Crystal Umbrella

Cultural relations organisation The British Council have announces that they are planning to move hundreds of their contractor positions offshore. This is likely to affect non-core functions such as IT services. The British Council receives taxpayer funding but if these plans go ahead, around 250 contractors and freelancers in this country would be let go.

The British Council have also stated that they are currently going through a ‘transformation programme’ which will see them shedding many more contract staff in a bid to save £45 million. They have said that IT positions in their UK operations will be cut down to 100 from 185. They will be seeking replacements in India as they aim to consolidate their UK, Eastern European and Sub-continent IT units. They are also aiming to consolidate their financial centres by reducing their numbers from 5 down to 2. This will mean that forty jobs will be cut across their sites in China, Poland and Mexico.

Chief executive, Martin Davidson said last month, “We are not immune to the external financial pressures facing everyone today. We must adapt to these realities if we are to safeguard and grow our international relations work for the UK in the arts, education, governance, science and sport.”

“We will very shortly be outlining specific proposals for post reductions across the UK and on how we wish to select staff who have volunteered for redundancy.”

The Council previously vowed to work with unions after the potential job cuts came to light back in April, however they are now facing possible legal action due to the lack of consultation on the off-shoring of UK jobs.

Contractors, specifically those working as sole traders or through limited companies, have been issued a warning by HMRC regarding the increase in Phishing scams.

Phishing, a term used to describe the sending of malicious emails, is a method in which people falsely claim to be from a company or other official organisation in order to trick the receiver into sending sensitive information to them which they can then exploit.
According to HMRC, Cybercriminals have been targeting taxpayers, using false email accounts and offering them promises of tax refunds.

The emails tell the recipient that they are entitled to receive a refund, and that they simply need to reply to the message with their bank details.

Chief Executive of HMRC, Lesley Straith, confirmed that “We only ever contact customers who are due a refund in writing by post.

“We never use emails, telephone calls or external companies in these circumstances. I would strongly encourage anyone receiving such an email to immediately send it to us for investigation and delete it from their computer.”

HMRC stressed that anyone who receives such an email and replies runs the risk of Cybercriminals stealing their bank details, credit card information and even their identity.
This is not the first time that HMRC have issued such warnings. In January, warnings were made of a phishing scam appearing in the run-up to the online self-assessment tax return deadline.

Small, one person businesses or contractors who supply goods or services could be at risk of non-payment if the clients they supply have deferred their tax bill. The state initiative, known as Time To Pay (TTP) or Business Payment Support Service, allowed companies to defer their tax payments to HMRC which has allowed around 170,000 some financial breathing space through the economic downturn. However, no checks have been made on how these companies will manage to pay the money in due course.

P&A Partnership Insolvency Experts said, “The worrying fact is that the financial state of the company has never been investigated and whether they will be able to pay the tax in due course has never been established.”

They also commented that while TTP helps firms to survive through difficult times, the initiative also “merely puts off a severe problem for another day”. Overall, this means that all creditors and suppliers are at risk.

P&A continued, “The position from a suppliers’ and creditors’ perspective is quite worrying; they will have no knowledge of the financial situation of the company and may increase their exposure as the business continues to trade. And here is the danger, if the company goes into an insolvency arrangement later and it transpires that it was insolvent when it took the ‘Time to Pay’ lifeline, then liability falls back on the directors personally for wrongful trading.”

The total amount of delayed tax payments owing to HMRC totals £3 billion, consisting of PAYE, National Insurance Contributions, Corporation Tax and VAT. Those firms requesting a tax breather are not being asked to make all creditors aware of their position. However, recently a VAT bill of £168,000 was settled with HMRC without any checks on the company finances overall.

HMRC said that their Business Payment Support Service was targeted to help ‘viable businesses. They went on to say, “We assess and monitor the risks inherent in these arrangements, including the risk of deferring tax for businesses that have the ability to pay us on time and in full, as well as the risk of agreeing time to pay for businesses that are not viable and will later fail.”

Alistair Darling has announced plans to withdraw ‘equitable liability’ with effect from April 2010. Equitable liability allowed tax demands to be scaled back during periods of illness and bereavement. This move by the Chancellor is expected to have implications for self-employed people and the elderly.

The equitable liability concession applied to corporation and income tax. It allowed HMRC to use this rule as a safety net against bankruptcy when taxpayers had missed their deadlines for tax filing and appeals. HMRC would usually apply these concessions when the assessed liability is more than the tax that would have been charged if the return had been filed on time.

