Tag Archive | "ir35"

“Down The Drain!” – Public Sector and IR35 Reforms


It’s no secret that many public sector contractors were planning to down tools and head towards the private sector. The reason? IR35 of course.

Since these IR35 reforms came into effect earlier this year many experts have observed the so called “talent drain” from public to private…with one pundit quipping that the public sector is going “down the drain!”

This comes after a survey of nearly 1500 recruiters who hire contractors on a daily basis, and their opinion? What they have noticed is that public sector contractor placements have fallen off the map over the last few months, with 70% of recruiters noticing the shift towards the private sector.

I could have told you that…as regular readers of this blog will be all too aware. It’s just common sense though isn’t it really when you think about it, because if contractors are better off elsewhere and making more money they are going to take advantage of the opportunity, not sit around watching the clock while working for the government.

Samantha Hurley, the director of operations at the company behind this survey agrees with me, she said, “As we feared, it seems that these changes have had an adverse effect on the supply of contractors to the public sector.”

Some experts and pundits have even put a number on the amount of contractors who will eventually make the move from public to private, with 85% being touted as the total.

This is almost like the old days of the American frontier if you ask me, where thousands of Americans made the move from East to West, all in search of gold and new opportunities.

Only this is 2017 and it is the UK contracting scene, but that doesn’t change the fact there is a new gold rush to get excited about, but only if you make the move to the private sector. Those who stay put in the public sector, you miss out.

Julia Kermode, chief executive over at the Freelancer and Contractor Services Association, or FACSA as some people like to call them…she also agrees with me as this was a recent statement made by her…”We have seen decisions being taken by the public sector banning all workers who operate through their own limited company This has seen many contractors deciding to leave the public sector.”

Maybe the private sector gold rush won’t last for long though? Reports are suggesting that IR35 is going to be introduced there as well at some point, which of course, would totally annoy the vast majority of contractors.

Not only that, but the survey shows us that 78% of recruiters think that IR35 in the private sector would damage the UK economy as a whole, especially with Brexit just around the corner.

My message to contractors is make the most of the private sector while the times are good. Who knows, you might even be able to take an early retirement before IR35 comes in. Keep making that money.

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Do You Pass The IR35 Public Sector Test? Most Do…


A well known and respected tax advisory company have recently done some research, and what they found will surprise many, especially in the public sector.

It was the public sector where this research was carried out you see, and the subject on the top of the list was the dreaded “IR35 reforms,” which thousands of contractors around the country have been complaining about of course.

Do the majority of public sector workers even have to take part in this whole IR35 thing, anyway? According to the new research…maybe not.

What they found is that 89% of the people surveyed passed their unique IR35 public sector test, which was a detailed status assessment that really put contractors through their paces.

The end result of all of this was that most contractors “sit outside of IR35,” which means they won’t have to bow down to the recent changes which came into effect on April 6th and have been the subject of much controversy

At this point I would just like to point out that all of this research has been carried out independently by a third party company and has nothing to do with the government at all.

In other words, if you are a public sector workers then don’t expect to turn up at work tomorrow and be told by your boss to forget about IR35.

This is a view shared by the tax advisory company who did the research, as although they were very sure of their findings regarding IR35 and public sector workers, they did go on to admit that every case needed to be reviewed individually by a government official.

They also went on to add that most of the public sector contractors surveyed worked in the IT industry, which does appear to have a higher pass rate than other industries.

No matter what industry you work in…the word on the street is that freelancers and contractors everywhere feel completely unsupported by the government.

In a shocking survey conducted only a few months ago, it emerged that a staggering 97% of self employed workers have no belief in the current regime at Number 10.

That is definitely a lot of people, and it makes you wonder how the Tories even got re-elected in the general election. They did of course, but only just.

The IR35 changes have obviously played a major factor in the distrust between hard working contractors and the government, but also the ridiculous tax grab and other issues that have become apparent.

If you are a public sector contractor then you might want to contact a specialist tax firm who can advise you on the best way forward regarding IR35.

