Tag Archive | "public sector"

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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Contractors to Leave the Public Sector Due to Tax Changes

The IPSE have warned that key contractors will leave the public sector if the government continue with proposed tax changes this year.

Basically, up until now it has been down to the contractors themselves to determine if they have the correct employment status, and this only gets questioned if the Inland Revenue has reason to believe it might be wrong.

With the new changes it will be up to public sector employers to decide the employment status of a contractor, which means they become responsible for putting on employment taxes. Not only that, but it also takes away a lot of control from the contractors themselves, as they could could find themselves labelled as an employee rather than self employed.

In short, things are going to become a lot more confusing for both employers and contractors, and it will no doubt just lead to more paperwork and time wasted phoning up places where they put you on hold for 45 minutes.

When you consider all of this, it’s easy to see why the IPSE are predicting that contractors will leave the public sector in their droves and start looking elsewhere for work. Why continue in a sector that just wants to hold you down, when there are so many other industries out there that are new and dynamic? The choice is going to be clear for thousands of people.

You can be sure the government didn’t think of this when they were sitting around and planning things out. That is the problem with many of these new initiatives…they fail to see the bigger picture.

No doubt the initial goal of all this is to save money for the government, but in the long run they may end up losing money as they find it hard to fill jobs in the public sector.

Actually, it wouldn’t surprise me if the government do a complete U-turn once they see just how many people start to quit. It wouldn’t be the first time they have backtracked on a new policy.

Sure, these kind of things seem like a good idea when you are sitting around in a meeting room in a nice building in the centre of London, but then it gets implemented in the real world and soon becomes apparent that they got it completely wrong.

Who knows though. Maybe the IPSE are off the mark in their predictions, and perhaps the new changes will be a good thing for the public sector. I highly doubt it, but let’s wait to see what happens.

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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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Contractors to face new tax compliance evidence requirements

Businesses and contractors alike aren’t looking forward to new tax compliance rules that  require them to meet heightened evidence requirements.

I don’t know about you, but I always get a bit spiky when the government steps in and tries to ‘help’ or make things better, and this could very well be one of these times. The government is convinced that the best way to stamp out the very real problem of tax avoidance is to encircle our freelancers, contractors, and small businesses in more paralysing red tape. These new rules, which will go into effect on 1 April, will not only require anyone applying for a public sector contract to produce evidence that they have not been engaging in any tax avoidance, while also making it a requirement to have a supplier disclose any pat misdeeds such as having a tax related offence conviction or being slapped with a evasion or civil fraud penalty.

Danny Alexander, chief secretary to the Treasury, commented on the new law, remarking that it’s important to convey the message to public sector contractors that there’s no place in the UK for aggressive tax avoidance, adding that this was the main motivation behind these new rules designed to limit the impact of firms and individuals trying to pull the wool over the eyes of HMRC. The government is spending hundreds of millions of pounds in order to put thee rules into effect and providing for the infrastructure to enforce the new regulation, and Mr Alexander insists that the new General Anti-Abuse Rules will be just one more tool that will help the government weed out firms that have been involved in underhanded tax avoidance in the past.

Meanwhile, I have my misgivings about this plan. Does nobody seem to realise that this could have a chilling effect on the public sector if everyone has to jump through all these hoops  before even being able to be considered for a contract? Who’s going to want to put up with all this when you can simply find a private sector contract without all the hassle?

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Finance, accountancy contractors to see increased job growth

One recruitment firm announced that contractors working in the finance and accountancy sectors are likely to see increased job and growth in the next 12 months.

Around 43 per cent of contractor accountants working in the public sector expect to experience an increased number of job postings next year, according to the recruitment company’s survey. This is a marked improvement over 2011, when research figures indicated only 38 per cent of finance contractors expected the same.

The recruitment firm’s managing director, Matthew Brown, commented on the results, remarking that the coalition government’s plans to cut costs have created a large quantity of work for public sector finance teams, who now have to achieve deficit reduction goals by cutting public spending and managing costs in a more effective manner. The result has been that in-house teams are being supplemented by experienced contractors, as using interim workers can aid in finance management and lead to overall payroll savings better than hiring on more permanent workers, and Mr Brown added that these contract workers will be integral to the public sector’s goals of being as efficient as possible with its finances and controlling costs in an effective manner.

However, there are indications that it won’t be just larger financial firms utilising contract workers in greater numbers. In fact, the SME Capex Barometer from GE Capital indicated that small businesses could be creating as many as 450,000 new positions over the next year.