Keith Gordon, a barrister who is petitioning against the abolition of this concession said, “HMRC proposes to abolish this practice. This means that where HMRC have estimated tax liabilities and taxpayers have not lodged a formal appeal within the statutory 30-day period, HMRC will now pursue those amounts even where taxpayers can prove that their real tax liabilities are less.”

Under the concession HMRC did not pursue the difference between the liable amount and the revised amount although the legal tax liability was not reduced. There must be evidence to support the reduced amount due.

Tax officials have long questioned the need for this concession to remain. They argue that taxpayers are awarded many opportunities to tell HMRC if a tax bill is incorrect. However, Mr Gordon is counter-arguing that the removal of this system will lead to injustices.

He said, “This will expose many of the country’s most vulnerable taxpayers to debts that they cannot afford and do not actually owe. HMRC should not aim to collect more than the right amount of tax.”

While this rule has been changed to ensure that people are not paying too little tax, commentators have stated that HMRC should also be legislating to ensure that people do not end up paying too much.

HMRC have said that they will still accept late returns in exceptional cases. Speaking in an online statement they said, “In such cases HMRC will accept the late information and adjust the liability accordingly. We will also continue to help taxpayers who have difficulty paying what they owe and in appropriate circumstances allow payment to be made over a period of time.”

Leading technological companies in the UK have formed a coalition to will the creation of quarter of a million IT jobs over the next decade. This coalition has been developed by software firm Micro Focus who have asked other influential firms to sign their Technology Manifesto. They have said that due to a decline in manufacturing and the resulting “shock” to financial services, the IT sector needed a boost in order to stimulate the economy. More than thirty influential sector figures have backed this manifesto.

Micro Focus chief executive, Stephen Kelly said that the economy is presently “saddled with debt, decline, depleted industry and deteriorating employment”, however he believes that the IP-rich industries can “make Britain great again”.

The Technology Manifesto includes five directives for the IT sector. The directives include radical tax incentive overhauls for individuals and companies investing in the growth of technology business in this country. The manifesto states that ‘fiscal incentives’ should accompany these tax reforms for IT companies in the UK. They state that this will boost the output of world leading R&D from the UK. The Manifesto also suggests using the skill of IT entrepreneurs working in the overseas market by calling on their ‘good will’ to train IT start-up businesses in Britain which have a potential for high-growth.

The signatories on the manifesto state, “The over-riding goal of the manifesto is to increase UK technology jobs by 250,000.” The signatories include Kingfisher IT, Carphone Warehouse, Oracle, BT Global Services, Virgin Media, INSEAD and Tata Consultancy UK.

These companies said that the job creation process should “significantly raise the contribution by home-grown technology businesses to GDP over the next ten years, thus providing a real roadmap for recovery by creating sustainable jobs, businesses and wealth.”

Just last week figures emerged which signalled an upturn in IT contract opportunities within the financial sector. However, it has just emerged that Lloyds Banking Group have cut 370 contract roles with the majority of jobs going in IT support.

These new job cuts will be on top of the 400 contract job losses already announced by Lloyds Banking Group. In total, since the merger of HBOS and Lloyds, 8,200 jobs have been cut including 800 contractor positions. A Lloyds spokesperson could not confirm how many of the fresh job cuts would affect freelance staff.

They released a statement which said, “The group’s policy is to use natural turnover and to redeploy people wherever possible to retain their expertise and knowledge gap within the group. Where it is necessary for colleagues to leave the company, it will look to achieve this by making less use of contractors and agency colleagues.”

IT contractors working for the Group have already had their pay rates cut by a total of 20% over the last year.

The bank has been criticised for retaining its workforce abroad despite the high level of job cuts in the UK. Speaking about his issue, the Lloyds TSB Group Union (LTU) said, “Even though both the Bank’s IT and Collections and recoveries operations are directly supported by well over a thousand staff based in India – and the bank are flying into the UK many more IT staff from India who are paid low salaries – the axe has fallen entirely on the jobs of UK staff.”

They continued, “So, for instance, whilst Collections and Recoveries intends to reduce from 8 to 6 the number of sites in the UK that it intends to operate from – existing sites in Andover and Southend – it is insisting upon leaving the three operations in India untouched.”

