are and which has put St Vince back in his box.

Or perhaps not…

About the author: Alan Watts

Alan has worked in IT for most of the last 35 years, and first went freelance in 1996. He has been a PCG member from its start and has been spreading the message that freelancing is a professional career choice for many years. Alan also runs Malvolio’s Blog, a personal but highly informative take on the life of the modern freelance.

Alan Watts, Principal Consultant, LPW Computer Services

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

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IoD favours OTS proposals for cash accounting for SMEs

The Institute of Directors has come out in favour of cash accounting for small and medium sized enterprises, saying the system more closely reflects the way non-accountants understand profit.

The OTS recently published its discussion paper about creating a simpler income system for the UK’s smallest business. In it, the Office pointed out that a lot of SMEs probably use cash accounting already, without HMRC noticing.

Some contractor accountants have squashed the proposal, saying that we are so used to accruals accounting that it would be too complicated to change to a simpler way of doing things.

Danielle Stewart, from Baker Tilly, pointed out it doesn’t make sense to switch to cash accounting because all accounting software is geared towards the accruals method.

However, Richard Baron, the head of taxation at the IoD said cash accounting is the leading option and the OTS paper is a step in the right direction. It’s nonsensical to continue the way we are going, with thousands of small business owners struggling to get to grips with the technicalities of accountancy.

We already have a cash accounting scheme in place for VAT, whereby businesses can use cash accounting if their taxable turnover is between £1.35 million and £1.6 million.

The IoD did question the suggestion that small business owners and freelancers could claim fixed allowances for expenses, such as running an office at home. The Institute felt thus could lead to large differences in the tax charged and the amount that would be due if such expenses were worked out accurately. Baron said that profits are still the most sensible basis for calculating taxation.

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AWR – everyone ready for the end of the world?

It’s happening on Saturday and no, I don’t mean Scotland beating England by eight points. Although that would be fun for us Welsh…

No, Saturday is the day the eagerly anticipated Agency Workers Regulations come into force. And for such a significant event – and not just significant in our little world of contracting but in its potential impact on the UK economy and businesses – it all seems remarkably low key. And I find that both surprising and just a shade encouraging.

Of course it could be because everyone understands the new world and have prepared accordingly. Well not us Limited Company contractors of course, since we are out of scope so don’t have to do anything. This didn’t stop one poor soul asking questions about how he could persuade his agency that he was actually in scope. God knows why he thought that might be a good idea. Of course, he may simply be winding us all up – very occasionally that seems to happen on the internet, you know – and for his sake I hope that’s the case.

And, needless to say, there have been questions about does it really, really apply because of the ominous “genuinely in business” caveat the BIS or DBERR or whoever they are decided to add in for the fun of it. To which the answer is who knows, until it goes to court. Which I suspect it won’t, but you never know.

That reminds me of one of the better ideas I heard over the weekend. A group of us were pondering the work of the OTS (remember them? They’re still going you know) and how they could better focus their efforts. OK, so perhaps some of us should get out more, or perhaps drink less, but we found it worthy of discussion. The suggestion was made that the OTS could very usefully start with the various tax laws that have required a court case or two in order to figure out just what the hell the real rules are. Still, I digress…

So clearly the umbrellas and the agencies are well prepared, to the extent that I’ve heard of one agency that was trying to get its contractors to move to the right vehicle – PAYE through an agency, umbrella or limited Company – depending on their rates. Which is slightly deranged in one way but you can see the logic of it. So well done all.

But it does beg an interesting question. Why?

I mean, why is everyone so well prepared? Previous changes of similar magnitude – stopping MSCs, killing off some of the more imaginative offshore schemes, the Arctic Systems case, even IR35 itself – sort of burst upon a world that wasn’t really ready for them. That doesn’t seem to happen any more.

And that’s down to the wonderful Law of Unintended Consequences. In 1999, when the well-known failed tax-evader Ms Primarola introduced IR35, the aim was to punish us uppity freelancers by smacking us in the pocket. After all, given the recently released Freedom of Information answer that showed how pitifully ineffective IR35 has been financially, it clearly wasn’t done for the money. Or very well, come to that. But what it did do was galvanise a bunch of us uppity freelancers to fight back. And now, ten years on, HMG is not only listening to what we say, they are asking us what we think before they do it. Doesn’t mean they have the brains to listen, mind – else why do we have the AWR in its current foggy form – but at least we get the chance to publicise and explain things well ahead of their implementation. Which has to be a good thing.

