Crystal Umbrella

Today was the original deadline for those sheltering money offshore to disclose the details to HMRC to receive a reduced penalty in return. However, the deadline has now been extended to 4^th January 2010. Take up of the New Disclosure scheme has been really slow so while the official reason provided for the extension is “fairness”, it has been suggested by many tax advisers that HMRC are hoping that more time will result in more people taking up the amnesty offer. Anyone who comes forward prior to 4^th January will receive a ten per cent reduced penalty providing they have not already been requested by HMRC to make the disclosure.

Dave Hartnett, HMRC’s permanent secretary said: “Some bank customers will not be contacted by their banks in good time for the original deadline of 30 November so in the interests of fairness we have decided to extend our deadline by a month to 4 January.”

He continued: “I strongly urge anyone who has been hiding taxable assets offshore to go on line and register. The NDO is voluntary but from the start of the New Year we will begin to investigate those who were eligible to use the NDO but instead buried their heads in the sand.”

Those who do not disclose prior to the deadline will face penalties between “30% rising to 100% of the tax evaded” according to HMRC. They could also risk prosecution.

As part of the celebrations for National Freelancers Day, the Professional Contractor Group has called for “fairness, clarity and recognition” as it launched its ‘Manifesto for Freelancing’ at a House of Commons reception on Monday. This reception was attended by key figures from the three main political parties alongside PCG members and other prominent stakeholders in freelancing.

John Brazier, managing director of PCG stated: “Freelancers bring a degree of flexibility and a skill set to the economy which is a real asset for UK plc. This Manifesto clearly outlines the key messages the major parties need to adopt, in order to allow this vital part of the economic landscape to flourish”.

Brazier commented further: “We know that freelancing is helping business cope with the worst recession we have seen for 60 years.  But this has to be a fair deal.  Freelancing must be recognised as a legitimate business model.  Measures such as IR35 continue to place an unfair burden on nano-businesses.  If we’re serious about growing an enterprise-friendly economy we need to address these faults in our tax system urgently.  We will be continuing in the run-up to the election to take this message far and wide.”

The manifesto involves five main themes; fairer taxation, better regulation, recognition of freelancing as a valid way of working, positive vision for the future of freelancing and easier access to the market. The full manifesto is accessible via the PCG website.

In conclusion, John Brazier said: “This Manifesto demonstrates just how far PCG has come as a credible lobbying organisation in its ten year history.
Our first, but by no means our last manifesto will prove a clarion call for change, urging the next government to protect and advance the interests of this vital, vibrant and growing part of the UK’s economic landscape”.

The Service Providers Association (SPA) has launched a code of conduct for the professional freelance sector and all organisations who work within this sector including umbrella companies and companies who provide support services to limited companies. The aim of this code of conduct is to improve professional standards across all freelancing sectors.

The code will detail standards and ethics in a bid to encourage best practice.  As part of the code of conduct, all members of SPA will be reviewed by a Top 4 accountancy firm, namely PwC, KPMG, Deloitte or Ernst & Young). The outcome of these reviews will be sent on to HMRC on a voluntary basis. It is this open-book policy that has been so readily welcomed by HMRC. SPA themselves provide many services to the freelance sector including tax, employment, accountancy and administrative support services. SPA have stated that they strive to provide their members with a professional service at all times.

Speaking about the launch of the code, an HMRC spokesperson said: “We welcome moves by some service providers in the temporary labour market to self-regulate. A commitment to effective self-regulation and transparency in dealing with HMRC is a positive step in reducing compliance burdens and HMRC is pleased to give advice on its interpretation of the law to those wishing to devise a regulatory framework”

The Forum of Private Businesses (FPB) is lobbying the government to include specified tax cuts within their pre-budget report on 9^th December. The FPB have recently surveyed all of their members and more than twenty per cent believe that the government should be focussing policies to relieve tax burdens on SMEs.

A number of changes have been suggested by FPB in their proposals to government. These include the creation of a national insurance holiday for businesses with less than ten employees alongside a delay in the implementation of the planned 0.5% NIC rise. They would also like to see corporation tax cut to 20%. They see this as a small concession by the government which could really benefit businesses.

VAT is another major taxation issue and the FPB would like the return of the 17.5% rate should be postponed to a more reasonable timescale. They also believe that VAT should be reduced permanently within labour-intensive sectors to just 5%.

