Crystal Umbrella

For those contractors who want to retain their autonomy while achieving a reduction in their tax liability, an umbrella company could be just what they are looking for. Umbrellas are ideal for those contractors who would rather not work as a sole trader or set up their own limited company. Just think, you could wave goodbye to all that administration that would burden you if you were operating your own limited company such as expenses, timesheets, expenses, contracts, filing and tax calculations. By working through an umbrella you effectively become its employee while choosing for yourself which contracts to accept, what rates of pay to accept and the terms and conditions for your work.

Of course, these are not the only benefits of working through an umbrella company. Your umbrella will work with you to reduce your tax liability and can also offer you further cover such as public Liability and Employer cover in the event of any legal action based on services rendered. Many umbrellas can also offer extra benefits which are tailored to each contractor’s personal requirements. Such benefits include pension plans and health cover.

Crystal Umbrella makes sure its customers are aware of the guidelines that it is proud to work within. All umbrella companies have a responsibility to work within the HMRC guidelines. Crystal Umbrella makes sure that it also adheres to the HMRC benchmark scale rate for expense allowances. This means that our customers are at a much reduced risk of being subject to an HMRC investigation based on an artificially high and unrealistic dispensation.

The Association of Employment Management Companies (AEMC) has posted a blog which praises the UK’s flexible workforce and calls for wider recognition of the worth of the 1.4 million freelance workers in the UK.

By calling for a “fresh approach to freelancing”, AEMC are asking the government to acknowledge the contribution that freelancers make to the UK economy. AEMC believe that policymakers have yet to acknowledge the benefits of a flexible workforce or the range of skills and experience that this workforce has to offer. The AEMC are calling for the regulatory burden experienced by contractors to be abolished.

This year will bring the next general election and AEMC will be lobbying for political parties to acknowledge the freelancing workforce and to promote a fairer taxation framework for contractors. Also on their agenda is the abolition of the often-costly tendering process which often sees contractors unable to compete with bigger businesses.

The blog continued: “The next government must encourage freelancing as a flexible, innovative and entrepreneurial way of working that enables business to perform more cost effectively, especially when recovering from recession.”

This call for fairer treatment of freelancers comes at a time when temporary contracts have risen faster than any other month in two and a half years according to the Report on Jobs published by the Recruitment and Employment Confederation and KPMG. This is mirrored by Crystal Umbrella’s own experience which saw a sharp increase in temporary placement throughout December which has continued into January.

New research has been conducted by the Confederation of British Industry which shows the effect that low trading forecasts has had on the spending plans of IT departments in the financial services industry. A decline in trading forecasts has resulted in the scaling back of planned IT spending.

Only a couple of months ago, the Confederation was reporting an increase in planned IT spending which had not been as positive since August 2008. In November their research showed that 7 per cent of financiers questioned were planning to purchase new IT equipment. The latest research, however, shows a negative response to spending cash on IT services and equipment.

This has been attributed to a predicted slump over the next three months and the after-effects of a very mild upturn over the previous three months which has been described as “disappointing”.

Chief economic adviser at the Confederation of British Industry, Ian McCafferty, commented: “The bounce in UK financial services activity over the past six months is not expected to last as we enter 2010.”

Mr McCafferty continued: “Firms see their business volumes falling back again, with no further improvement in profitability over the next three months.”

The financiers who took part in this latest survey also cited a reduction in the use of IT systems as a means of improving and growing their business, in comparison with the previous quarter, as a reason for the reduced spending plans.

However, on the whole most respondents did state an intention to continue to purchase software and hardware in the long term as part of their continued plan for growth particularly in insurance, banks and finance houses.

Following the announcement this week by HMRC that they will be offering medical professionals the opportunity to disclose any unpaid tax, the Chartered Institute of Taxation (CIOT) stated that they believe the scheme will be rolled out to all taxpayers in the interests of fairness.

The scheme allows medical professionals the opportunity to disclose arrears to HMRC in return for a reduced penalty of ten per cent. Anyone not making a disclosure who is believed to owe tax will be subject to investigation and a 100 per cent penalty on top of any tax owed plus interest.

