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The Royal Court of Justice has ruled against the retrospective effect of BN66 being unlawful. Mr Justice Parker presiding disagreed that there was a breach of human rights with regards to the backdating of the Finance Act Section 55. This retrospective rule has only been in effect since 2008 and imposes tax liabilities dating as far back as 1987. This is the first time that the rule has been backed by the courts. Mr Justice Parker also refused an appeal. Delivering his ruling he stated that had the taxpayer acted prudently there would be no cause to challenge the backdating.

He stated: ““At no time did HMRC indicate to affected taxpayers, including the claimant, that they could safely rely upon the arrangements. HMRC consistently maintained that the arrangements did not work, and advised taxpayers to pay on account the income tax which HMRC said was properly due.”

Much of this case rested on the seven year period of inaction by HMRC, however the judge appeared to be of the view that HMRC’s actions were proportionate while taxpayers utilising a BN66 scheme knew the associated risks.

He continued: “It might also have been thought that, with the passage of time and long inaction on the part of HMRC, the likelihood of retrospective measures receded, and it was safer to let sleeping dogs lie. However, if such tactical calculations were made, taxpayers simply ran the risk that at some point parliament might legislate to put the matter beyond doubt, and might well do so…retrospectively”.

Mr Justice Parker concluded: “In so far as taxpayers may have relied upon the route previously travelled by HMRC and the legislature in Padmore, they did so at their own election and risk.”

The ruling in the largest case ever heard in London’s Technology court has now set a precedent for end users to claim large payouts from contractors who exaggerate their skills and experience.

Mr Justice Ramsay who presided over the case accepted that EDS had made unsubstantiated claims in order to win the £48million contract to build a customer management system for BSkyB. The contract was awarded ten years ago and EDS have since become part of HP.

However two years after awarding the contract, BSkyB terminated the agreement between themselves and EDS due to their failure to fulfil the obligations in their contract. The project had been hit by numerous delays and rising costs. BSkyB were then forced to appoint their own team of IT workers to complete the project which reportedly cost £265million.

The original contract had damages capped at £30million but Mr Justice Ramsey, in an unprecedented move, ruled that this figure should be disregarded. Speaking of this ruling to ContractorUK, Jeremy Drew from law firm Reynolds Porter Chamberlain said: “This is a major decision that’s going to have a huge impact across a broad range of businesses. Any service company that bids for customers will have to be much more careful about avoiding loose sales talk and exaggerating its past experience and capabilities, otherwise it could find itself on the receiving end of a similar claim.”

However, Mr Justice Ramsey did not actually set the amount of damages payable but BSkyB believe it will be in the region of £200million despite their original claim for £709million.

Mr Drew concluded: “IT and other service providers will now have to be more careful that they can back up any sales claims with hard evidence. In the past it’s always been the case that the customer has had to make a judgement call on the sales pitch of a bidding company to assess whether they are competent and capable, but this decision means the burden will now be shifted to the bidding company to rein in any exaggerated claims.”

HP are now expected to appeal the ruling. It would appear that an agreement between HP and BSkyB is still some time away.

Source: ContractorUK

PCG, the body representing freelancers and contractors, have commented on the EU 2020 consultation. They have stated that they welcome the objectives of the strategy. EU President Barrosso has set in motion plans for a more sustainable social market economy which should result in a better use of resources, skills and knowledge. The strategy for turning this ideology into practice is the EU 2020 Strategy. The consultation period on this strategy commenced in November and ended on 15^th January. PCG submitted their comments to the EU Commission and highlighted the need for wider recognition and promotion of freelancing as a career option.

The Commission is due to submit their proposal in the next couple of months. It is expected that the governments and EU Heads of State will adopt the EU 2020 Strategy at their Spring 2010 meeting.

Managing director, John Brazier, said: “It is important that European policy-makers fully familiarise themselves with the freelance model of working, which is already bringing benefits to the UK economy. By taking on risks in exchange for higher rewards, freelance professionals represent the dynamic and flexible workforce that Europe needs to thrive in the future.”

He continued: “Freelancing is an active choice mainly motivated by the desire for professionals to run their own business and secure a better work-life balance. The European Commission should consider it as an innovative solution to tackle unemployment and foster social inclusion, especially among young people and those over 50”.

The Chartered Institute of Taxation are concerned that a large proportion of the 25 million tax code notices currently being issued by HMRC are wrong. They are requesting that HMRC launch a publicity campaign to make people aware of the potential errors.

In a press release, President of CIOT Andrew Hubbard stated: “Most people on PAYE are used to assuming that what the taxman sends them is correct. Many file away coding notices without even bothering to check them. But this year, many of them are being given wrong information too, and they could get a nasty shock when they open their April pay packet and see it is as much as a hundred pounds lighter than they are expecting.”