So hopefully the AWR will do what it’s meant to do and protect the vulnerable and leave those who don’t need that level of care well alone. And we won’t get any more nasty surprises.

About the author: Alan Watts

Alan has worked in IT for most of the last 35 years, and first went freelance in 1996. He has been a PCG member from its start and has been spreading the message that freelancing is a professional career choice for many years. Alan also runs Malvolio’s Blog, a personal but highly informative take on the life of the modern freelance.

Alan Watts, Principal Consultant, LPW Computer Services

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

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OTS considers simplifying small business taxation

The OTS is looking into the feasibility of introducing a simpler system of income tax for the UK’s smallest businesses and the issues concerning disincorporation.

The Office of Tax Simplification says the choices for making small business taxation simpler fall into two categories. It could either change some regulations to ease the complexity in certain areas, or use non-profit measures ranging from administrative changes to more fundamental reforms.

If turnover was the determining factor for eligibility for the simpler system, the OTS is considering between £20,000, £30,000 and the VAT registration threshold which presently stands at £73,000.

The OTS will evaluate the non-profit measures in use in other countries and as well as considering cost accounting or a system of charge indicators and flat rate expenses allowances. Small businesses would then prepare their accounts based on cash received and have fixed rates for expenses, or taxable profit would be a fixed percentage of annual turnover.

John Whiting, the tax director at the OTS, said tax administration is a major headache for small businesses. He wants businessmen and their advisers to provide their opinions on the different options available.

As far as disincorporation goes, the OTS is examining whether micro-business owners should be given the chance to revert to partnership or self employment status and they ways to handle the tax implications of such a move.

Alex Henderson from PwC said the scope of the consultation was too narrow; focusing primarily on sole traders. He went on to add that he would welcome a review of all business structures and any changes would also have to deal with HMRC’s concerns.

Consultations on both proposals will be running until October 7th and the official documents can be viewed on the OTS website. Recommendations will be presented to the Treasury before next year’s Budget.

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Income tax and NI merger moves a step closer

The government is proceeding with its plan to merge income tax and national insurance by first inviting businesses to provide evidence of the problems they encounter administering two separate taxes.

Employers and payroll professionals will have until the 19th of September to answer 14 questions primarily focusing on the burden of the PAYE system.

One of the questions on this evidence-seeking consultation asks respondents to rank the amount of time spent carrying out income tax and national insurance processes on a scale of one to five. Others ask about calculation errors, usage of payroll processing software and the introduction of Real Time Information.

David Gauke, the exchequer secretary, said the coalition has committed to making the taxation system in the UK the most competitive in the G20 countries for business, as well as simpler for individual taxpayers to understand.

Integrating income tax and national insurance will be a radical reform, but the government believes it will bring about real improvements, he added.

Anthony Thomas, the president of the CIoT, has welcomed the government’s decision to gather evidence from interested parties. He pointed out that a recent OTS report showed that both employers and HMRC can make significant administrative savings by harmonising the way NI and income tax are run.

The responses to this process will give the government an idea of how it should proceed with the formal consultation which is planned for the autumn.

The Treasury has also made it clear that NICs will not be levied on pensions, people above pension age, dividends or savings.

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So when is a business not a business?

That is a question that’s been exercising me and a few like-minded souls over the last week. And this existential philosophising has been prompted by the planned creation of the IR35 Forum, which aims to establish who is liable for consideration as IR35 fodder and who isn’t. So first a quick history lesson may be in order.

The idea of IR35 as a way to recover NICs avoided by use of dividends has been around for quite a while. It was certainly floated to the Thatcher/Major governements and was firmly rebuffed as being both ineffective and unnecessary. Still, treasury officials are nothing if not doggedly persistent (or doggedly bloody-minded, if you prefer) and it came up again when we switched to New Labour. And found an ally in the Paymaster General, the fragrant Miss Primarola.

However, Primarola – herself, let it be remembered, a failed tax evader (which takes a degree of ineptitude all by itself, having had a tax bill she didn’t agree with paid for by a supporter with perhaps more money than sense) – was adamant that IR35 was only aimed at people cheating the system,. Those “genuinely in business” need have nothing to fear.