However, you could also join the thousands of public sector workers who are leaving and moving into the private sector, where many say the opportunities are in abundance and the money is a lot better. The choice is yours.

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“Be Pragmatic” Says Accountant, Regarding IR35


The IR35 changes have had contractors complaining and moaning, there is no doubt about that…but should they all leave the public sector? Maybe not.

This is what one specialist accountant is saying anyway, who has recently gone on record to suggest that independent contractors who are currently working within the public sector should take a more “pragmatic” approach to the situation.

In other words, don’t rage all out war against IR35. Instead, try and find ways you can make it work in your favour.

The accountant went on to add that he acknowledges the fact that recent IR35 changes are probably the “most hated legislation” within the public sector contracting industry, but, contractors must remember that when the original IR35 legislation was introduced 17 years ago there was actually some benefits associated with it. In his opinion anyway.

More specifically, it was of benefit for loyal public sector employees who suddenly started to realise that the contractors they were working side by side with…well, in many situations those contractors were making more money and paying significantly less tax.

Many pundits over the years have claimed these contractors in the public sector are basically using special circumstances as a tax dodge, which isn’t fair at all, and that is why we have finally seen the recent IR35 changes in an attempt to level the playing field.

It might not be going how they expected though, because as I’ve reported about before, rather than sitting down and simply accepting these new changes, there are many contractors who are downing tools with the public sector and looking towards the private sector for better opportunities.

There are many who have already made the move, with thousands more expected to join them before the end of 2017.

This isn’t a temporary move either, because according to many public sector insiders what they are saying is the IR35 changes are going nowhere soon.

However, this particular specialist accountant reckons that contractors should not be totally against the IR35 changes, and in fact, if they were to get the right mindset about this whole situation then they could use it in their favour.

He suggests that contractors should not knock out IR35 completely, and instead, view working within the confines of IR35 as a “necessary evil” to get what they want.

What do contractors want, especially those in the public sector? According to the accountant it is NOT more money. Oh no. It is more flexibility in the way they work, which means that working with the IR35 changes as a self employed contractor, even if it means paying more tax, could give them the flexible lifestyle they require.

I’m not too sure about this one. Yes it is something that every contractor wants…flexibility that is, but should it come at a cost of paying more tax, which in many experts view is unnecessary and unjust? Especially when you consider that there is more than enough opportunities in the private sector, where there isn’t any IR35 madness but the same amount of flexibility is usually on offer.

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Research Confirms IT Contractors Leaving Public Sector


One subject I’ve talked about before is how IT contractors would be leaving the public sector once those unpopular IR35 tax changes came into force.

Well, it looks like I have been proven right, because new research has just confirmed that IT contractors are jumping ship and going elsewhere…mostly to the private sector where they are not subject to this IR35 madness.

Who can blame them though? At the end of the day, if you are getting money taken out of your pocket, which in your view is unfair, then of course you are going to down tools at the first available opportunity and seek out new opportunities.

The IR35 tax reforms came into effect during the month of April this year, and it means that IT contractors get taxed like an employee, which ultimately leads to a more expensive tax bill with some reports suggesting that it is costing 25% more than before. Not surprisingly, the vast majority of workers were, and are, outraged.

So what has the new research found out about IT contractors, the public sector and IR35? The first statistic that caught my attention is that 71% of those surveyed admitted that their income had taken a hit since the new tax changes.

A third of that 71% mentioned they now take home 15% less in their pay packet, while a further quarter said they were getting 25% less.

Out of the 1000 IT contractors surveyed, half said they had already or were planning to leave for the private sector, while 75% said the private sector is the place they would most like to be.

Who can blame them? In my opinion, there has never been a better time than right now to find an IT contracting job in the UK. Many companies in the private sector are actively looking for a wide range of skills, and if you have the talent, then you should be taking home a nice bit of change every week.

Not everybody agrees though, as the survey went on to show that 6% said they were sticking with their IT contracting jobs in the public sector and it was the best place to be.

