Crystal Umbrella

Liberal Democrat MP Lorely Burt’s Early Day Motion to abolish IR35 and “remove unnecessary barriers to enterprise” has been wholly welcomed by The Professional Contractors Group (PCG). John Brazier, managing director of PCG, expressed gratitude toward Burt on behalf of the group, which represents the UK’s freelancers.

The motion was tabled by Burt in an effort to eliminate the distress caused by IR35 to the UK’s freelancers and contractors, suggesting that the effort contractors put into proving their legitimacy in HMRC investigations could be better expended at work earning more money to put into the economy.

Burt told Consultant News: “PCG has made me aware that of the 1,468 IR35 cases known to them, 1,462 have resulted in no extra tax being owed and there is no evidence that the tax is raising any money for the Exchequer. In light of the current economic difficulties, I support PCG and its members and have raised this EDM to press the Government to abolish IR35 at the earliest opportunity to give freelancers a fair chance.”

PCG has over the last ten years continuously appealed to the Government to repeal the tax law, considering it to be one of PM Gordon Brown’s worst mistakes.

Said Brazier: “I would urge more MPs across all parties to support the Motion to send a clear signal to Government that it must act now, acknowledge just how damaging IR35 is to freelancers and the UK economy and abolish it.”

Cost-conscious firms have stated that their dependency on freelance IT contractors, who are charging at a premium, has crippled their operations. Research from IT consultancy Morse shows that most IT directors feel their IT contractors are being paid too much by the company, and ‘flexible resourcing’ could offer a cost-efficient alternative.

In a recent survey conducted by Morse, over 70% of the 200 IT directors who participated said they recruit IT contractors when they have skills shortages, as the downturn has limited the firms’ ability to recruit full-time staff. Furthermore, almost the same number of IT directors expressed their regrets for becoming too dependent on contractors just to bridge the gap, despite knowing that their current ones were overpaid. Almost half of the IT directors said they would prefer to hire an extra permanent employee over a contractor, yet they know that the costs involved can make this unfeasible. Morse also suggests that, in order to cost-effectively access skills, several firms have started to examine the benefits of ‘flexible resourcing’ as an option to recruiting IT contractors. Moreover, freelancers’ contractual commitments indicated a strain on IT budgets, which held back firms from benefiting from new income generation or efficiency savings.

Mike Devlin, director at Morse, said “…employing IT contractors can help organisations to fill skills gaps immediately. However, it can also make the IT department less flexible and unable to respond to the changing needs of the business.” He added “Organisations now have to pay a premium for their skills and experience. Unfortunately, this expense comes at a time when many businesses need to make the most of every penny.”

In order to continue to offer superior service that focuses on ensuring the highest levels of customer service are adhered to, Crystal Umbrella is delighted to announce the launch of its new Online Web Portal. Designed to ensure that Contractors have complete control and flexibility over their transactions, they will be able to submit instant timesheets and expenses, along with other documentation, and receive access to a wealth of information that will only help to make the contract life cycle easier.

“The Portal will give Contractors complete control over their contracting needs and communication requirements, ensuring that mission critical documentation is submitted and received at the touch of a button,” explains Donna Duckworth, General Manager at Crystal Umbrella.

The interactive member’s area will allow Contractors the flexibility and power to manage their Crystal account, wherever they have an internet connection. Whilst further enhancing the service commitment offered by Crystal Umbrella, it will compliment the work which their dedicated Client Services team continue to provide to those who prefer that personal touch.

“This launch is phase one of an exciting new service offering with the Online Portal and we can expect to see phase two launched shortly, offering similar services for Agencies, representing a fully interactive and dynamic service for both our Contractors and Clients alike,” says Duckworth.

For more information on the Crystal Web Portal, please call 0800 848 8888.

The number of non-EU IT workers arriving in the UK has tripled since the dotcom boom. Statistics uncovered by the Association of Professional Staffing Companies (APSCo) under the Freedom of Information Act, show that the rate of foreign (non-EU) IT workers who entered the UK last year has increased almost three times since the onset of the current recession.

The data shows that from 12,726 in 2000, the work permits issued to IT workers from non-European Union countries increased to 35,430 in 2008. APSCo adds that the number continues to increase significantly despite the current economic situation, which has led to thousands of UK IT workers losing their jobs. However, the statistics uncovered by recruitment trade body APSCo also revealed that the number of non-EU IT workers coming to the UK in 2008 decreased by 8% from its high point of 38,450 in 2007.

APSCo also states that the data indicates that the new points-based immigration system introduced in 2008 seems to have very minimal effect on minimizing the entry of foreign (non-EU) IT workers coming to the UK. The vast majority of non-EU IT workers (80%) coming to the UK are on intra-company transfers, through which companies move IT workers between offices in different countries.

Ann Swain, Chief Executive of APSCo, says: “It seems crazy that with the economy in a severe downturn and thousands of IT workers having already lost their jobs we are still bringing three times as many foreign IT workers to the UK than during the dotcom boom when we had a chronic skills shortage.”