Yeah, right…

So wind on ten years and we have a new government and IR35 cases are still being prosecuted almost at random; a recent case is against someone who has been providing services to multiple concurrent clients for several years. Like I said, the usual dogged persistence by HMRC. Or something canine anyway (or should that be lupine…?)

Anyway, now it turns out that we get to keep IR35 because it will stop people leaping from employment to freelance doing the same job to avoid paying the taxes they now owe since their offshore EBT money boxes have been slammed shut. This is almost as skinny an excuse as the original Dim Prawn explanation, but we can live with it, as long as IR35 is only aimed at these cowboy Friday-to-Monday converts and not us real businesses.

Osborne took the key OTS suggestion and has determined that the administration of IR35 needs to be vastly improved. Setting up the IR35 Forum for that very purpose is happening now. It is something of a shame that he didn’t take the extra step and set up something vastly to improve the administration of HMRC itself, but let’s be grateful for small mercies

So the IR35 Forum’s most knotty problem will be working out the common factors between Mr Patel at the corner shop, the guy with a successful SME business, the average jobbing contractor and the traditional self-employed and separating them from someone who genuinely has incorporated just to save paying some taxes. Perhaps they should look for the crossed fingers?

It ought to be as simple as saying your client today isn’t the same as your employer two days ago, you’re VAT registered and have a company bank account, but the more you look into it the harder it gets. This is one debate that I suspect is going to run and run. And one that whatever the outcome. A lot of people aren’t going to be happy with it.

If only we could wave a magic wand, bin IR35 and start from a clean sheet of paper. If only…

About the author: Alan Watts

Alan has worked in IT for most of the last 35 years, and first went freelance in 1996. He has been a PCG member from its start and has been spreading the message that freelancing is a professional career choice for many years. Alan also runs Malvolio’s Blog, a personal but highly informative take on the life of the modern freelance.

Alan Watts, Principal Consultant, LPW Computer Services

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IR35 – an abomination in the eyes of the Lord?

Now the dust has settled on the OTS report, it’s been fascinating to see the various reactions to it. Most interestingly, nobody seems to have focused on the biggest potential recommendation, that IR35 be suspended with immediate effect. Which is a shame, really.

Most of the discussion obviously centres on the main recommendation, that PAYE and NICs get merged into a single tax. As I said last week, this is a far from trivial exercise, although the ultimate benefits in terms of simplicity and consistency would be enormous. Even if Mr Osborne does take this on, as many commentators seem to think he will, it will be years before it is achieved. More importantly, if the focus stays on the anomalies that are bound to arise during the transition, such as pensioners who don’t pay NICs in the first place, rather than on the real benefits then it will go nowhere. So let’s hope that just for once the commentators and pressure groups keep their eye on the real prize and, just for once, look at the long term picture.

So assuming Osborne does bite the bullet and make a bid for being a seriously reforming Chancellor (as opposed to one who simply wants to cut everything, which is how the opposition want to portray him and which really is a load of Balls), then what is the next OTS recommendation?

That’s right – stop IR35. Whoo hoo…

Needless to say, even doing that is not that simple. What happens to the cases currently being investigated? Are they simply stopped, leaving the worker hanging without a decision in case it is later reinstated, as may happen? Are they abandoned altogether, which seems a little unlikely? Or will they be allowed to continue to a conclusion, which is my guess since legal processes are fairly much unstoppable once invoked. About the only certainty is that nobody else would have a simple PAYE audit mutate into a five year, £50,000 court case.

Take out IR35 and would we then see a rush of incorporations as all those who say they use umbrellas because they can’t be bothered with the administrative overhead of their own company suddenly realise it isn’t actually that much of a problem and the extra income would really come in handy. That wouldn’t do the umbrella companies a lot of good either, especially with the Agency Workers Directive kicking off later this year.

In fact the only people to remain comparatively unaffected by it all are those like me who have their own companies, understand the rules who are trying to work as a business and always have done.

The “In Business” tests didn’t get a lot of attention, possibly because the OTS doesn’t really see adding an extra layer of administration as a simplification, even if it would greatly limit the number of cases HMRC would have to worry about.