HMRC have also recently offered disclosure opportunities to those holding money or assets offshore. These schemes are designed to assist HMRC in recouping the tax that is evaded year on year.

Chair of CIOT, Gary Ashford, said: “Whilst we welcome HMRC encouraging people to get their tax affairs in order, there is a measure of unfairness in offering a deal to one sector of the population and not to others. Surely it would be better to have a general arrangement available to all and a concerted effort by HMRC to get their message over?”

He continued: “It would be sensible to consider a genuine one off disclosure for everyone. And one that lasts sufficiently long and is sufficiently attractive to get people to come forward. This could enable them to clean the slate before the advent of the harsher ‘Naming and Shaming’ rules that come in from April 2010.”

The British Chamber of Commerce has released the results of its Q4 2009 Economic Survey which shows that while improvements are continuing, growth was slower than in the third quarter of 2009. The evidence gathered would suggest that the country is starting to come out of recession but it is still a slow process.

BCC Director General, David Frost, stated: “Although these results are not as impressive as hoped, they do contain some positive features – most notably strong improvements in employment and exports within the manufacturing sector. Businesses are showing resilience despite difficult and uncertain trading conditions. Confidence is improving, and the boost in exports must be nurtured in order to strengthen Britain’s trade position globally, and to help rebalance the economy away from an over-reliance on the public sector.

He continued: “It is vital that the government now demonstrates a determination to support wealth-creating companies in 2010. Additional business taxes must be avoided, and the 1% increase to employers’ National Insurance Contributions planned for 2011 should be scrapped. Unless the private sector is given the freedom to create jobs and wealth, the UK’s economic recovery will be slower than it should be, and we will face the serious risk of a double-dip recession.”

The BCC’s Chief Economist, David Kern, warned that this recovery will only happen if the government helps out and “strengthen Britain’s AAA credit rating by urgently producing a more credible medium-term plan for cutting the country’s huge budget deficit, and restraining public spending.”

HMRC have set out fresh plans to uncover tax underpayments sector by sector. This new approach will begin with the medical sector. Medical professionals will have until 31st March this year to make a disclosure in return for a reduced penalty. Following this date, HMRC will investigate individuals based on the records they hold regarding their pay.

Those who do make a disclosure will have until 30^th June 2010 to pay all tax, interest and any penalties due. They can expect to receive a discounted penalty of ten per cent. Anyone not making a disclosure who is later found to have underpaid tax can expect to pay a penalty of 100% on top of the tax and interest owed.

Mike Wells, HMRC’s Director of Risk and Intelligence, said as he launched the campaign: “Our aim is to make it as easy as possible for people to come forward, make a full disclosure and benefit from the certainty of a reduced 10 per cent penalty that HMRC is making available to those who qualify for this opportunity.

He continued: “From April we will be using the information at our disposal to investigate medical professionals who have not declared their full income. I therefore strongly urge any in this group who think they may have outstanding tax liabilities on their income to get in touch with HMRC and get their tax affairs in order simply and on the best available terms.

Mr Wells concluded: “This is the first step in enabling those with undisclosed income or gains to avoid a full tax investigation together with much higher penalties. The message is clear: contact us before we contact you.”

The current economic problems faced by companies are not convincing HMRC to go easy on them. New figures just released show that HMRC are responsible for around half of the petitions submitted for the closure of companies. These figures obtained by UHY Hacker Young showed that over the past six months, HMRC had lodged 43 per cent of all ‘wind-up’ positions.

UHY Hacker Young commented that while banks have been asked to go easy on debtors, it seems that HMRC’s main priority remains to maximise debt recovery.  Those having difficulty are advised to apply for the Time to Pay scheme although HMRC are making it more difficult for people to utilize this scheme if they have used it previously.

UHY Hacker Young’s Nick Hancock stated: “Businesses will be concerned about HMRC turning the screws after the election as it strives to improve the public finances. If a business has unpaid tax and does not have a ‘Time to Pay’ agreement in place, HMRC is still prepared to pull the plug on that business to recover what is owed.”

