Independent Contractor Services Blog

PCG Worried By Treasury Statement On Tax Arrangements

icsjonathan — Thu, 24 May 2012 14:06:30 +0000

Following recent exposure into the government’s use of contractors and other workers engaged in ‘off payroll arrangements’, the treasury have released a statement outlining their review of various public sector tax arrangements.

The statement from the Chief Secretary to the Treasury, Danny Alexander MP, said that the review looked at these off payroll arrangements to identify situations where tax avoidance may be taking place. Although he also stated that in some cases it may be necessary or appropriate to appoint an individual off payroll, such as highly skilled or expert contractors, the fact that there were over 2,400 instances of this was “unacceptable”.

The review has led to each government department publishing details of any off payroll appointees who were on an annual salary of more than £58,200. Figures from the treasury’s statement revealed that more than 40% of these related to specialist IT contractors, with many working through personal service companies or employment agencies, as well as those who are self employed.

With some cases involving contracts dating back more than two years, and some even over 10 years, the treasury were keen to act, and this has led to more than 350 cases identified and ended. The full statement can be read on the HM Treasury website.

Following this statement, the PCG have responded, suggesting that the details could be “spun by government” as an exercise in transparency, which they fear could “demonise the pool of talented, tax-paying freelancers operating in the UK’s public sector and beyond.”

PCG managing director John Brazier continued; “Disguised employment and tax evasion should be investigated and stopped, however today’s move puts the Government at serious risk of penalising genuine, hard working freelancers and as a result, the public sector as a whole.”

He said that contractors contribute greatly to the public sector, and that there is a danger that this statement could lead to a clamour to introduce policy that fails to differentiate between those who abuse tax legislation and those who operate legitimately as contractors.

ICS are one of the leading contractor accountants and administration companies and have helped thousands of contractors working in a range of industry sectors. You can contact us now for a tailored proposal based on your individual circumstances as a contractor.

REC Respond To ‘Beecroft Report’ Debate

icsjonathan — Wed, 23 May 2012 09:50:57 +0000

A recent report into recommendations regarding employment law has generated mass debate from both politicians and employment bodies. The well publicised ‘Beecroft’ report has been commissioned by the government, and gives a number of proposals into reducing employment laws and regulatory burdens in order to encourage businesses to recruit more people.

The report outlines a number of measures, including exemption from new EU regulations for SMEs and from some health and safety regulations for many self employed workers. Whilst the government have said they are pleased with the report and are considering some of the ideas from it, opposition has been raised over what has been dubbed a “fire at will” proposal.

However, as many relevant and useful suggestions have been made within the report, the REC have called on the government to return the focus to these key points, rather than be pulled into a debate over party policies. REC chief executive Kevin Green commented;

“We need an honest and truthful debate about employment regulations in this country. But the leaking of this report has turned the issue into a sideshow of arguments between Ministers from different parties. Rules that could have an impact on many thousands of employers, recruitment agencies and workers need to be considered in a serious, meticulous fashion – not as fodder for a political slanging match.”

REC Director of Policy Tom Hadley also spoke about some of the recommendations, saying that they support the government plans, but must find the best way to strip away excess regulations without reducing essential safeguards for workers. He continued;

“Building business confidence to take on new staff is key to the economic recovery, especially for SMEs, but any changes must be carefully scoped to achieve the right balance.”

ICS work with a team of experts in employment and tax law to ensure our services are fully compliant with existing IR35 legislation and the latest government regulations, such as the AWR. You can contact us now for a tailored proposal based on your individual circumstances as a contractor.

APSCo Report Boost In Engineering And Finance Sectors

icsjonathan — Mon, 21 May 2012 11:07:30 +0000

Despite last week’s news of a fall in the rate of unemployment, a number of reports have found that both temporary and permanent job markets are still struggling. The REC reported a slight fall within the temporary jobs market which has been supported by further data from the Association of Professional Staffing Companies.

APSCo found that permanent vacancies were down over 20% from last year, with temporary roles facing similar, but smaller problems, at a drop of 10% compared to March 2011. However, some sectors have preformed particularly well, including roles within finance and engineering.

Month on month temporary vacancies in accounting and finance rose by 37% in March, and engineering rose by 3%. Whilst this rise is still well below last years levels for the finance sector, in engineering the vacancies are 5% higher than last year.

APSCo Chief Executive Ann Swain commented saying although the jobs market as a whole staged a rally at the start of the year, it has lost a bit of momentum recently. She said this has led to difficult hiring decisions for employees, with only essential roles being filled to compensate for the flat lining economy. She continued;

“Understandably, with the outlook still uncertain employers have turned to temporary workers to plug any immediate skills gaps. Temporary workers provide a flexible resource, allowing employers to deal with short term spikes in workload without having to add to fixed employment costs.”