And the third option, that HMRC’s administration of IR35 be greatly improved, was described by PCG as “risible”. Not because the idea of HMRC doing anything even vaguely resembling effective administration is seen as something of a forlorn hope (which it is, of course), but until HMRC are subject to a formal duty of care and subject to a full cost benefit analysis of the cases they bring, there is nothing to stop them pressing cases that they have little or no hope of winning, just because they can. They demand we do everything 100% correctly and attack us for the merest slip, but are totally exempt from any such constraint themselves.

We have to wait until the Budget to see what is going to happen of course, but PCG are to be congratulated for driving us to the position we now find ourselves in, that not only HMG are recognising that IR35 is an abomination in the eyes of the Lord, but that they may actually do something about it.

About the author: Alan Watts

Alan has worked in IT for most of the last 35 years, and first went freelance in 1996. He has been a PCG member from its start and has been spreading the message that freelancing is a professional career choice for many years. Alan also runs Malvolio’s Blog, a personal but highly informative take on the life of the modern freelance.

Alan Watts, Principal Consultant, LPW Computer Services

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

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IR35 – The war is not won….yet

Big news of the day is the release of the Office for Tax Simplification’s report on Small Business Taxation. Well, big news for freelance contractors anyway. This is because this is the report that lays out what they think should happen to IR35. And it’s received a resoundingly cautious welcome from people like the PCG.

So not all good news then?

The main recommendation is that HMG bites the bullet and merges PAYE and NICs into a single tax. This is something that’s been around for a while – the Mirrlees report said exactly the same thing last year, as did a Treasury consultation from 2007. Except we didn’t really have a functional government back then and it went in the “Too difficult” box.

However merging the two has a lot of useful side effects, such as eliminating the advantage of payment through dividends, which among other things would make IR35 completely unnecessary. Which has to be a good thing in anybody’s book.

The snag is this will take years to bring into effect and the more you look at what’s involved the more complicated it gets. For example, the tax system recognises the difference between earned income and risk-based investment income and taxes them separately so as to encourage entrepreneurialism. Pensioners don’t pay NICs, so would need their own separate tax treatment. And so on – getting from here to there is a complicated and politically dangerous road.

But the report goes on to say that if that basic principle is adopted, then IR35 should be suspended with immediate effect. This suspension would allow HMRC to focus on other, frankly rather more important areas of tax gathering – you know, the ones that actually return more than they cost to collect – as well as showing what would happen to tax revenues if IR35 was simply abolished outright. So, for example, all those people who work through umbrella companies out of fear of IR35 may well incorporate and get the benefits of being a real contractor. There may be a rush of companies pushing their employees into turning freelance, which is what IR35 was supposed to prevent (it didn’t, as it happens, but let’s not go into that right now). There’s also a whole industry built on the existence of IR35 that would go into a sharp decline. So lot’s of potential issues to be resolved.

To be fair the report also suggests two other options; firstly that IR35 remains and HMRC are far more sensible, responsible and systematic in the pursuit of its enforcement (which caused me some hilarity and probably wins this weeks Littlejohn prize for “You couldn’t make it up”) or secondly the adoption of a series of tests that put you outside the scope of the IR35 legislation, clearly and simply.

So why a “cautious welcome” from the PG, who have been pushing for the abolition of IR35 for a long time? They are totally in favour of the suspension of IR35 as a step towards its removal but suspensions can be reversed, so it’s not the 100% solution they were hoping for. They also support the idea of the “in business” tests (as does the IoD, come to that), but are not exactly in favour of the “HMRC taking more care option” – to quote them, “This is widely regarded as risible”. And of course, it is all dependent on Mr Osborne taking note of and accepting the main recommendation for merger.

Still, it is a huge step forward and PCG deserve all credit for their work in getting us to this point. The war is not yet won, but we have perhaps now won the El Alamein battle for the abolition of IR35.

About the author: Alan Watts

Alan has worked in IT for most of the last 35 years, and first went freelance in 1996. He has been a PCG member from its start and has been spreading the message that freelancing is a professional career choice for many years. Alan also runs Malvolio’s Blog, a personal but highly informative take on the life of the modern freelance.

Alan Watts, Principal Consultant, LPW Computer Services

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

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That was the year that was

And, I have to say, quite a successful one, perhaps unexpectedly given where we started from. Speaking strictly as a freelance contractor of course, I thought it appropriate to round off 2010 with my slightly biased view of how the year has gone. So here goes with a very personal summary of the key events.