He continued: “The most important message for businesses is that they cannot allow themselves to fall behind with tax payments and then hope for HMRC’s good will.”

Hancock concluded: “They have to open up a dialogue with HMRC as soon as they foresee cash flow problems and negotiate a realistic ‘Time to Pay’ agreement.”

HMRC use their ‘Spotlights’ publication as a means of communicating with tax payers. The latest edition is being used to highlight the different tax avoidance schemes which they will be likely to investigate as they continue to crackdown on such arrangements.

As such, HMRC has highlighted particular indicators which it has said taxpayers should be wary of. While one of these isn’t necessarily an indication that you are involved in a tax avoidance scheme, the presence of more of these indicators is likely to give HMRC greater cause to investigate.

The indicators include arrangements which are contrived or artificial or complex in comparison with the work carried out by you. Also, if there appears to be no risk to yourself but guaranteed returns then you should be asking questions. Another thing to be wary of is if you are required to agree to a confidentiality clause or if you are asked to pay money up front. You should also avoid any scheme which operates on a no win/no fee basis.

Often these schemes attempt to prove they are valid by stating that they have been vetted by an accountant or a lawyer but they do not provide their details. This should be a warning sign. It is basically a good idea to question every detail including the need for the use of offshore trusts, tax havens and tax exempt entities.

The number one rule is to be vigilant and remember that if it seems too good to be true then it probably is.

The start of a new year is always a time for reflection and planning for changes. This week already we have seen PCG outline what they believe to be the necessary focus for the government and policy makers in terms of freelance workers. Now, the Recruitment and Employment Confederation (REC) have spoken out about the policy issues which they believe to be most pertinent as we go forward in 2010.

We know there is going to be a General Election in the first half of the year and so the REC point out that this period of campaigning for a new government and indeed the newly elected government making an impact, will be a “pivotal” time in terms of influencing policy.

As such, the REC have released a statement in which they detail their “key lobbying priorities” for the year ahead. These priorities will be in addition to their campaigns within the financial services sector, interim management, technology, construction and healthcare.

The REC director of external relations, Tom Hadley, stated: “We face an action packed regulatory agenda in 2010 with a full hand of red hot issues. As well as fighting our corner and pushing back to government, we will use developments in areas such as safe recruitment and equality to highlight the positive contribution of the industry.”

He concluded: “The REC will continue to fight for the best possible regulatory landscape and it will be more important than ever to maintain a strong collective voice for the industry over the coming year.”

The head of public policy at REC, Anne Fairweather, said they would be taking forward issues of business tax and red tape, employment and skills, the benefits of a flexible workforce in the UK, public sector employment and the regulatory environment as a whole.

John Brazier, managing director of PCG, the trade body for freelance workers, has started the new year by openly requesting a fresh approach to contractors by policy makers.

He said: “All too often Government and policy framers have failed to pay adequate attention to the needs of the UK’s 1.4 million freelancers. Freelance businesses are part of the bedrock of the private sector, bringing a degree of flexibility and a skill set to the economy which is a real asset for UK plc. There needs to be a clear recognition of freelancing as a valid way of working; fairer taxation, better regulation, easier access to the market for the smallest businesses and a proper appreciation of the changing work patterns for millions of people.”

Mr Brazier also spoke of the need for an overhaul of the tax system as applicable to freelance workers. He commented: “We want to see a pro-business climate fostered in the UK, a real commitment from policy framers to think small first, not just say it. Fair regulation means regulation that is clear, accessible and not unduly burdensome. Fairness means allowing freelancers easier access to the market for their services. The Government needs to ensure regulatory barriers, burdens and costs to tendering are reduced, so freelancers can truly compete with larger businesses.

In conclusion, Mr Brazier stated: “Heavy handed and senseless laws weigh business down like a ball and chain. This is even more so with nano-businesses. Every hour spent complying with red tape is an hour not spent productively. We need to free up Britain’s talents to create wealth, not stifle them with top down bureaucracy.”