Crystal Umbrella

We are delighted to announce the winner of our internal customer services award, GEM, as Lisa Wrangles. Although not operating in a ‘front line’ role, Lisa has demonstrated a pure focus on the customer. Quietly, steadily and focused, she acts in a professional manner at all times, which are core competencies of the GEM brand. Praised by both internal and external customers, Lisa has been a regular nomination for the GEM quarterly awards, and thoroughly deserves this commendation.

Many congratulations to Lisa and we endeavour to deliver even more energy behind GEM in 2009

Several users visiting the HM Revenue & Customs website used for self-assessment tax purposes have issued complaints that the site is not secure.  Users note that when they use the website their password is actually displayed as a part of the URL which is shown in a web browser’s address bar.

The security risk is that people can take the password and use it to access someone else’s tax information which is located on the site.  The field for a person’s username will auto-complete the name once you begin to type it.  Because the username and password are so easy to obtain it could pose a real security issue for anyone that chooses to use the site.

To make matters worse, any time you print a document from the website the URL is also printed at the bottom of the page.  Because the password is clearly visible in the URL, anyone that found the piece of paper would also find the person’s password.

 An expert on security at Cambridge University, Richard Clayton, noted that the password issue was not a common practice.  He said “Seeing someone’s tax return is not the same as accessing their identity, however. Though it could be a step towards doing that.”

HMRC has defended the website and has denied that a password is revealed in the URL.  Instead they said that it was actually a unique taxpayer number that was displayed, and that this had nothing to do with a person’s password or username.

Source: www.computing.co.uk 

With effect from the 27^th January, HM Revenue & Customs has decided to reduce the interest that they pay out to 0%.  People that have made overpayments to HMRC in regard to their income taxes, National Insurance contributions, stamp duty, and even capital gains taxes will no longer collect any interest on the amount before it is refunded to them. 

Before this change was made by HMRC, a person could expect interest at the rate of .75% to be added to any overpayment amount that they might have made.  The Bank of England’s recent decision to reduce the base rate is believed to be the reason for HMRC’s decision to pay 0% interest.

People that find themselves in the position of owing money to HMRC will still have to pay interest.  The rate of interest that they will owe has dropped a bit to 3% from 4.5%.

The inflation rate right now is estimated to be about 3.1%.  With the interest rate being paid by HMRC now at 0%, people will actually experience a decrease in the value of the money that they are owed while they go through the refund process.

 A partner at a tax firm, Rupert Shiers, noted that “This [reduction of interest] will cost companies who have to estimate their tax and pay it upfront throughout the year to HMRC a lot of money.  These companies frequently find that they have overpaid HMRC and the interest payments are important to them.”

Source: www.pressassociation.co.uk

Many tax payers using HMRC’s online self-assessment filing facility may have fallen victim to a computer glitch.  The system had an option available for taxpayers that allowed them to choose to pay their taxes by way of a special PAYE tax code. 

It is thought that hundreds of people decided to select this option.  The problem for HMRC seems to be that this option was supposed to only be available until the end of December 2008.  Unfortunately, HMRC can’t seem to figure out how to make the option unavailable so anyone that visits the site will see it as a valid option to choose.

Because the option appears to be valid, people may select the tax payment option without ever knowing that there is a problem.  No taxes would be removed through PAYE and a person could be liable for interest on the amount of taxes that were due.

 HMRC has said that anyone that ends up in this type of situation will not be penalized for their mistake.  According to HMRC “If customers use this option believing that having their underpayment coded out is still a valid option, we will show any underpayment in their PAYE tax code if they contact us and ask us to do so.”

It was also noted by HMRC that they will be contacting people who selected this option in early February.  Many people have already contacted HMRC in regard to the issue and have had the problem taken care of.

Source: www.bbc.co.uk

This spring will be the tenth anniversary of IR35 which represents a budgetary press release.  The purpose of IR35 is to prevent people from using things like personal services companies as a way to avoid paying their National Insurance Contributions.  When freelance contractors first heard about IR35, many of them expressed outrage in regard to the measure.

 As a result of the chaos that IR35 produced, a lobbying group called ‘Professional Contractors Group’ was created.  John Brazier, Managing Director of PCG has spoken about the challenges that contractors face in terms of dealing with the rules that correspond to IR35. 

 Brazier said “More and more it seems that the way one operates on the ground is an issue. You might have a very good contract which ticks all the right boxes in terms of putting your status outside of the remit of IR35, but if the operating procedure is different once you’re working directly with the client, you have to be careful.”