He continued: “The government should launch an urgent publicity campaign to highlight what has happened and tell people what they can do about it. They also need to add a specific warning about it to the majority of P2 notices – the letters containing tax code information – which have still to go out.”

Mr Hubbard concluded: “This comes at the worst possible time of the year for HMRC, whose enquiry systems are already stretched to capacity by people seeking advice ahead of the self-assessment deadline at the end of January. The new PAYE system is potentially very good and this is really just a teething problem – but a serious one that HMRC needs to warn taxpayers and their advisers about and help them resolve.”

As the Agency Workers Directive regulations were laid before parliament last week there was a widespread sense of relief that it would not be implemented until October 2011. However, there still remain widespread concerns regarding this legislation and many professional bodies have spoken to Contractor UK to voice these.

The Association of Professional Staffing Companies (APSCo) believe the Directive is “riddled with inconsistencies”. They are also of the opinion that the high costs associated with AWD compliance “will be borne by the contractors who usually earn more than permanent staff but may now get lower rates.”

APSCo chief executive Ann Swain stated: “The exclusion of limited company contractors from the regulations is a huge victory for the professional recruitment sector. Determining whether limited company contractors are genuinely self employed or not is hugely complicated and is not something recruiters will be able to do reliably without detailed guidance.”

Meanwhile the Association of Recruitment Consultancies (ARC) are dismayed that despite two consultations last year, industry were not given the final word on the regulations. They believe the directive still has “many anomalies”.

ARC chairman, Adrian Marlow, commented on the reality for workers when the directive comes into force: “The jury must be out until the detail can be seen. We are not jumping to any conclusions.”

The government stated that the decision to lay the regulations before parliament last week stays true to their promise that the AWD would be on the statute book during this parliamentary session. However, they have said that agencies, recruiters and workers now have “time to prepare and plan” before it is enshrined in October.

Source: Contractor UK

Yesterday, as the final regulations for the Agency Workers Directive were laid before Parliament, there was confirmation that its implementation would be delayed until October next year. This move has been welcomed by agencies and contractors alike.

As reported in The Recruiter, chief executive of the Recruitment and Employment Confederation, Kevin Green, said of this news: “Professional recruiters will bear the brunt of making these complex regulations work on the ground and we are pleased that some of the recruitment industry’s key concerns have been taken on board. In particular, we welcome the delayed implementation date and the decision not to impose potentially damaging restrictions on the fees charged by agencies where a temporary worker is taken on permanently by an employer.”

In conclusion, however, Mr Green added his concerns about the legislation: “However, there are real concerns that these EU regulations are ill-adapted to the UK labour market and could limit job opportunities at a time when flexible working options are providing a crucial route into employment. The priority now is to ensure that effective guidance is developed for employers and recruitment agencies.”

While the later implementation date is good news, there are still concerns and apprehension aplenty regarding this directive. Speaking for manufacturers’ organisation EEF, their head of employment policy David Yeandle confirmed their stance with The Recruiter, stating: “manufacturers will be pleased the government has confirmed that this legislation will come into force in October 2011 and that it has resisted pressure for its earlier implementation. However, we remain concerned about the costs and administrative burdens that this new legislation will impose on employers and, in particular, about how the decision to include some bonus payments in the definition of pay that will be used for equal treatment.”

Mr Yeandle concluded: “It will now be important for the government to publish clear and practical guidance for employers on these regulations well before their implementation in October 2011.”

Research conducted by Investec Specialist Private Bank and the Entrepreneurs’ Organisation has concluded that unfair business taxation and regulation is of the utmost concern to contractors, freelance consultants and entrepreneurs. Many believe that the existing taxation system could be overhauled to alleviate this burden. Only 17% of those surveyed believe that the current UK taxation system make the UK an attractive location to set up a business.

With regards to the current economic situation, 5% believe that it will be easier to access funding this year. Conversely 25% believe the lack of access to bank loans will have an adverse effect on business throughout 2010.

Commenting on their research, Investec’s Ed Cottrell commented that “there is considerable room for improvement in the overall regulatory and tax environment in the UK.”

Mr Cottrell also stated his belief that such changes “will be key to helping the country recover from the recession”.

Doug Richard, entrepreneur and former Dragons’ Den star, believes that innovators would be more likely to succeed if unfair tax burdens were reduced and regulations were overhauled.

He said: “We are a nation that has everything it needs to capitalise on the opportunities of the 21st century. However, the government must unshackle the only means of increasing wealth and social mobility – the entrepreneurial culture.”

The current low interest rates could encourage entrepreneurs to approach banks seeking finance while the news that corporation tax for small businesses will stay at 21 per cent for the next financial year should be good news!