I’m sure that some people didn’t get affected as much by the IR35 tax changes, and this is why they are content to keep on working in the public sector.

Recruiters have also had their say, with 77% saying that the private sector was now the most desirable place for IT contractors and 59% admitting that digital skills were lacking in the public sector.

This has led many experts to say that project delivery is now a concern within the public sector, and that a lot of projects will never see completion

Just look at the whole “making tax digital” saga as a perfect example of this. For a few years now it has been in the works, and then, unexpectedly, it was scrapped. Perhaps they no longer have the IT skills to make it happen? Who knows for sure.

What I do know that is many IT contractors are now moving boldly forward to a new and exciting life in the private sector, where more opportunities and money awaits them.

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Contractor Plans Legal Fight Against IR35 Reforms


An IT contractor has taken the bold step of planning to take on the government and their IR35 reforms in a legal battle.

As you can no doubt imagine, this type of thing isn’t going to be cheap and that is why he is looking for donations to make it all happen. The cost of full legal action is expected to be around £360,000. Not exactly small change is it.

I’ve reported before about these IR35 changes of course, which came into force during April for contractors within the public sector and has mostly been unpopular.

In fact, some IT divisions within the public sector have seen thousands of contractors walk out once their contract was up, with many more planning to do the same once they get the chance.

Would a U-turn by the government on IR35 change contractors minds? It very well could, but I think many are probably doing just fine out there away from the public sector, maybe even making more money.

As I’ve spoke about in another blog post, contractors and their skills are more in demand than ever before, with many companies willing to pay top cash for those who want to put in the hours.

I’m sure there would be some who might consider a return to the public sector though, because the work is quite steady and predictable, which gives a bit of reliable income.

This legal challenge has got to make it into a court of law, and with over quarter of a million pounds needing to be raised it does make me wonder if we are going to see anything happen? Let’s wait to find out.

You don’t need to send any donations just yet, as the IT contractor has mentioned that any potential supporters should email and say how much they could donate on a monthly basis. £20 a month has been talked about.

The one thing I do know is that the government very often do change their mind. Just take the “making tax digital” plans as an example, where for months it seemed to be at the top of their to do list.

It now appears the plans for making tax digital has been scrapped, after a lot of hard work and millions of pounds spent, so it wouldn’t surprise me at all if one day some government official decided that IR35 should also be scrapped.

What can you do though? Most contractors will simply get on with their life and make the best of anything that comes their way. If the public sector is no longer viable then they look elsewhere, and if the public sector starts to seem more attractive again then I’m sure many will be back.

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Public Sector Contractors Walk Out – “had enough” They Say


As you might be aware, changes are about to happen in the public sector with thousands of contractors facing disruption to their tax situation.

It is the IR35 tax change that has got everybody up in arms, and the reason is because many contractors who work in the public sector will end up paying more tax, something which many of them don’t want to do, obviously.

This has lead thousands of contractors to simply down tools and walk out. “I’ve just had enough,” said one contractor who wanted to remain nameless. No doubt they are leaving the public sector and going to offer their services elsewhere in a bid to avoid IR35.

What were the government expecting though, did they really think people would take it? Reports suggest they came up with the idea of changing the IR35 system in a bid to make £440 million a year from 20,000 hard working contractors in the public sector.

What they didn’t expect was that many of these contractors are going to walk out and never go back. Looks like it’s back to the drawing board for the people at government HQ.

One of the biggest areas of the public sector that hires contractors is IT with an estimated 18,000 on the books of Central government.

However, many reports are saying that IT contractors are the most affected by IR35, and they are not impressed at all. One example is a recent defence related IT project that is no doubt crucial for the nation…but 87 of the contractors working on that project have already left, with many more expected to follow.

It’s also come to my attention that another project involving public sector contractors, this time consisting of security consultants…well, almost half of the people in that team have already moved on to the private sector.