The main one, of course, has to be the replacement of Gordon the Glum with a real person. You may not like CallMeDave but you have to agree he’s an improvement on his predecessor: OK, not if you’re Ed Balls or Piers Morgan of course, but who listens to them anyway…?

We’ve gone from a Government that was totally and utterly convinced they knew best how to spend your money to one who was perfectly happy to let you spend it how you wanted. Of course, there wasn’t all that much to spend and they were going to have to hang on to even more of it than before. But let’s not be picky; at least we know why they’re being so mean.

So let’s look at the good things…

ICTs and the abuse thereof. Something I may have mentioned once or twice before? Leaving aside the wider question of uncontrolled immigration, there is a clear intent by HMG to cut down the number of workers coming in to the country to undercut the local workforce. Of course we are never going to stop companies using the cheapest labour they can find, that’s all part of capitalism and globalisation, but at least someone is trying to make it a bit harder to get us to train them how to do take our jobs away and kill off the industry at its source. Which, ultimately, has to be a good thing?

We still labour (geddit, geddit…?) under the Damoclean threat of IR35 of course. I never shared the conviction of some that a Tory government – oops, sorry, a Coalition led by the Tories – would instantly delete IR35 from the statute book. That was never going to happen; there is a political justification for IR35 that, while utterly barking, is not going to be reversed in any meaningful way.

Obviously the establishment of the OTS, and its very clear directive to look at IR35 as a priority was highly welcome. Even more welcome was the PCG gaining an influential seat on the Consultative Committee of the OTS looking at small business taxation. An organisation with 20,000 members and a 10 year lifespan gaining such access and respect at that level is something that simply cannot be underestimated. The OTS is working to some impossible deadlines, but fingers crossed, progress is being made.

The job market certainly seems to be picking up. I’m seeing hugely more jobs in my scope that I saw this time last year. Of course, 95% of them I won’t bother going for because the hirers are demanding impossibly tight lists of skills, industry knowledge and qualifications. The agencies are still incapable of challenging them and offering alternatives. For example I’ve been tracking a discussion on LinkedIn about how to use shared services and/or outsourcing to save money in Local Government. Good idea and one that may well work. Sadly, the consensus is that it won’t happen because the hirers put Local Government knowledge well ahead of any business experience that means you might actually understand how to do it properly. You see the same thing in Finance, which is a real shame since that’s where the work is. And don’t get me started on Security Clearance.

Oh, and I nearly forgot. St Vince of Cable has shown himself to be every bit as incisive, astute and intellectually superior as I always thought he was…

Personally it’s not been a bad year. I’ve worked most of it and actually banked a profit, which is nice. There is certainly reason to be optimistic about next year. The PCG continue to make great strides forward which is a source of pride, even from my marginal input to that progress. And I’ve had some nice comments about this blog, which proves that at least people are reading it, even if they don’t agree with me.

So roll on 2011. I think it could be an interesting year. I’ll see you there…

Alan Watts can found at LinkedIn.
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OTS recommends five tax reliefs for the axe

On the 13rd December, the Office of Tax Simplification published its interim review of 13 reliefs, providing some light reading for online accountants.

The interim review included CGT relief on the disposal of private houses, income tax relief on luncheon vouchers, tax relief on research and development and VAT relief on supplies and sales for charities.

Of the 13 reliefs, the OTS decided that five should be axed including the luncheon voucher relief and the tax break for workers who get a taxi home after working late. The OTS says the taxi break, which was introduced in 1987, is unfair. It is used frequently by financial services and legal firms who want employees to stay at work late to complete urgent projects, but it is not available for shift workers travelling at night unless they have to work later than usual.

Another relief that could go is the vaccine research relief which Gordon Brown introduced in 2002. It was designed to encourage research into HIV/AIDS, malaria and tuberculosis but only 10 companies are allowed to claim it. The OTS says the relief is very rarely used and there is no evidence that additional research into vaccines for the named diseases has been undertaken.

The OTS has identified a total of 1,042 separate tax reliefs and is now going to focus on 74 in a final review.

The Institute of Chartered Accountants of Scotland is also urging the OTS to recommend merging income tax and NICs. This would lead to less administrative costs for both HMRC and businesses, according to the Institute.

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