It has been 10 years since the United Kingdom introduced the ‘IR35’ tax legislation through a press release issued by Her Majesty’s Revenue and Customs (HMRC), the British Government’s non-ministerial department responsible for collecting taxes. IR35 ensures that so-called ‘disguised employees’ (contractors and freelancers) are subjected to the same taxation laws as people who do similar work under Pay As You Earn (PAYE) conditions. PAYE pertains to the amount collected from the employees by their employers on behalf of the government.

IR35 has been criticised in an article posted on 9^th March entitled, ‘Ten Years On and IR35 Tax Still Damaging the Economy’. In the article, the leading business representative group, Professional Contractors Group (PCG), discusses the disadvantages of IR35 and why the government should eradicate it.

PCG condemns the failure of the government to abolish the legislation. According to the group, the law damages the economy, and freelancers continuously face costly and stressful IR35 investigations. PCG also says that the government has already admitted its unsuccessful implementation of the law.

According to PCG, the problem of ‘disguised employees’ needs to be addressed by employment law, rather than by tax law. Such a law must recognise that freelancers and contractors are in business on their own account. John Brazier, a member of the group, commented that IR35 remains one of the most ill-conceived tax laws. PCG calls for the law to be repealed and for political parties to support its abolition. The continuous implementation of the law, PCG goes on to say, is an affront to the contractors and freelancers who give an invaluable dynamism and flexibility to the economy.

· Improving affordability helps new and existing buyers

· House prices fell by 1.8% in February

· More cuts in base rate expected

Falling rates reduce existing variable rate borrowers’ typical payments by a third and new buyers see significant improvement in affordability

Commenting on the figures Fionnuala Earley, Nationwide’s Chief Economist, said:

“The price of a typical house fell by a further 1.8% in February, bringing the annual rate of change to -17.6% and the price of a typical house down to £147,746, from £179,358 this time last year. Sharp cuts in interest rates have helped affordability, but have not yet affected housing market confidence sufficiently to boost the levels of new transaction activity or slow the pace of house price falls. Early signs of increased interest in housing, as reported by the pick up in new buyer enquiries, have yet to filter into sales, but do suggest that falling prices and interest rates are raising curiosity now, which could flow through quickly once confidence returns.”

The exact reasons for why a person might be investigated over their IR35 status are not actually known by the public. What is known is that once people are suspected of avoiding taxation through IR35, HM Revenue and Customs has a couple of different ways in which they can proceed.

Any contractor could potentially have their IR35 status investigated by HMRC through a random audit of their tax return. This would mean that the entire tax return submitted by the contractor would be viewed in detail. Contractors may also be forced to provide any documents that might be relevant to the tax return as well.

Another way in which HMRC can investigate an IR35 violation is based on risk assessment. When asked how HMRC decides who is investigated thorough this method, a spokesperson said “Any individual who provides his/her services through a service company to an end client potentially falls within IR35. HMRC seeks to narrow those cases subject to investigation by considering a range of factors, including, but not exclusively, sectors, engagement patterns and the nature of the service company.”

Beginning in April, there will be new rules for IR35 employees. It is not thought that these changes will have any effect on how HMRC finds those contractors who might not be in compliance with IR35 regulations. In many cases HMRC can easily identify contractors who might be acting as a disguised employee by simply examining their account activity around the time that tax returns are due.

Source: www.contractoruk.com

The Chancellor of the Exchequer made it clear in his recent Pre-Budget Report that he would leave the current rules on tax relief for travel expenses unchanged. However, he also promised that the HMRC will refocus its efforts to ensure that the current regime is properly applied. He added: “If compliance does not improve, the Government may return to
this at a later date.”

The message to the industry is clear. We must clean up our own stables or face action that could undermine the industry. The easy option is to go on as before, hoping that the government has bigger fish to fry and won’t do what it has promised, but this may leave many stranded and again non compliant.

The AEMC, along with Crystal Umbrella & other members at the forefront have decided to be proactive and seek to build a strategic relationship with ministers and HMRC. The AEMC also wants the trade bodies’ presence to increase the understanding of the industry and its issues amongst parliamentarians of all parties.

It has therefore been decided to engage the services of a political adviser, Gary Kent, a veteran insider in Westminster who has worked for 22 years as a researcher, columnist and lobbyist for cross-party causes.

Gary Kent said: “the AEMC now has the opportunity to build itself as a respected trade association that can influence opinion-formers and decision-makers that its activities benefit temporary workers and the Economy as a whole. The sector must demonstrate that self-regulation can work for everyone.”

He added: “My aim is to bring AEMC representatives together with Parliamentarians, and others, to make it plain that the AEMC is deadly serious about compliance. It has to prove beyond reasonable doubt that it is willing and able to step up to the plate. Even if the sector wasn’t interested in politics, politics is interested in the sector.”