Let’s be honest here for a moment. Is it really a surprise this is happening? Of course it isn’t, mainly because people don’t like to lose money. Simple really isn’t it, but for some reason the organisers behind the IR35 change just couldn’t see this. Or maybe they did and just don’t care? Who knows exactly what is going on here.

What I do know is that at the end of March thousands more contractors officially come to the end of their public sector contracts, and guess what…many are not going to be renewing.

Instead, they will go boldly into the private sector, where they are not going to be subjected to this IR35 madness.

The only way they will go back is if the government decides to not go forward with the IR35 tax change, but I don’t think that is going to happen.

In the meantime thousands more public sector contractors are going to be walking out and going elsewhere.

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IR35 – Up for Discussion


The government’s been as good as its word and offered up IR35 for sacrifice discussion. The 11-page document is by no means something that genuine contractors should fear.

For HMRC, the current legislation is not working. The new discussion seeks to create a framework with the input of stakeholders to find out:

  • why the current legislation isn’t working;
  • how the rules can help better IR35’s implementation;
  • what the taxman’s team of auditors need to do next to ensure they’re targeting (and punishing) only those who deserve it.

Okay, hands up. That’s the way I’m reading the document’s scope.

One can only hope that those stakeholders the government listens to share the same outlook. Here’s a bit more translation, without the big words.

The Rationale

The reason the government has launched the IR35 discussion document is because they don’t believe they’re catching ‘disguised employees’. In other words, they’re not getting as much tax from those with a higher earning potential as they’d like.

The document also states that it’s just not fair on an employee if someone doing the same job, yet has gone to the time and effort to create a branded limited company, should retain more of their income.

Yes, they’re going for the sympathy vote, already, trying to whip up the support of employees who may feel wronged. The government shows a worrying lack of comprehension of the sizeable task of creating and operating a limited company – or PSC – in the first instance.

It’s almost as if the government wants everyone back working for the man, despite the lack of flexibility this will give the UK workforce. Not to mention that with more people back on the shop floor, the need for unions will only become stronger. In so many ways, you can see history repeating itself before the cornerstone of the new Tory government has even been laid.

The Options

The government refutes the the allegations that the only option is to ‘abolish’ IR35. They believe that reform can help ‘protect the Exchequer’ from disguised employees claiming tax relief, when they really ought not.

What they are looking at doing is ‘levelling the playing field’. In other words, someone who would otherwise be an employee if it wasn’t for the fact that they were contracting though a PSC would be inside IR35.

Call me stupid, but isn’t that what the legislation has been trying to uphold since its inception in 2000?

The Problem

The government is caught between a rock and a hard place. They need to categorically define employment. They need to say:

  1. if [worker] meets these conditions, then they’re employed;
  2. if, on the other hand, they resemble this, then they’re self-employed.

The problem is that to do that, many of the advantages they offer to entice big businesses to make London their home would be in conflict. Many of the expenses MPs claim – for surely they would be employees, too – would become moot.

So unless MPs are prepared to take a huge, massive pay cut (expenses, etc.), then the reforms to IR35 will be minimal.

Going back to what I said, genuine contractors shouldn’t be afraid, I stand by it. But only because I put the greed of MPs before common sense. If the discussion should somehow reflect the truth of the House of Commons, then all limited company contractors should be looking for a second and third client, to prove they’re not the employee of one single client.

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Will HMRC deprecate IR35? Has the shift to SDC already begun?


Fantastic article over on Contractor UK. Written by Contractor Umbrella’s MD, Lisa Keeble, it covers many contractor-centric hot potatoes. But three topics stand out as most poignant:

  1. the furore surrounding the last budget’s heralding of loss of travel and subsidence benefits for umbrella employees;
  2. the forthcoming emergency budget, public sector debt and what it all may mean for *genuine* contractors;
  3. the shortage of new IR35 cases HMRC is launching, and ponders what their inaction may mean against the backdrop of SDC.

As Keeble portends, the taxman is keeping schtum on many of these issues. At a time when limited company owners need clear guidance, HMRC’s silence is a big, fat fail.