“The engineering sector continues to defy the uncertainty in the rest of the market. With infrastructure investment at record levels, and exporters benefitting from the weak pound, demand for engineers should remain buoyant for the duration of the year.”

Temporary Jobs Boost Reliant On Employer Confidence

icsjonathan — Thu, 17 May 2012 13:21:51 +0000

With contractors and freelance workers subjected to a number of recent headlines, from the debate over how the government employs them, to the latest IR35 updates, there has been some positive news in the form of recent employment figures.

The Office for National Statistics revealed that the unemployment rate fell to 8.2% last month, with the total figure falling by 45,000 to 2.63 million in the UK. The REC’s Kevin Green welcomed the news of this fall, and said that it was in line with the data from their most recent Report on Jobs.

Whilst Mr Green said that employer confidence is fragile due to ongoing issues such as the Eurozone crisis, and that further volatility in the jobs market is expected, he confirmed that “flexible working continues to provide opportunities for both jobseekers and employers” with workers “increasingly asking their bosses for greater flexibility” which they expect to be a continuing trend across the UK labour market.

Although they did report positive news in line with their Report on Jobs with permanent jobs growing, the REC found that temporary and contract jobs suffered a further slight fall. The previous month’s Report on Jobs suggested that the fall was due to the impact of regulations, such as the AWR. Kevin Green again said that this could be the case, although increasing levels of permanent staff is also affecting the temporary staffing figures.

He was fairly positive about the growing employer confidence, saying; “During 2011, employers made do with the staff they had, trying to exploit any additional capacity in their existing workforce. Having maximised the growth they could achieve in this way, confidence has grown sufficiently for organisations to make the positive decision to take on more staff.”

Dispute Continues Between IR35 Forum Members

icsjonathan — Tue, 15 May 2012 11:57:41 +0000

Last week’s announcement of the HMRC Business Entity Tests brought an anticipated negative reaction from a number of contractor groups, most notably the PCG, who have been an active member of the IR35 Forum.

The main area of disagreement is the proposed scoring system of the tests, which the PCG have disputed due to their claims that it was “unfair and not reflecting the realities of how businesses operate.” Martin Hesketh, who represented the FCSA on the forum, provided further insight into the disputed system;

“The proposed scoring system undermines the business entity tests altogether. It will push a disproportionate number of businesses into the high-risk category, and in so doing will prevent genuinely high-risk cases from being identified. An alternative scoring system, backed by a majority on the Forum, was suggested but to date those suggestions have been rejected by HMRC.”

These disagreements within the IR35 Forum have led to further disputes between one of the members of the forum, Kate Cottrell, and the PCG. Kate Cottrell was quoted on a number of contractor news site as discrediting some of the points made by the PCG regarding how favoured the business test was by HMRC and government officials.

The PCG responded to Ms Cottrell’s quotes, noting various “factual inaccuracies” and claiming that she “had not sought to engage with us constructively”. They were also disappointed about her claims that there was no real opportunity to change IR35.

Looking past these ongoing disputes, the IR35 Forum are now preparing to monitor the impact of the new tests over the next 12 months, in what they have called a ‘test and learn phase’, which suggests that there is still a long way to go before a better approach to IR35 is taken.

Groups Claim HMRC IR35 Tests ‘Lack Clarity’

icsjonathan — Mon, 14 May 2012 09:51:26 +0000

Following the full release of the details of HMRC’s Business Entity Tests last week, a number of contractor groups and members of the IR35 Forum have responded to the announcement with a resounding joint statement.

The bodies representing freelancers and SMEs, which includes APSCo, FCSA, FSB, PCG and REC, have previously expressed concerns over aspects of the tests, and following the official announcement they have said that “HMRC have missed a great opportunity to bring clarity, transparency and fairness in dealing with IR35.”

The statement continues that they believe the new IR35 guidance “fails to take into account key elements of [the IR35 Forum’s] advice” and that “[these organisations] are united in their concern that the measures suggested in the HMRC report will not go far enough and will not reflect the new approach promised by the Government at the 2011 Budget.”

The full statement, which can be read on the PCG website, includes quotes from some of the key personnel of these groups. PCG chairman Chris Bryce summarised their views saying;

“HMRC’s new guidance demonstrates their fundamental lack of courage and commitment to improve the operation of IR35. While the external members of the Forum have worked tirelessly to develop innovative solutions, HMRC appear at this stage to have opted for a risk averse approach that will not deliver the improvements that are so clearly needed. ”

HMRC Release Details Of IR35 Business Entity Tests

icsjonathan — Fri, 11 May 2012 09:14:29 +0000

After much speculation, the details of HMRC’s IR35 Business Entity Tests were finally revealed this week. The tests have been brought in following over a year of review from groups including the OTS, IR35 Forum and HMRC.