Finally, they are asking that all small businesses are automatically enrolled for the Small Business Rate Relief as figures show that less than half of the businesses who qualify for this relief have actually applied for it.

Phil Orford, FPB’s Chief Executive, said: “There is still a long and difficult road ahead of us, but small businesses are key drivers of the economy and the Government must create a tax environment in which they can thrive. That means tax relief in specific areas that would help to foster cash flow, innovation and employment opportunities so that small businesses are able to seize the opportunities that will emerge as the economy emerges from recession.”

The CBI stated yesterday that Britain is set for a complete reform of its business model and contractors are set to be at its heart. They have said that they expect companies to work with a small core team and enhance the skills within by employing freelance staff and consultants. These contracted staff will be essential to the overall running of the organisation, providing core skills and services, but will only be utilised when required.

This is also set to benefit the contractors themselves as they will be rewarded financially for their willingness to work in such a flexible manner, especially given the recent economic difficulties. Businesses are sure to recognise that contractors are not awarded the same job security as their permanent counterparts.

The CBI believe that these changes to the way our workforce operates will be as a direct result of the recession, which came as a shock and hit businesses hard, resulting in mass redundancies across all sectors. The recession has also highlighted the skills deficit within many staff teams. Businesses will be looking for these specific skills sets and, therefore, there will be a greater responsibility placed on contractors to make sure that they are taking advantage of all training opportunities. This will provide them with greater job opportunities.

The CBI commented: “Without the right skills and/or mentality will find it increasingly difficult to secure jobs – in some areas, long-term unemployment…will become a major problem.”

They concluded: “Others will prefer the security and stability of a permanent job, but those skilled individuals who are prepared to work flexibly will get higher rewards.”

Anyone holding undeclared money or offshore accounts has only one week notify HMRC. The official deadline is actually months away, however, an intent to disclose must be made to Revenue and Customs by November 30^th.

Anyone failing to notify HMRC within this period of time will not qualify for the New Disclosure Opportunity (NDO) which offers smaller penalties. The usual charges are set at 35% but any taxpayer utilising NDO should only be charged 10% as long as they have not already been subject to a request from HMRC to provide this information.

Dave Hartnett, permanent tax secretary, is hopeful that the NDO will be successful as he believes that the lower charges will be an attractive enough prospect to entice people to come forward. In fact, he is predicting around 100,000 accounts could be settled through this process.

However, Mr Hartnett’s optimism is not backed up by official figures gained by McGrigors law firm which shows an extremely slow take-up of NDO and the Liechtenstein Disclosure Facility (LDF). So far only 27 people have registered for LDF since registration opened on 1^st September. HMRC have refused to release figures relating to the take up of NDO.

McGrigors commented: “If it seems that not many people have come forward under the NDO, this may dissuade others from doing so. HMRC must be concerned that the tax amnesties are not bringing in enough tax evaders. Bigger fines are an obvious way to encourage people to comply, although to be effective that must be combined with a real risk of being caught.”

They concluded: “There was a time, in living memory, when HMRC was able to impose penalties in excess of 100% of the underpaid tax. There is an argument that HMRC should be pushing for a return to that level of penalty.”

The Queen’s speech confirmed that the Agency Workers Directive would not come into force until the end of 2011. However the implementation of the EU directive continues to cause potential issues for contractors. In fact, policy-makers are continuing to face issues regarding how to remove the threat to contractors’ work from the scope of the law.

The government has conceded that self-employed workers and limited companies would potentially suffer if caught by the scope of the directive. This resulted in the proposals to exclude contractors on managed service contracts, those working through limited companies and genuinely self-employed workers from the reaches of the legislation. However, last week an MP who is firmly behind the law said that the proposals to exclude these group weren’t “particularly encouraging”.

Speaking in an interview, Brookson founder Martin Hesketh said that Labour MP Andrew Miller believes that policy-makers “don’t have an answer” to this issue. He also stated that a recent discussion with recruiters of IT contractors resulted in the belief that current definitions within the draft regulations are “very unclear”.

This meeting was hosted by the Association of Professional Staffing Companies (APSCo) who stated that the current definition of personal service companies is ambiguous. Marilyn Davidson, APSCo director, has also stated that the policy unit for the Directive were willing to take these issues on board they were not able to answer questions relating to how it will affect the self-employed.