Do independent professionals need any more ill-advised vendettas, as she reminds us UCATT embarked upon after the last budget?

“Do you… think there’s going to be a war? Siriusly?”

“It… feels like it did before.”

Are we at the start of a Greece-like slippery slope?

But back from the land of fantasy – and Harry Potter. HMRC needs to sort out what counts in appraising a genuine contractor business and who is a disguised employee.

We’ve seen what’s happened in Greece, where self-employment is a way of life. The avenues for avoiding tax are largely unpoliced, leading to an unsustainable economy.

It’s a safe bet the government won’t want to emulate Greece. But, with cuts aplenty expected in the upcoming budget, it’s doubtful that HMRC will have fresh funds to tighten its lax grip on IR35.

So what’s taking IR35’s place?

No one can say for sure that SDC will usurp IR35. The Supervision, Direction and Control policy in itself is ambiguous. As Keeble points out, we know that SDC will affect umbrella workers. But who’ll be responsible for its implementation?

Will the recruitment agency have to categorise the level of supervision each job invokes, risking putting off contractors if the assignment decreases potential benefits? Will the client/employer have to decide and face similar barriers? Is the client even interested in how a contractor pays themselves, just so long as they can complete their assignment?

It almost seems as if the taxman has seen the landscape changing and deployed the ostrich defence mechanism. Thousands and thousands more people will become self-employed as how we work changes. And HMRC knows that they’ve got to change, too, but perhaps don’t know how.

The way we work is changing; don’t fudge it

There’s simply no need for a large percentage of contractors and freelancers to go to site, any longer. The cloud, desktop software, Android apps – they offer tremendous real-time connectivity.

Being available for your client without having to hike across the city has rendered once in situ roles remote. If anything, this remote working helps negate the impact of restricted travel and subsidies that all the fuss was about earlier this year.

The key will be in how the taxman defines the remote workforce, compared with contractors who have to go to site. If someone works from home, irrespective of relationships, can anyone raise a convincing argument for them being an employee?

Once that’s established, it will give clearer guidance on how to assess on-site contractors. HMRC will have something to compare the UK’s temporary workforce against.

Going after low-hanging fruit is not the answer

At the minute, the taxman seems to be in denial, hanging on to beliefs that old-school classification remains valid. Comparing someone prepared to set up their own limited company with someone reliant on an employer working out their PAYE is like comparing apples with oranges. And as Greece has found out, oranges are not the only fruit.

What is certain is that Chancellor Osborne won’t want any bad apples in our barrel. We must preserve the reputation that genuine contractors have built whilst helping nurture the seed of the UK’s economic recovery. But until there’s clear definition of their role, the whole system remains exposed to the suspect few who are rotten to the core.

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HRMC to scrap Business Entity Tests, contractors rejoice


In news that falls under the “it’s about damned time” category, Her Majesty’s Revenue & Customs has decided to scrap Business Entity Tests for IR35.

Contractors are practically giddy with the news that BETs are soon to be no more, especially considering how shedloads of firms have been using them incorrectly. While it will be some time until HMRC dismantles the much-maligned test, the death knell for BETs has been sounded: next April will see them rubbed out of existence.

We all owe a massive debt of gratitude to the IR35 Forum, the focus group that made the recommendation to the Government in the first place. Not only that, but somehow somewhere a minister was listening to the IR35 Forum for once. If you ask me I’ll be going down to my local and raising a pint in its honour tonight.

For what it’s worth, the BET’s time has come, and then some. BETs have been used wrongly by many public sector clients to establish employment status when it came to its contractors. The whole process was just so wrong-headed that even the taxman saw that something needed to be done; the abolition of the tests, which is exactly what the IR35 Forum suggested, was seen as the best and only way to fix the problem.

Of course now that BETs will be a thing of the past by next April, it’s entirely possible that these same clients that tried to use them to establish employment status will just find some other tool to misuse and mangle. Surely there is a bit of a gaping hole left by the removal of the tests, and right now it’s unclear what HMRC will institute to fill this new gap. It’s not even clear if there will be new guidance on the issue to begin with, let alone a replacement put forward by the tax authority.