 Brazier noted that IR35 was not going to disappear and that it was important for contractors to learn how to work with the measure.  He also said that he felt like the contracting industry was sometimes overlooked by the government and not necessarily treated as fairly as other industries.

 It is also possible that as the economy continues to worsen and jobs disappear, more people will turn to contracting.  Time will tell what kind of impact this might have on the contracting industry during the year ahead.

 Source: www.accountingweb.co.uk

While the year of 2008 might have been a bit bumpy, many contractors are looking ahead to 2009 with great optimism.  An accounting group known as JSA which works with contractors conducted a survey and the results were quite surprising.  Nearly 40 per cent of contractors that participated in the survey said they are looking to make more money in 2009 than they did in the previous year.  This is despite the fact that the economy is showing few signs of improving anytime soon.

The survey noted that more than half of respondents thought that it was possible that they could lose their current contract, but felt they would easily be able to replace it with a new one. 

Rick Flood who is the Sales and Marketing Director with JSA said “Despite the tide of gloom that is encircling the world at the moment, freelancers tend to have a level-headed resilience and positive attitude that is a basic requirement for survival when you are literally out there on your own, with none of the support mechanisms of full time employment.”

The optimism expressed by freelance contractors was particularly surprising because the majority of respondents expected there to be fewer jobs available to them overall.  Around 55 per cent noted that they were hoping to work more hours in 2009 than they did in 2008.  One notable statistic that the survey produced is that nearly 95 per cent of respondents are confident in their abilities.

Source: onrec.com

During a great portion of 2008 contractor rates continued to fall.  By the last few weeks of the year it was looking like those rates were finally beginning to level out.  A report released by the Sanzar Partnership, which provides different types of contractor payroll services, showed that compared to the same period last year the number of new contracts was down by 21 per cent.

 The Chief Operating Officer of Sanzar Partnership, Chris Connor, noted that many employers seeking contractors are becoming very sensitive to cost.  He suggested that it would be important for contractors to take a close look at their tax liability to see if they could reduce the overall amount.  This would allow them to essentially bring home more money without needing to increase the cost of their services in order to secure work.

 Connor did add that “Contractor rates have been consistently squeezed as the recession takes a hold and all indications for 2009 are that rates will remain low. It’s far too early for contractors to think about holidays in the sun and hiking their rates back up.”

 There are also new reports that suggest the UK could experience job growth despite the downturn in the market that has occurred recently.  John Denham, Secretary of State for Innovation, Universities and Skills, said that training is essential to workers.  Having the right training is a great way to help ensure the security of your job during difficult economic times.

Source: PRWeb.com

Freelancing and contracting can be a very rewarding career move in terms of freedom of work, schedule and location choice. As well, it can be financially rewarding. However, what that takes is to avoid some of the common financial mistakes that freelancers and contractors make.

1. Skipping a long-term business plan. As a freelancer/ contractor, you are running a business. Every business needs a plan, especially because it makes concrete in your mind what you are working towards.

A typical business plan is for five years, but even a two- or three-year plan is better than nothing. Determine whether you want to offer more services (possibly outsourced), hire employees (or other freelancers), etc. What gross income are you aiming at? What do you need to do to get there? Will you need to market yourself more, and if so, how will you do it? What will it cost you to build your business towards your goals?

It’s easier to determine what your ongoing efforts should include (finances, skills building, networking, client building, etc.) if you know what you are aiming for, business-wise, in X years time.

2. No long-term personal planning. You are your own employee. So in addition to a business plan, you need to have a long-term personal plan. This includes deciding whether you’re going to pay yourself a salary and when, how you’ll invest long-term for your retirement funds, how to make your money work for you, and whether to build multiple streams of income.

3. Poor business practices. How you offer your services might affect whether or not you gain new clients and projects.

• Follow up with existing clients for additional work.
• Balance your workload with both large and small projects. This builds your reputation with small clients who might someday come back to you for bigger projects. Shutting them out altogether limits your client base. On the other hand, each project takes a certain amount of “ramp up” time. Taking too many small projects can end up fragment your overall work time and end up costing you in effective hourly rates.
• Your business plan should determine what your services are and how you offer them. For example, do not always charge by the hour. On one hand, hourly rates are very clear, but on the other hand, if you have a relatively high rate, you might be “losing” potential clients who think you’ll be too expensive for them, if a project goes over time. A project rate is also beneficial if you are quick to complete certain types of work, or if you intend to outsource some of your work.