Speaking to Contractor UK, she said: “That [the exclusion for self-employed contractors] is an area that is very foggy and we need to clarify. We will seek clarification through the final draft.”

New figures just released from the Annual Survey of Hours and Earnings courtesy of the Office of National Statistics shows that contractors working within the private sector are earning less money than those who work on public sector contracts.

According to the statistics, there has been a 3.1% rise in the average take home pay for public sector workers in the third quarter of 2009, with an average weekly wage of £539. Meanwhile, private sector earnings have only seen a 1% increase with average weekly wages totalling £465.

The Annual Survey figures also confirmed that those working in the public sector were experiencing a rise in employment opportunities. The second quarter of 2009 saw employment within the public sector rise by 13,000 to over six million. By contrast, employment in the private sector over the same period fell by 230,000.

However, the Institute of Employment Studies (IES) believes that pay within the public sector is set to decrease.

Duncan Brown, Director of reward services at the IES, Duncan Brown commented: “Private sector pay is rapidly going to escalate back up to three per cent, but in the public sector you’re going to see the reverse.

“Clearly now the government is serious about freezing pay in the public sector. You’re going to see that, very evidently, with some very different effects to the private sector – there’s been remarkably little industrial action in the private sector, whereas in the public sector you’ve got stronger unions.”

Contractor accountancy and tax services provider Brookson have hosted a ‘Future of Freelancing’ Round Table debate which was attended by Director of APSCo Marilyn Davidson, managing director of PCG John Brazier and Andrew Miller MP amongst others and was chaired by Martin Hesketh, managing director of Brookson.

They looked at all manner of issues affecting freelancers including the impact of the recession, government not fully understanding the freelancer role, the role of freelancers in the recovery of the economy, sector comparisons, technology and the debate regarding definitions.

Mr Hesketh commented: “Despite a surge in the last 20 years or so, freelancing is still a relatively new model of working and as such, is changing and evolving with increasing speed. In light of the current unstable economic landscape and ongoing debate around existing and proposed legislation, we thought it was important to bring the industry together to review how the future of our industry is currently being affected and shaped.

He continued: “The future, it seems, does appear bright for self-employed professionals. Granted, there are some hurdles still to overcome, not least of which is the argument around categorisation of types of freelance worker and the one size fits all approach to industry imposed legislation. However, our discussion highlighted a number of promising developments which would indicate, that with the right support, the freelancing market will continue to recover, grow and expand in years to come. Perhaps surprisingly, engineering appears to be the most robust sector within the market place. In September this year, the number of contracts in this sector shot up by around 40 per cent, yet IT has not followed suit.

Hesketh concluded: “The discussion also highlighted some interesting points around age polarisation within the freelancing market, in terms of a greater number of freelancers from the graduate generation and older generations. For graduates, this was attributed to an increase in exposure to successful entrepreneurship. For the older generations, an increase in redundancies coupled with a desire to extend working life time-scales, has led to a growing number of freelancers from this age group.”

Many contractors will today welcome the news that those workers who use umbrella or limited companies will remain exempt from the agency conduct regulations. The Department of Business Innovation and Skills said there was “no significant evidence” to support the removal of this exemption. The state had worried that some agency workers were too vulnerable to remain exempt from the rules which were drawn up in 2003. There was fear that recruiters were actually advising their workers to opt out and thus those workers were losing the protection that the regulations provide.

The BIS said: “Once a worker has opted out they lose they protections afforded to them by the Conduct Regulations and may be vulnerable, for example, to non-payment of wages.”

BIS consulted with 350 individuals and businesses regarding this issue and found no “convincing evidence” of these concerns.

BIS stated: “Furthermore the evidence provided by the professional bodies that represent contractors and umbrella company providers is that any changes would have an adverse impact on legitimate contractors who actively choose their arrangements.”

It was also recognised that by including all contractors in the code of conduct would actually increase costs for contractors and add administration requirements with regards to the information that is required by recruiters under the regulations.

The Association of Professional Staffing Companies (APSCo) said: “The government has acknowledged that there is insufficient evidence of the opt-out being used to exploit vulnerable workers. This is an important victory for the recruitment industry. If the opt-out had been withdrawn, the red tape burden on recruiters and contractors of automatically having to comply with the Conduct Regulations would have imposed significant costs.”