Honestly, HMRC has had a devil of a time trying to get IR35 across to normal Brits that don’t have an advanced degree in accountancy. To its credit, the taxman said it would rather spend a bit of time, effort and cash making IR35 clearer to everyone instead of investigating possible violations and collecting unpaid taxes. Yes, I know – I’m skeptical too, but let’s not forget that HMRC is technically on our side. Well, sometimes at least.

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Self-employment to become norm by 2020?


Self-employment, either through freelancing or working as an umbrella company contractor, could become the new normal by the end of this coming decade.

Or at least that’s what major contracting site Elance says in its latest research study. The site conducted a poll of new graduates, discovering that more than 8 out of every ten feel that it will be completely normal to work in self-employment by 2020. Additionally 90 per cent of survey respondents said that working for yourself is more rewarding than a more traditional permanent employment relationship.

This doesn’t surprise me in the least, especially when there are independent reports revealing that the highest paid freelance workers in the UK earn something like three times what a typical employee would earn, give or take regional differences.  By and large the Government is responding to the new trends as well, especially with the new Budget announcements referring to how more and more effort is being made by Her Majesty’s Revenue & Customs to ensure that everyone who says they’re self employed isn’t just doing so in order to get around tax avoidance rules. HMRC is indeed increasing their investigations into freelancers and contract workers, as last year alone saw more than 250 IR35 cases investigated – a massive jump from the less than 60 investigations that occurred the year previous to that one.

Still even with the heightened scrutiny of the Government I doubt that it’s going to do much to dissuade new graduates from seeking employment opportunities through freelancing or working for an umbrella company. The allure of deciding your own hours and in many cases being able to work from the comfort of your own home is strong, as is also not being beholden to one employer or company for your livelihood. While it’s true that many self-employed need to work harder to find projects to work on, with the skills shortage wreaking havoc with the country at the moment a skilled and qualified contractor usually has their pick of positions. While this won’t last forever of course – eventually either the workforce will increase the relevant skills needed to satisfy demand or these positions will be outsourced elsewhere, leading to a drop-off for freelancers as well as permanent employees – people still are pointing to self-employment as the way to go for the newest crop of graduates both now and in the immediate future.

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PCG calls for contractors to support Small Business Saturday


Whether you’re a freelancer or an umbrella company contractor it’s in your best interest to support Small Business Saturday, says one major industry body.

PCG came out in support of Small Business Saturday in a big way recently, and with no time to spare considering that the event is today. Aimed towards highlighting just how important small businesses are to the betterment of the UK economic recovery, Small Business Saturday should naturally include the accomplishments of contractors as part of the celebration, the campaign group said, especially in light of how the British economy benefited from some £95 billion in revenue last year thanks to freelance workers.

Now I’m all for solidarity within the ranks – we need to all pull together or we’ll pull apart, and so on and so forth – but isn’t this just a little bit of an example of PCG preaching to the converted? I mean let’s face it: freelancers and contractors already support small businesses, as SMEs make up a large proportion of the kinds of clients that these individuals complete projects for on a regular basis. Garnering the support of one another is all well and good, but don’t we need as a community – if indeed freelance workers and contractors are going to be welcomed with open arms into the SME community – to appeal to other sectors for more support, most importantly the Government?

It seems like the Government – specifically the Treasury – is constantly having a go at SMEs and contractors even as it lets large-scale corruption slip by unfettered. How many IR35 investigations have contractors had to endure, even when they were in no danger of being guilty of using disguised employment to avoid paying their fair share of tax, simply because Her Majesty’s Revenue & Customs is too busy being afraid of going after the blatant tax evasion of large multinationals? Far too many, if you ask me; for what it’s worth, we need to get the Government on our side for once and not waste so much time patting each other on the back for a job well done.

