Crystal Umbrella

The potential perils of IT contracting through limited companies have just been foregrounded by the successful prosecution of an IT freelancer for tax evasion.

IT consultant Stephen Maxwell was found guilty of tax evasion last week after a series of investigations by HMRC. The Revenue’s statement reveals that Mr Maxwell failed to declare income from his consultancy work totalling almost £2 million.

The money was earned between 1998 and 2008 and was channelled by Mr Maxwell into various offshore companies registered in the Isle of Man and Gibraltar. From 2005, the income was paid into his limited company.

Mr Maxwell commanded pay rates of up to £800 per day during the period under investigation, much of it from top City of London firms. He arranged for it to be paid into the offshore firm Gateway 3000 Ltd through several different companies, ostensibly seeking to hide his identity as the final recipient from HMRC.

His decision not to submit any tax returns for his limited company, however, was almost certain to arouse the Revenue’s suspicions. He is estimated to have evaded £623,015 in tax.

Currently remanded in custody pending further reports, Mr Maxwell’s riches to rags story was quickly brandished by HMRC. Revenue spokesman David Odd said that this was a case of “deliberate and systematic fraud.” He added: “Income tax fraud is not a victimless crime and HMRC take a very serious view of anyone who acts in this manner. For anyone choosing not to pay the tax they owe, this case proves that we will vigorously pursue them and bring them to justice.”

Suddenly, PAYE umbrella services seem like the sanest and safest option.

In what was a strong month for recruitment in the IT and Computing sector, umbrella companies are gaining hope that they, along with their contractors, will be able to see a rise in jobs in this sector.

According to a report published by the Recruitment and Employment Federation (REF) at the beginning of April, the IT and Computing sectors saw an eight-month high reached when it came to permanent jobs being made available, representing a significant growth in the industry. As employers face a slowdown in the number of available candidates, more companies could now request the services of contractors as they bid to fill the increasing gaps in their workloads.

Tom Hadley, Director of Policy and Professional Services for the Recruitment and Employment Federation said of the report: “This is good news for job-seekers and a positive indication of increasing employer confidence. Recent tax changes announced in the Budget, the Youth Contract and reductions in red tape for businesses that came into effect this month should further boost employer confidence and accelerate hiring activity. The benefits of flexible staffing arrangements are well established and other REC data provides some positive indications in terms of the outlook for temporary work in the UK.”

With the Recruitment and Employment Federation recently calling on the government to address legislation in a bid to make it more streamlined to help recruitment agencies with the stress they are currently facing when it comes to hiring people, reports are showing that employers are keen to maintain or even increase their temporary workforce.

The customary post-Christmas surge in job vacancies is no flash in the pan, according to new research from recruiters Adecco: billings for PAYE umbrella contractors and permanent jobs alike remaining encouragingly high in February, dispelling fears that January’s high-point was simply a conventional carry-over from the usual Christmas-period boost.

Umbrella companies serving the IT skills market did especially well: ads for both permanent and temporary jobs in IT and telecoms rose in February, indicating a favourable outlook in 2012 for those who earn their living through IT contracting.

Surprisingly, and contrary to expectations, contractor vacancies also increased in the public sector: temporary contracts rose by 2% on January’s total. The general and staffing sector (which includes retail and engineering) also saw a healthy rise in demand for permanent posts of 6%. Traditionally, the January rise in appointments falls off rapidly in February but the Adecco figures offer hope that annual the trend is at last being bucked.

Steven Kirkpatrick, Adecco’s Managing Director, welcomed the figures and maintained that they indicate January’s encouraging results were no mere “flash in the pan”. Rather, they suggest the return of much-needed confidence amongst employers with each passing month.

Mr Kirkpatrick added: “As expected, there has been a slight decline in advertised temporary roles compared to January’s traditional increase. However, the decline is minimal, supporting the results of our recent research which found that companies have handled the introduction of the Agency Worker Regulations very well and have generally found it to have little impact on their business.”

Many jobbing PAYE umbrella contractors will be rather pleased that they chose not to work through their own personal service companies following an ambiguous statement in yesterday’s Budget relating to contractor taxation. Already a chorus of concern has been sounded by a number of prominent industry experts, who fear it may be a knee-jerk reaction to the media feeding frenzy surrounding top civil servants who work through their own limited companies.