4. Not outsourcing work. Let’s say that, in two years time, you’ve decided in your business plan that you want to offer additional services. If this means that you cannot do the work, then you have a few options.

One option is to hire employees with suitable skills. Another is to outsource the work to a reputable company or a freelancer like yourself. Just be sure to avoid common outsourcing mistakes.

Outsourcing means you have less of a financial and management commitment than hiring employees. You also have both local and global choices for personnel – who’ll be relatively easy to find via the Internet. What’s more, you can outsource a great deal of business functions, including tax filing assistance, legal services, payroll and finance management, sales and customer support.

5. Not gauging performance. Whether you outsource or not, there are your own work tasks. How quickly are you getting them done? Rushing work at the expense of quality is obviously not recommended. However, to be efficient, you need to set and track your milestones, to gauge your actual performance and effective average hourly rate.

One tip: don’t focus on daily performance in terms of work done and billable amounts. Determine a daily average based on weekly and monthly totals. You simply cannot be productive to the same extent every single day.

6. Having poor work flow. Setting and tracking your performance should show you if you have poor work flow. Is work taking longer than you think it should – or longer than you can afford to have it take?

Often, being organized makes a tremendous difference in productivity. A lot of freelance work is creative in nature. While creativity itself is often an unstructured activity, productive creativity requires disciplined organization. The more organized you are, the greater periods of productive creativity you’ll have. That means either or both of higher billables or effective hourly rates.

7. Not forecasting cash flow. Because freelance work often follows a feast or famine/ ebb and flow nature, it’s critical to your financial well-being to forecast your cash flow as far into the future as possible. It makes budgeting easier, which allows you to smooth out the financial bumps. Use a spreadsheet tool such as Microsoft Excel, Open Office, or Google Spreadsheet to forecast, or outsource your finance management tasks.

8. Not factoring in payment delays. Factoring payment delays is one facet of forecasting cash flow. Consider not only the amount of time before you receive a check but the time it takes to cash into your bank account. If you are using an online payment processor such as PayPal, factor possible transaction fees as well as time to transfer into your bank account. Of course, if you have an emergency fund, it’ll help keep you operating.

9. Not building an emergency fund. Part of your budget should have an allowance towards an emergency fund. If you can build up at least three months of operating expenses, do so. Six months is even better. The more family members who rely on your income, the more months of operating capital you should try to save up. Having this emergency fund means not having to use relatively expensive credit/ loans, if an emergency occurs, thus saving on interest charges. What’s more, your funds will be earning interest for you in the meantime.

10. Not consulting the specialists. All freelancers and independent contractors should consider working with an umbrella company.  This removes all of those niggling worries about whether or not you have put away enough money to pay your tax bill, knowing what is tax deductible, what receipts need to be kept and so on.

11. Not protecting yourself. Protect yourself business-wise in a number of ways:  (1) Collect partial/ full fees upfront from a new client. This weeds out any client who might present payment difficulties. When you get to know a client better, you can reduce the upfront fee – or eliminate it, if you prefer.  (2) Have liability and any other suitable insurance. Some large corporations actually require contractors to have liability insurance.

12. Being financially wasteful. Bootstrapping is an ideal way to build a business on minimal cashflow. The principles are simple:

• If you don’t really need it, don’t buy it. If you need it, can it wait for a while? If it can’t wait, can you get it free somewhere, or for less.
• Take advantage of freebies. For example, free or trial versions of software that you need for your operations.
• Try to use cash for everything you purchase, instead of credit. (”Cash” includes bank card/ debit and non-postdated cheques.) If you cannot use cash, pay off debt balances before interest charges kick in.
• If possible, lease instead of buying. If you are leasing, items necessary for your business, you’re more likely to be able to write them off for tax purposes than if you buy.
• If you need an office, make an optimal office selection. A new option is a local “coworking” office, where you share with other freelancers/ contractors – in case working at home is not an option for you, and a regular office is too expensive.

Keep in mind that bootstrapping is not the same as being overly stingy. Bootstrapping is a good business practice, but it’s not about anxiety over finances. Get what you do need – just try to your best to have the smallest daily/ weekly/ monthly cash outflow that’s possible, without significantly hindering your operations.

13. Lacking in self-discipline. Having to manage yourself is not something everyone is used to. Discipline of work flow and administrative tasks is not the sexy stuff about freelancing, but it’s crucial to working smart and earning a higher average rate per hour.  Creating a higher effective rate leaves you the luxury of doing additional work (i.e., earning additional income) if you want to, and knowing that you can handle the work load.