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HMRC finally takes pity on the poor umbrella worker


Tax guidance for self-employed Brits such as umbrella company contractors is set to finally get a bit more easy, thanks to a new initiative.

Her Majesty’s Revenue & Customs has finally admitted that it’s simply too hard for freelance workers to access tax guidance. To that end, the taxman is going to slowly begin to make it easier to not just browse through the HMRC guidance website but to print, search, and view as well. Some 100,000 webpages will be transitioned over to a new gov.uk website steadily from now to sometime in 2014.

Of course, there’s a fly in the ointment when it comes to this new plan: you’ll still have to visit the existing HMRC website in order to use any of its other online services. That’s right, you still won’t be able to file an online tax return without going to the old site.

For what it’s worth I do appreciate the lengths the taxman is going in order to make things easier when it comes to tax guidance. Still, is it too much to ask for to have everything in the same damned place? I mean let’s be honest here – does it matter how well-organised this new information is when you’ve still got to go to the old site to get the lion’s share of your work done? It seems mad to me!

And let’s not forget that much of the so-called tax guidance for contractors is about as a screen door on a submarine. I mean shall we so quickly forget the massive IR35 debacle that we all had to deal with back when HMRC updated its guidance but neglected to actually change any relevant law? If you don’t have any recollection, let me jog your memory: suddenly you were, according to the guidance, at a higher risk for being found within the disguised employment rule than you were before the guidance changed, despite the fact that the laws had remained the same.

So let’s reiterate: the taxman is putting all its tax guidance into one new, more easily accessible place. This is good – except when HMRC gives us wrong or inaccurate information that doesn’t even match up with existing regulations. And let’s not have any sort of false hope here – we’re talking about the Government. We’re lucky they all don’t light themselves on fire at the local garage in a freak petrol fight accident.

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New Best Practice Charter gains traction among umbrella firms


It hasn’t been long since the new umbrella contractor trade industry body known as All Umbrella Companies Are Equal has launched, but i’s making serious waves.

The industry reformer’s Best Practice Charter, a document designed to provide more support for umbrella contractors, might have been met with skepticism initially, but the contracting industry has actually begun to adopt the tenets put forward by the charter. In fact, the ‘Straight Talking’ motto of the charter has been adopted by no less than 26 firms working within the umbrella company sector in just a month or so!

It’s an all-too common refrain nowadays: contractors have been running into serious tax bills as high as five figures or even more because of less-than-honest umbrella companies operating unscrupulous tax avoidance schemes. Her Majesty’s Revenue & Customs has placed this sort of activity square in its sights, and many contractors are ending up facing HMRC’s wrath for participating in illegal tax avoidance schemes that they didn’t even realise they were involved in.

The problem here is that there’s no industry body to regulate umbrella company behaviour. HMRC doesn’t have a say in approving umbrella companies, even though you may have heard otherwise; the downside in this is that contractors are left out in the cold when it comes to choosing an umbrella company that’s not going to end up causing more problems down the line; likewise operating through a personal service company is less of a viable option as it was in the past, since the taxman has had a bee in its bonnet about IR35 enforcement over the past few months as well.

This is where All Umbrella Companies Are Equal has decided to step in by campaigning for better transparency when it comes to umbrella company practices. The website’s forums are public and are for the discussion of umbrella company contractor experiences, making it easy for those looking for specific information about a particular umbrella company and its practices without actually becoming a member.

Meanwhile, the Best Practice Charter put forward by the industry body, which was drafted with HMRC guidelines in mind, could provide a framework for a regulatory body somewhere down the road. This is a fantastic development in my opinion; I can only hope that more and more umbrella companies join the ‘Straight Talking’ movement and adopt the charter in order to safeguard the financial health of their member contractors.

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Not enough help for contractors in Budget, says REC


The Budget may have some positive things in it to look forward to, but one recruitment industry body says that more could have been done for contract workers.