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Treasury secretary issues warning against tax avoidance

Chief secretary to the Treasury Danny Alexander has stopped mincing words when it comes to how the taxman is going to treat anyone trying to weasel out of tax.

Decisive action will be taken against any who try to bypass paying the proper amount in tax, Mr Alexander said in a recent conference speech. In fact, the chief secretary went so far as to single out any contractors who work for the public sector, putting them on notice that Her Majesty’s Revenue & Customs will not take any sort of tax avoidance schemes lying down.

Mr Alexander had nothing but praise for how HMRC has been dealing with tax avoidance issues as of late. However, he was quick to add that further measures would be taken against anyone with the nerve to continue short-changing the Treasury, even after multiple warnings have been given out time and again over the past few months.

The entire tax avoidance issue was blown wide open this past summer after it was revealed that Student Loans Company head, Ed Lester, had been paying less in national insurance and tax because he was working on behalf of a bogus limited company. Doing so allowed him to minimise his tax liabilities – at least until it was discovered and the scheme was shut down, leading to Mr Alexander putting the rest of the public sector’s contractors on notice for engaging in similar practices, which could likewise allow them to get away with not paying their fair share of tax.

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More debt collecting agencies are helping HMRC

HMRC is increasingly turning to debt collection agencies in its bid to boost its take of outstanding tax and VAT. Furthermore, the Government department is also becoming more reliant on credit agencies as it tries to reduce fraud.

Public services lose £31 billion each year due to fraud and error, and losses due to tax mistakes account for nearly 20% of that total.

According to the Credit Services Association, debt collection agencies were employed to chase debt worth £58 billion last year in the UK. During the second half of 2011, the total value of debt held by members of the CSA increased by 11%.

Sara de Tute, the president of the CSA, said its not surprising that debts have increased since the credit crisis. However, the increase is also due to new private and public sector creditors who now see outsourcing their debts to professional agencies as a valid means of recovering vital funds.

Overdue debts cost the government between £7 billion and £8 billion every year and 95% of that debt is owed to HMRC and the Department of Work and Pensions. The government has now asked collection agencies to help it recoup some of those debts.

The Revenue has introduced a process for screening tax credit applications and this has saved it £50 million. The department is also developing Connect, a new system that will identify tax fraud and non-compliance. HMRC is also conducting more tax investigations and has increased the number of people it prosecutes each year to 1,000.

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Are accountants unearthing more fraud?

According to recently published data from KPMG, total fraud in the UK reached an all time high of £3.5 billion last year.

In the final six months of 2011, around £2.5 billion worth of fraud was unearthed. Included in that total were five cases of fraud, worth in excess of £50 million each, which have since come to court.

Forensic partner Hitesh Patel from KPMG said economic uncertainty had fuelled the increase in fraud. Government agencies and businesses have been rooting out more cases of fraud through operational changes and austerity measures, but the economic downturn has added financial pressure on employees and acted as a catalyst towards more fraud.

The public sector suffered from 68 fraud cases valued at £1.09 billion, whilst financial companies had fewer cases at 59, but these were worth £1.52 billion. Of the latter, professional criminals committed the majority of the fraud, but customers and company insiders also contributed to the numbers, KPMG discovered.

In fact KPMG found that professional criminals were responsible for a total of 98 cases of fraud worth a total of £1.4 billion. Many of these were committed online, such as phishing attacks and bank fraud.

57 cases of fraud, totalling £729 million, were committed by management, an increase of 74% from 2010. In one case, a hedge fund owner was accused on over-inflating assets after some fraudulent transactions collapsed.

Patel stressed that organisations must make sure they have robust fraud prevention mechanisms in place so that they do not lose the money they have worked so hard to make.

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

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Civil Service wastes millions on ineffectual training

The National Audit Office recently published a report stating that £275 million worth of taxpayers’ money was wasted by the Civil Service last year on ineffectual training courses.

The NAO estimates that hundreds of millions of pounds are wasted every year as the Civil Service puts employees on expensive courses that don’t work. Less than 50% of the public sector employees questioned thought that the training they had received in the last year helped them do their work better.

Kevin Beales, the MD of the North-East based Test Factory, said these figures were probably just the tip of the iceberg of a UK culture of poor staff development. Organisations in both sectors know they need to offer staff regular opportunities for personal development if they are to get the best out of them, but they give little thought to what the needs of their staff actually are.