There has been a lot of scrutiny surrounding the announcement of the tests and particularly the way contractors are scored, with members of the IR35 Forum publically withdrawing their support due to disagreement over this.

As well as HMRC’s own guidance document, the PCG have also produced a detailed assessment of the tests questions and their scoring. The questions are intended to assess which risk band a contractor lies within, with a score of under 10 representing a high risk, 10-20 medium risk and over 20 low risk. The 12 question categories cover the following topics;

Business premises
Professional Indemnity Insurance
Efficiency
Assistance
Advertising
Previous PAYE
Business plan
Repair at own expense
Client risk
Billing
Right of substitution
Actual substitution

The tests have been designed in order to help contractors find out what risk band they are in, however HMRC have said that they are voluntary and any results do not have to be reported.

ICS will monitor the reaction to the tests as well as providing our own response as to how our contractors may be affected. We will also provide a full update with the IR35 FAQ section of our site.

FCSA Give Further Response On Government Contractors

icsjonathan — Wed, 09 May 2012 12:26:55 +0000

After a leaked letter last week revealed the government’s decision to review how some public sector employees are paid via limited companies, there was a strong response from the contractor and freelance community.

The PCG and IMA were among the first groups to respond, stating the value of contractors in both the public and private sector and defending those genuine contractors who may be caught up in the governments review.

Stuart Davis, Chairman of the Freelancer and Contractor Services Association (FCSA), has echoed the thoughts of these groups in a further statement. He stated how there is nothing wrong engaging with contractors at any level, including the civil service, providing correct taxes are paid, and continued;

“We would like to remind the Government and those who are criticising these employment arrangements, that freelance contracting work is undertaken by thousands of workers up and down the UK and is a legitimate and valuable way of working that benefits both employers and contractors.”

Mr Davis spoke of the many traits of contractors, in particular their flexibility, saying; “It is this flexible movement of people to go where and when their expertise is needed that boosts the competitive elements of the UK economy, which are recognised as necessary for recovery and growth.”

FSB Report SME Public Sector Struggle

icsjonathan — Tue, 08 May 2012 09:34:30 +0000

A new report from the Federation of Small Businesses (FSB) has revealed how small businesses are struggling to win public sector contracts, despite efforts from the Government over the last year to make more available.

The FSB’s ‘Voice of Small Business’ survey found that 40% of small firms believe the tendering process for public sector contracts is too complex, with a further 37% stating that bigger firms are preferred by public officials, who sideline many SMEs.

With more than 2,700 FSB members surveyed it was surprising to see that whilst one in seven firms had bid for public sector contracts, 41% of them had failed to secure any businesses. Referring to the Governments Contracts Finder website launched last year, only 27% of SMEs said they found it useful whilst 55% said they instead relied on personal contacts or referrals for public sector work.

Further findings from the survey were that 38% of small businesses believe that the government and public sector should actively use SMEs or encourage their use where possible. The FSB are using the result of this survey to call on the government to support small firms, with their Chairman, John Walker, commenting;

“The Government has made an effort to raise awareness in the public sector that Britain’s entrepreneurs and small businesses are willing and able business partners. But clearly more must be done. While central government has raised its game, without a true culture change across the public sector as a whole the Government’s initiatives will have little impact.”

Industry Groups Respond To Government Contractor Review

icsjonathan — Fri, 04 May 2012 13:16:10 +0000

A number of contractor and industry groups have spoken out about the Government’s use of contractors, following a leaked letter last week. The letter revealed that a treasury official is reviewing pay and tax arrangements for some of the highly paid public sector contractors.

Jason Atkinson, chairman of the Interim Management Association (IMA), backed the government’s review of long term contractors and the wider investigation into tax avoidance. However, talking about the value of contractors and interim managers within both the public and private sector he expressed some caution regarding the review. He said;

“Danny Alexander’s letter would suggest they are at risk of throwing the baby out with the bath water. By applying this review to all senior interim executives, the Government could lose the ability to quickly deploy highly skilled interim managers, on short-term contracts to deliver specific results immediately and effectively, which is often critical in the public sector.”

The PCG also spoke about the leaked letter and government review, cautioning them not to “destabilise and discourage the vast majority of talented, tax-paying freelancers in their search for a rogue minority.”

In a statement on their website, MD John Brazier said, “Disguised employment and tax evasion should be investigated and stopped; but genuine freelance contractors should not be penalised in the rush to ‘do something’. Genuine contractors contribute greatly to the economy, providing value for money to the taxpayer, and essential skills and services to the public sector.”

He continued; “Amidst this debate we should reflect on the number of government departments which rely on the flexibility and skills of freelancers with a specific talent that can be used where and, importantly, when they are needed.”