Crystal Umbrella

The Friends and Family Allowance is being effectively removed, no longer to be part of existing claims dispensations on review and barred altogether from new dispensations, HMRC has announced. After a review by the tax office, officials in a recent online briefing said of the FFA that they found it had ‘no legal basis for giving tax relief’.

Effective from April 6, the initiative will eliminate what advisors have perceived to be the most commonly claimed tax-free expenses by those who do not really incur any costs, and is intended to tackle abuse of expenses in umbrella companies by withdrawing the allowance for staff who stay overnight with friends or family.

The FFA will also not receive a scale rate in HMRC’s new benchmark scheme, which brings in “advisory” tax-free rates for employers to reimburse subsistence expenses for their staff. According to Bauer & Cottrell, if the scheme’s rules are applied consistently, there should be no difference between net pay rates outside the fee each umbrella company charges for its services.

SJD Accountancy’s Simon Dolan told Contractor UK: “This is the start of standardisation across umbrella companies which is fantastic news, as it will remove the ridiculous and damaging claims, like ‘increase your take home pay by using umbrella ‘x.’ ”

Umbrella companies are now expected to develop their marketing promotions beyond being “HMRC Compliant”, which should cause them to focus more on what Dolan called “differentiation by service, which can only benefit the contractor”.

Recent research shows that the demand for IT professionals with web expertise is rising steadily, even in the face of the currently difficult economic climate, the most sought-after candidates being professionals with .Net and Java/J2EE skills and web analytics experience.

The study, carried out by recruitment consultancy Robert Walters, also shows that UK firms in 2008 recruited more web professionals than the year before, with the trend set to continue this year. “Overall retail revenues are down year on year but a higher percentage of this revenue is now coming from online,” says the study. “This shift has led to an increased demand for web professionals with exposure to large scale e-commerce platforms.”

While IT experts are in high demand for virtualisation, financial services, web services and compliance as well as implementation in long-term projects in the banking sectors, the perceived risk of moving jobs in light of the present market uncertainty is causing many professionals to shy away from the opportunity due to nervousness, which provides an excellent opportunity for contractors.

“Employers do not necessarily want the commitment of permanent staff, so if things go downhill they will take advantage of the flexibility of hiring freelancers,” said Atsco chief executive Ann Swain.

Overall, contractor salaries have reached their highest level in two years, according to the study, despite rate reductions and cuts in certain sectors. In the six months to February, hourly rates increased by 11 per cent.

Thanks to computing.co.uk for the initial report.

Last week at the Digita annual conference in Coventry, HM Revenue & Customs officials confirmed that the department is planning to launch its own online Corporate Tax filing system this autumn; a service specifically designed for self-employed individuals and smaller companies across the UK.

The motivation behind the planned system appears to be largely due to the tendency of many smaller, unrepresented companies and individuals to do their own accounts rather than using agents. Simultaneous to the launch of the online filing system, HMRC will also provide a new validation service, which will enable accounts to be filed using eXtensible Business Reporting Language (XBRL), an electronic language which is becoming the world standard for handling business and financial data.

With the confirmation of these new initiatives HMRC continues to move steadily forward in direction of the milestones laid down by Lord Carter’s review of the online services arm of HMRC. Present plans include the mandatory online submission of in-year PAYE documents for companies with more than 50 employees – to be effective this month – and from 1^st April 2010 the department intends to phase out hard-copy VAT returns for new businesses as well as all VAT-registered businesses with a turnover greater than £100,000.

HMRC officials attending the Digita annual conference also said that work on the HMRC web portal would continue with a complete re-vamp of the site, which is thought to improve the information flow both ways, also to be introduced this autumn.

April 2009 marks the month that will make effective several changes in the powers of Her Majesty’s Revenue & Customs. These changes will include increased freedom for HMRC to investigate individuals and contractors, as well as businesses. There will also be changes to several tax laws.

Experts, who stress the importance of the taxpayer understanding the eventual implications of such changes, consider that the increased authority of HMRC to investigate people potentially in violation of the tax rules is a very significant change. Simon Wilks, tax partner at the firm Big Four, told Witan Jardine: “No one can afford to stick their head in the sand and think that these changes won’t impact them.”

In addition to these changes several new amendments become effective during the first week of April. These are intended to improve how consumers and businesses work with the governing body. A new two-tier system of tax tribunals will replace General Commissioners and Special Commissioners, as well as the VAT and Duties Tribunal. This set of tax rules will be applied across PAYE, VAT, income tax, capital gains tax and corporation tax; effective from April 1st.

From April 6th all employee starter and leaver notifications, as well as other pensions notifications, will have to be filed online by employers with 50 or more employees. HMRC permanent secretary for tax, Dave Hartnett, told Money Marketing, “These initiatives will provide businesses with more consistency, certainty and faster on-line processing of key documents.”