In order to provide suitable training, employers, including accountants for contractors, should analyse staff training needs so that they can make an informed decision on appropriate training. Employees should also be given the opportunity to identify areas where they feel they could improve leading to personalised training plans to aid their development.

Research from the CIPD suggests that workplace coaching drive business success and helps employers manage change effectively. Dr John McGurk, said companies should ne maximising the value they get from their employees and this can be best achieved by aligning coaching to business objectives.

The CIPD’s adviser for learning and talent went on to explain that about 80% of UK businesses use coaching to improve staff performance levels and maximise their employees’ potential.

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

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BDO says average single business fraud is £4.5 million

BDO’s six monthly Fraud Track update shows an increase in the number of business fraud cases that were reported.

The report for the six months to the end of May 2011 also showed a year-on-year decrease in the value of fraud from more than £1 billion to £920 million. There was also a significant drop in the value of an average single fraud, down £1.5 million to £4.5 million.

However, there were 205 reported cases of fraud in the six month period, the highest number since the inception of the report.

Simon Bevan, BDO’s head of fraud services, said the insurance and finance sectors could be dealing with fraud through civil means rather than criminal prosecutions. He believes the financial services sector could be reluctant to report fraud and 90% of fraud is never reported. A lot of those who do report fraud question whether the police or the Serious Fraud Office are the best people to deal with it.

Whilst the value of reported fraud in the insurance and finance sectors has nearly halved, public sector fraud has almost doubled since this time last year.

The report also showed that only 2 cases of procurement fraud where reported to the police in the last six months, even though this is the most common type of fraud. Bevan pointed out that two-thirds of all the investigations he has conducted over the last twenty years have involved procurement fraud.

85% of buyers think they should be doing more to combat the problem of procurement fraud, according to a SM100 poll earlier this year.

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

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Do accountants for contractors want to cut holiday entitlement?

New research has discovered that a lot of private sector employers, including some contractor accountants, are thinking of reducing holiday entitlement to cut the cost of employee benefits.

Insurance provider Metlife surveyed 403 SMEs and found that 27% think holiday entitlement is too generous and 25% are thinking about reducing paid holiday leave.

Full-time workers in the UK are entitled to 28 days paid holiday per year, including bank holidays. Employers would like to cut 4 days paid leave to reduce costs and 36% say they are thinking about offering staff additional unpaid leave.

Dominic Grinstead, the MD of MetLife, said employers are questioning the value of employee benefits packages and paid holidays form an expensive part of the bundle. A lot of employees show that they are prepared to be flexible, but they do want something in return.

The survey also found that more than 33% of employees would work longer, but only if they received more money. However 60% of employees do not think they will get an annual salary increase in the next year and 28% have not seen their wages rise for more than two years.

Public sector employees are facing a salary freeze and although some private sector wages are increasing, the average 3% settlements are below inflation. 16% of private sector organisations are operating pay freezes, 31% intend to offer increases below RPI inflation and 17% say they will offer targeted salary rises for some of their employees only.

John Cridland, the CBI’s director-general, said he was confident that growth in the private sector will compensate for public sector job losses but inflationary pressures are causing the majority of employers to make tough decisions when it comes to pay.

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

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Are any contractor accountants getting pay rises?

26% of employers do not intend to increase salaries this year as sluggish private sector growth and public sector austerity measures impact companies’ capacity to reward their employees.

The latest annual Reward Survey from the CIPD shows that while 99% of employers will not be cutting pay this year, only 65% will actually be increasing it. A further 9% have delayed their review of salaries.

60% of respondents said market rates were the most important factor when it came to determining salary levels and 61% link pay to individual performance, at least in part.

67% of organisations operate reward schemes that are performance-related and the most common options are pay rises based on merit and individual bonuses. 29% also operate non-monetary awards for individual clerical and manual members of staff.

The CIPD’s performance and reward adviser, Charles Cotton, said it’s not surprising that some companies are not able to award salary increases this year. The survey results also show that employers are focusing more on linking pay and bonuses to performance.

Meanwhile, private sector pay edged up by 3% in the first quarter of this year. Inflation is hovering around 4.5% so the rise doesn’t fully compensate but it is an increase which is something public sector workers currently yearn for.

The increase in private sector pay has been led by the automotive and utilities sectors. 3% is still well below the CPI rate and when you factor in the freeze in public sector pay, the average comes out at 2.5%.

Experts are now predicting that the Bank of England will hold the base rate at its historic low of 0.5% until at least November. With inflation rising faster than wages, take-home pay will continue to shrink for a while yet.

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

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