We are delighted to announce our latest winner of the Crystal Umbrella customer service award as Sam Cayton. Sam, who scoops the 2nd quarter award, is dedicated in his role as IT Assistant. Sam has always demonstrated a positive and helpful attitude towards his work. His professionalism, courteousness and willingness to learn new tasks, were all key factors in his triumph. GEM is about showing you are customer responsive and always trying to make an interaction positive. Sam demonstrates this continuously across the board when dealing with not only Crystal Umbrella but other external organisations. He never complains and is truly passionate about what he does.

Congratulations Sam.

The Professional Contractors Group (PCG) has submitted another Freedom of Information request to HMRC following an ex-government minister’s refusal to disclose data on IR35.

Last month, the then Treasury Minister, Kitty Ussher was asked by Labour MP Terry Rooney for information regarding how many IR35 investigations had been conducted over each of the past five years . He also asked her how many of these investigations had resulted in prosecution and how many had resulted in an increased tax bill.

In an unprecedented move, she refused to answer for fear of non-compliance. Her response was, “The intermediaries legislation, commonly known as ‘IR35′ was introduced with effect from 6 April 2000 to counter the avoidance of employed levels of tax and national insurance by individuals providing their services through intermediaries. Disclosure of HM Revenue and Customs’ compliance data relating to the legislation would result in a risk of non-compliance with the legislation. Accordingly I am not able to provide the date requested.”

Days after the question was asked of her, Ussher was sacked by Gordon Brown for her part in the MP expenses scandal.

The IR35 rule aims to tax contractors as employees. The PCG submitted a Freedom of Information request back in May which showed that IR35 was raising just £1.5 million per tax year. The PCG disclosed that of the 1,468 IR35 investigations that they have been involved in, only six have resulted in an the owing of additional tax.

The PCG have now asked the same question as Rooney under the Freedom of Information Act.

Freelance World has conducted research into high street accountancy knowledge of contractor legislation and the results are worrying.

The survey was based on twelve individual accountancy firms. The majority of them were offering contractors a ‘targeted solution’ without the knowledge that this is forbidden under the MSC legislation.

The IR35 tax rule has been in existence since 1998. Contractors are subject to IR35 which taxes freelance workers as employees. Freelance World declared that the firm they surveyed had a “lack of detailed knowledge” and “worryingly vague knowledge” regarding compliance.” One firm in particular said that contractors “didn’t need to worry about it” while another said the rule had “died a death”.

Managing director of Freelance World, Alasdair McGill, commented: “What these firms should be telling their prospective clients is that IR35 work should be handled by an employment law specialist…, not telling them that it is nothing to worry about.”

He continued, “Accountants should not be issuing advice on IR35 unless they have real experience of employment status and are confident about defending their clients in front of the tax tribunals.”

Mr McGill drove home the message of how crucial the right tax advice is for contractors. Failure to comply with the relevant tax legislation could result in future credit problems due to HMRC blacklisting.

A representative from HMRC admitted that advice given to freelancers “sometimes presents a too simplistic picture of whether the Intermediaries legislation applies or not”.

Freelance World concluded, “It is quite clear that many high street accountancy firms simply do not have the expertise to advise contractors on key legislation, compliance and management of their specific requirements.”

High Street accountancy firms have been investigated by Freelance World, a contractor services company based in Aberdeen. Freelance World carried out their ‘mystery shopper’ survey which found that many high street accountancy firms have little or no knowledge of legislation pertaining to contractors such as IR35 and Managed Company legislation. They also noted that many of the firms they approached had a “worryingly vague attitude to the need for compliance within the legislation”.

Managing Director of Freelance World, Alasdair McGill said, “We have been genuinely alarmed at the poor advice being given by some firms to prospective clients. It is like going to a GP for treatment when you really need to see a specialist consultant. It is quite clear that many high street accountancy firm simply do not have the expertise to advise contractors on key legislation, compliance and management of their specific requirements.”

He continued, “One accountant offered an off-the-shelf incorporation service – a practice that is prohibited by the Managed Service Companies legislation of 2007. Another told a researcher that they ‘didn’t need to worry about IR35′”

Worryingly, one firm that was approached by the researchers said that IR35 “had died a death”. The repercussions for a contractor accepting that advice could be large HMRC fines and possibly even long term credit problems due to non-compliance. Contractors are therefore advised to only use specialist accountants.