No one will be surprised to learn that, as widely predicted, IR35 regulations will remain in place unchanged, and that measures will be implemented in April to improve HMRC’s administration of them. The statement that has squeezed expert adrenals announces that the Government is to consult on “requiring office holders/controlling persons who are integral to the running of an organisation to have PAYE and NICs deducted at source by the organisation by which they are engaged.”

The PCG lost no time in responding to these words, stating that it was “deeply concerned about the ramifications of this proposal on the interim sector and we will seek urgent clarification on what exactly this will mean for freelancers.” The organisation’s MD, John Brazier, said that the plans sounded “ambiguous,” and could have an adverse effect on senior interims. He added that it is “crucial that these legitimate businesses do not suffer as a consequence.”

We’ve recently reported some gloomy news for the IT contracting world, or at least those PAYE umbrella contractors working in banks and financial services who have seen substantial cuts to their pay rates in recent months. However, new research from a specialist recruitment agency suggests that City firms are engaged in a bidding war to secure the talent they need in the IT skills market.

Salaries for senior IT professionals working in hedge fund management have surged by 30% since 2010 and bonuses by 60%, the specialist IT recruiter ReThink reveals.

Commenting on the figures, ReThink’s Head of Financial Services, Fhamid Malik, said “A shortage of candidates has meant that bidding wars for top staff can easily erupt – which can result in base salaries being increased by up to 30% to stop key members of their IT teams leaving.”

The skills that appear to be most in demand are predominantly .Net and C#, but tekkies who can combine sound technical knowledge with experience in trading and pricing analysis are especially sought after. The clamour to keep contractors and other staff with the requisite IT expertise has reached such a point that, in a growing number of cases, bonuses are being paid on a quarterly basis rather than annually, as is customary.

Less encouraging data, however, emerged from the specialist financial services recruiter Astbury Marsden, which paints a rather different picture to the “bidding war” scenario uncovered by ReThink. According to Astbury Martin’s data, cost cutting in the financial sector has led to a surfeit of IT contractors looking for work, who rose by 30% on last month’s figures.

Over the years, PAYE umbrella contractors in the IT skills market have acquired a reputation for their forward-thinking embrace of flexible working arrangements. However, a new study suggests that most of them actually rate job stability most highly in their list of priorities.

Specialist recruitment agency Elan commissioned the survey of 500 IT workers, asking them to rank their top three priorities for moving into a new role. From IT business analysts to those holding support or developer roles, IT contracting professionals are less the adventurous ‘guns-for-hire’ of popular mythology and more the conservatively security-seeking family men and women of everyday life.

Although the proportion of permanent workers who rated job stability as their top priority was highest (83%), a surprisingly high number of IT contractors shared their views – 67%.

The results suggest that contractors and permanent workers alike are being affected by the climate of economic uncertainty that hangs ominously over the UK at present. Moreover, it may also suggest that the IT contracting workforce today is a little older than it was a few years back – people in their thirties with family commitments and mortgages are more inclined to seek work stability than young adults in their twenties.

Flexibility about working hours, however, came in as the second highest priory, with 68% of permanent workers and 60% of contractors choosing it as the ‘runner up’ priority. Both groups selected technical training as their third priority in roughly equal measure.

IT contractors, it seems, are rather more ‘cuddly’ in their approach to working life than their folklore image suggests.

It has been revealed in a new survey that up to three quarters of small business owners find it difficult to go on holiday and leave their work concerns at home. With many freelancers providing ongoing services for a range of companies, sole contractors also feel concerned, finding that they are unable to relax whilst away. Whilst umbrella companies offer the ideal support for contractors, the uncertainty of long-term work keeps many individuals from unwinding fully.

The news comes after Intuit, the accountancy software provider, revealed results of its latest survey. 72% of small business owners worked whilst away, with a seventh admitting they spent less time relaxing than they did working. In addition, 22% of those questioned admitted that their first day back in the office left them more stressed than they had been before going on their break.

With many of these concerns also relating to the freelance market, Inuit revealed that ‘work-cations’ were increasing in prevalence, with individuals going on holiday but taking mobile devices and laptops with them so that they could work whilst away. Managing Director of Intuit UK, Pernille Bruun-Jensen, said “Everybody needs to take time off now and then but our findings show that small business owners never switch off, even when they could really do with switching off. Rather than not taking a break at all, many of them are choosing to take their business away on holiday with them.” With umbrella companies seeing a rising number of people in the freelance field, more people than ever are expected to be indulging in work whilst away.