It’s true what they say – honesty is the best policy. Well, this is certainly the lesson that has been learned by four IT contractors who have lost their contracts as a result of misleading claims on their CV regarding qualifications that they did not hold. These false qualifications were not picked up at the application stage but were highlighted during the screening process when they were renegotiating an existing contract.

Powerchex who were responsible for screening the four contractors in question said that checks on contractors’ qualifications and skills at the end-of-contract stage were becoming increasingly commonplace.

Alexandra Kelly, founder of Powerchex, commented to Contractor UK: “A lot of IT contractors are being screened for the first time for qualifications. A few were caught lying about degrees and other qualifications. In every case they lost their contracts, even though they had been with the client for a long time and they were screened as part of renegotiating an existing contract.”

It would seem that contractors have become more likely to lie on their CV as a result of the current jobs climate, particularly in a bid to cover up long periods without work,

Ms Kelly stated: “The gaps in particular are gaining prevalence as contract candidates try to shorten periods of being without work. My advice is not to lie. Clients understand that times are tough and people are being made redundant, but they are ruthless with the lies.”

New figures obtained by UHY Hacker Young show that HMRC are now far more likely to pursue unpaid taxes through the Tribunal system rather than enter into negotiations for a “fair settlement”. Commenting on this fresh information, a tax advisor stated that this is a costly process and it is doubtful how successful litigation actually is.

The fresh data shows that between 2006 and 2007 the number of cases brought before the Special Commissioners Tribunal and the VAT and Duties Tribunal rose from 3146 to 4311.

UHY Hacker Young have attributed this rise to new powers that HMRC have been awarded in order to pursue unpaid taxes. They make particular reference to the ‘Litigation and Settlement Strategy’ which HMRC will use to pursue a case through the courts if they believe it to be “strong enough”. There has also been a great deal of restructuring and integration internally which has released staff time to pursue unpaid tax which is currently top of their agenda.

Roy Maugham, UHY Hacker Young tax partner, stated: “The Treasury needs every penny it can get its hands on. For example the government has just doubled the maximum penalty for tax evasion in relation to offshore bank accounts from 100% to 200%.”

The most recent figures show that the cases brought before the Special Commissioners Tribunal and the VAT and Duties Tribunal rose to 4897 in 2008 from 4311 during 2007.

Mr Maugham concluded: “HMRC seems to be less and less deterred by the cost of litigation. It is now much more prepared to go all the way through the Tribunals rather than negotiate a fair settlement with the taxpayer as it used to. It is doubtful whether this is the most effective and pragmatic way to solve problems.”

A Freedom of Information Act request has provided details of illegal workers who have been employed by government agencies since 2006. The data shows that ten foreign workers were actually employed by the UK Border Agency, the Home Office department responsible for vetting immigrants who come into the country. The Home Office itself also employed two illegal workers at their headquarters in Whitehall. In total, the figures showed that hundreds of illegal workers were employed at 54 NHS trusts and 34 local authorities across the country.

Of the twelve people employed by the Home Office, one was from Ghana and the other eleven were Nigerian. The ten workers at the UK Border Agency were cleaners while one person was employed as a security guard at Whitehall and the other illegal worker there held a chef position.

These twelve people have since been subject to investigation and action has been taken. Eight have been deported and three are currently detained pending appeal. Only one of the twelve has been granted permission to remain in the UK.

As this data was made public, Shadow Home Secretary, Chris Grayling stated: “This is an absolute scandal. The Government has taken tough action against private companies over the employment of illegal immigrants, yet on this evidence it is quite clear the public sector has taken on bogus workers and escaped any form of censure.”

He concluded: “We have ministers constantly telling us they have got to grips with the chaos in our immigration system, yet the Home Office itself has been employing illegal workers. It is completely unacceptable and we need an urgent explanation from ministers.”

These figures will be a further blow to Home Secretary Alan Johnson who has already publicly condemned the government for its handling of immigration. Only last year Attorney Baroness Scotland was found to have employed a Tongan housekeeper who was not eligible to work in this country. She was subsequently fined £5000.

In total, 349 illegal immigrants were employed in public sector positions according to the figures released. The NHS employed four foreign nationals as doctors and 13 as nurses in their hospitals. Six people were employed in secondary schools as teachers and ten people were employed as care and social workers.

The Home Office responded to these figures via a spokesman who said: “The 12 illegal workers identified since 2006 were all sub-contractors, none of them were directly employed by the Home Office. It was our checks and the strict regime we operate on illegal working in the UK that brought these cases to light. We are doing more than ever before to crack down on illegal working, with raids taking place up and down the country every week, and thousands of rule breakers deported.”

These figures show that the employment of illegal workers continues to be a problem across all sectors. Crystal Umbrella recognises its responsibility to protect agencies and clients alike from the potential pitfalls. As such, we are investing heavily in UK Border Agency compliant registrations in order to have the most effective procedures and technologies in place as a pre-emptive measure.