The Recruitment and Employment Confederation spoke out in protest at George Osborne’s new Budget, remarking that the British economy simply won’t see the growth and recovery it so desperately needs unless limited companies, freelancers, and umbrella company workers are given more support. The definition of who is or isn’t ‘self-employed’ should have been overhauled in he Budget to help contract workers better navigate the sometimes Byzantine labyrinth of tax law in the UK, according to REC, and the fact that the incredibly murky guidance on IR35 hasn’t been suitably overhauled, I’m inclined to agree with the REC’s protests.

The guidance for determining if you as a contractor or a freelancer need to ensure you don’t fall under disguised employment rules is incredibly obtuse at the moment, with the current system muddying the waters as to whether or not you need to jump through the hoops of IR35. On top of that, many contractors have said that they have worries about whether they’re filling out their self assessment forms properly – which might be good for the nation’s accountants, but small businesses and freelancers often don’t have the room in their own budgets to pay for accountancy services if they can’t help it.

The REC also said that it had serious concerns about the state of the information technology sector as well, in particular the fact that there seems to be a serious shortage of qualified IT contractors working in the UK. On top of that, the types of positions being offered to IT professionals are often calling for skill sets that currently don’t exist in high enough numbers, which creates the paradoxical situation of there being both not enough positions open and too few at the same time – it’s a bit mind-boggling but it starts to make sense if you squint and tilt your head to the side for a few moments.

The REC would like to see more IT sector support, and I can’t blame them in the least. Depending on how the Government could possibly go about doing so – perhaps by offering tax breaks to firms that engage in training IT staff with the skills they are lacking at the moment – there could be some room for growth in this area, but the jury’s currently out on whether there’ll be any help from the public sector towards increasing IT contracting opportunities.

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Some public sector contractors to be spared from IR35


It looks like not every public sector contractor will have to live in fear of falling prey to an IR35 compliance investigation, it was recently revealed.

Earlier this month, it was revealed at an Association of Professional Staffing Companies meeting by a Treasury official that while all public sector departments include terms in their contracts that provide them the right to demand a contractor, freelancer, or umbrella company worker lies outside the scope of IR35, there is no expectation on the part of the Treasury that every hiring manager will call for these assurances in every situation where there is a worker off-payroll. The Treasury representative instead remarked that the most common occurrence will be hiring managers sampling a fraction of their contracted workers.

APSCo reported on the assurances given by the Treasury as it worked to dispel the perception among freelancers working public sector contracts that every single one of them would be subject to scrutiny under the disguised employment legislation. In fact, the industry body explicitly told its members that the Treasury neither expects or demands such occurrences, though there were no guidelines forthcoming on what percentage of public sector contractors would be subject to IR35 scrutiny.

This will spell massive relief for many nervous freelancers who have been worried that the Treasury will be investigating their contractual relationships with with public sector clients, as the Government has expressed a desire to crack down on disguised employment in an effort to regain tax revenue lost from lax IR35 enforcement.

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The Midlands are where it’s at for temporary work


If you’re a temporary worker, you can’t do better than looking for contract work in the Midlands and the south of England, according to last month’s figures from the Recruitment and Employment Confederation.

The REC says that contract billings filled by freelancers and umbrella service company workers rose in both the south of England and the Midlands in July. However, it’t not all roses, according to the REC, as the job gains in those two regions were offset by declines in the north of England and the capital..

The public sector continued to strip back their demand for temporary workers as budget cuts take their toll, offset by renewed interest by private industry. The medical, construction, and engineering sectors were the big drivers of the interim working economy.

The contract working sector truly is the one bright spot in a UK economy that has since slipped back into a double-dip recession. The Summer Games have also been less than stellar as a means to kick-start economic growth, as anywhere outside East London is a virtual ghost town, leaving business owners scratching their heads and wondering where all the blasted tourists are.

Contractors are the only people to win big so far, especially those who use umbrella companies to manage their affairs. These firms take the hassle out of PAYE and any other taxation issues, making it easy to focus on the project instead of getting bogged down in the minutiae of the taxman’s demands – IR35 regulations alone can send many freelancers into paroxysms of despair.

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