The NHS is seeking highly skilled specialists in IT contracting working through umbrella companies, according to data from the international recruitment firm Badenoch and Clark.

Contractors in the IT skills market who have knowledge of NHS data systems and SQL server business intelligence are experiencing increased demand for their services, figures contained in Badenoch and Clark’s latest Talent Spotlight reveal. The company’s Operations Director, Mark Gascoigne, says that NHS Trusts based in Birmingham are creating new NHS datasets and are on the lookout for skilled information analysts as a result. The health service needs to develop more robust data warehouse solutions and business intelligence, Mr Gascoigne explained, both of which are driving demand for IT contractors.

In London, numerous NHS Trusts are attempting to complete major projects and are seeking data migration professionals, especially those with testing and training experience in RiO and Cerbner, he added.

Outsourced work for IT professionals may also be more generally on the rise. Technology sector analyst Ovum claims that the utilities sector, which is known to be squeezed for cash, is reluctantly outsourcing IT work in a bid to keep the long-term costs associated with permanent positions to a minimum. Hiring PAYE umbrella contractors and other skilled freelancers is about the only option they have to keep permanent headcounts to a minimum.

The rise in outsourced work is hardly a tidal wave – Ovum’s Principal Analyst Stuart Ravens described it as small but significant – but it is a trend he believes will increase over the coming year. Utilities companies are beginning to realise that outsourcing must be given serious consideration.

PAYE umbrella contractors with expertise in the IT skills market should consider placements with small tech firms, according to one expert who believes they provide exciting opportunities for tekkies.

Ian Hogarth, the Chief Executive Officer of the music website “Songkick,” claims that smaller companies emerging in the technology sector can deliver a stimulating and stable working environment for freelancers specialising in IT contracting. Songkick itself represents one of the success stories for such firms – launched only four years ago, it’s now a thriving enterprise.

But Hogarth’s invitation came with a note of caution: economic circumstances remain extraordinarily difficult for small businesses in particular, and small tech firms have not received sufficient government support at the crucial start-up phase. With government backing, however, he believes they could easily become a highly attractive option for the UK’s best IT talent.

He urged the coalition to do all in its power to assist start-up tech firms to flourish. This would help stop the bigger companies from mopping up all the leading IT talent and help the crucial smaller business sector to drive employment upwards. He said, “We’d like to see the government promote start-ups as a stable, legitimate and exciting option for graduating software engineers.”

Hogarth drew attention to a disturbing fact – even though the UK has some of the finest educational institutions for engineering in the world, most of the country’s top engineering graduates end up joining a management consultancy or a bank. Too many IT graduates think that jobs in software development with a new company are still too risky and they want a more secure option. Adequate government support would dispel this fear, Hogarth believes, and attract talented software engineers – the “lifeblood of tech start-ups” – toward working in new firms.

IT contracting in the financial services sector continues to have decidedly healthy prospects, new research suggests.

The study from the contractor service provider Giant Group suggests that insurance firms and banks are boosting their IT expenditure, a development that hasn’t gone unnoticed by many PAYE umbrella contractors in the IT skills market. A third of IT contractors believe that it will be the financial services sector where most IT jobs will be found in the coming year – a significant rise from the same time last year, when only 8% of those polled felt that way.

The number of contractors anticipating that the public sector will produce the most jobs has virtually halved, plunging from last year’s 17% to today’s 9%. In 2008, the proportion was a positively buoyant 30% but the government’s austerity measures have since taken the wind out of the public sector’s sails. With public sector opportunities evaporating, the finance sector is becoming considerably more important to specialists in IT contracting.

Experience and skills in cloud computing will be especially in demand, according to the Giant Group’s Managing Director, Matthew Brown, who believes the evidence now suggests that banks are “ramping up spending again” after the recession, during which they pulled out of many IT projects.

In addition to efforts to improve productivity through cloud computing, banks also have to deal with new regulations aimed at making them more transparent. Brown believes this, too, is driving demand for IT contractors.

The research heralds a welcome change in fortune for IT contractors, who suffered acutely during the depths of the financial meltdown.