Crystal Umbrella

On April the 6^th the higher rate tax will come into effect with a liability of 50 pence in the pound. Tax advisors had been suggesting that limited company owners may wish to bring forward dividend payments this year to avoid this tax burden. However, it would appear that HMRC have caught up with this advice, according to accountancy firm Smith & Williamson. This means they are one step ahead of any companies who attempt to pursue this route.

Their tax director, Richard Mannion commented: “HMRC will take a special interest in dividends paid towards the end of the tax year to check that have been properly and legally paid. So if anyone plans on bringing forward their payment date, they must prove that payment is made before 5^th April 20120 and that it relates to profits earned up to that period.”

Smith and Williamson did concede that HMRC could actually have placed a ban on early dividend payments therefore an investigation into anyone employing this tactic is the least restrictive option. However, Mr Mannion believes that it is not the “easy option for government” as this clampdown is “akin to retrospective legislation”.

The bottom line is that any companies paying out dividends must be able to show that there are sufficient company reserves to distribute the dividends through their supporting accounts. Also, bringing forward dividends requires careful consideration as it could effectively force someone into the higher tax bracket.

Skillfair have conducted a survey amongst 40,000 independent professionals and have found that their daily fees have fallen by around eight per cent. The data collected shows that in 2008 the average daily fee charged by freelance consultants was £565 but by 2009 this had dropped to £523. Contractors who have experienced the highest pay cuts primarily worked in change management, IT management, telecoms and engineering.

Analysing these figures, Skillfair believe that is shows clients are “still prepared to pay realistic rates” for skilled freelancers. However, they also believe there could be a further explanation for the average drop in rates as many consultants are now working through agencies thus resulting in an average drop in take-home pay of fifteen per cent. Of course, the main reason believed to be behind the drop in rates is the fragile economy which has been responsible for “a lot of consultants…asked to work for derisory rates.”

This is the view of Gill Hunt, Skillfair founder, who spoke to Contractor UK. She said: “Interestingly, they’re quite comfortable with this if the client is in genuine need – but much less happy if they think [it is solely due to] an agency protecting their margins by passing on all the pressure.”

The Skillfair survey also revealed that ninety per cent of contractors expect that pay rates throughout 2010 will either increase or stay the same.

New research data shows that 60 per cent of small firms are unhappy with the reliability and speed of their broadband service. Thirteen per cent of the 1300 small firms surveyed said they would actually consider moving premises in order to secure a better connection which is unsurprising considering 30 per cent of respondents said they currently have an unreliable connection. This data comes at a crucial time, since the Digital Economy Bill is set to be debated next week in the House of Lords.

The Federation of Small Businesses is now urging the government to put in place a decent broadband infrastructure to ensure small firms are actually receiving the broadband service they are promised when they sign up to it.

Federation of Small Businesses Chairman, John Wright said: “The online world is crucial to small business development, especially as small firms look to grow and expand as the economy recovers. Small businesses, particularly in rural areas, have been promised action to deal with slow broadband and the ‘notspots’ – where there is no broadband access – but they have seen little action.

“These figures show that the broadband service provided to small firms is letting them down. Small businesses need fast and reliable broadband to ensure the UK remains a key player in the global economy. The Digital Economy Bill gives the Government a chance to guarantee Britain becomes a real competitor and the FSB is calling on the Government to enforce rules on service providers and regulators so that small firms are given the fair deal they deserve.”

The Association of Recruitment Consultancies (ARC) is challenging the legality of the draft Agency Workers Directive Regulations which were laid before Parliament at the start of this year. Despite a two part consultation process, ARC have stated that the draft Regulations contain important aspects which were omitted from the consultations and should not be introduced as part of a secondary legislation such as AWD.

The point in question refers to recruitment businesses who have no contact with agency workers. These recruitment businesses do not fall within the scope of the AWD but the regulations provide that they can still be held liable for the acquired rights of the agency worker. ARC have questioned the legality of this position and has subsequently raised this issue with government, requesting that the relevant regulations be removed from the draft. ARC believe that the government is essentially redefining the employment relationship definition within law. However, the Department for Business, Innovation and Skills has yet to comment on this issue.

Adrian Marlowe, ARC Chairman, commented: “It is crucial to understand that this argument does not affect the rights of agency workers to equal treatment or enforceability against the actual temporary work agency or the hirer. It is unfortunate that so little time has been given to consider these regulations when we have pressed for more time, and that they have been laid before Parliament ahead of an approaching election when MPs minds are probably more on their constituents than anything else. However we are where we are and everyone can be assured that the ARC will take whatever action is required to clarify this issue as it could have serious consequences for agencies. The Government’s sledgehammer to crack a nut approach also highlights an element of mistrust of the recruitment industry that regrettably still exists in Government. This makes it all the more important that ARC pursues its objective of improving relationships and understanding between Government and the recruitment industry.”

The Chancellor of the Exchequer, Alistair Darling, has confirmed that ‘Britain’s Budget for 2010′ will be delivered on 24^th March which means that he now has less than two weeks preparation for what may or may not be his last budget, given the looming general election.

The budget date was announced by Mr Darling in a ministerial statement yesterday and this detail was later reiterated by the prime minister during a separate speech. The date of the budget will draw further speculation that the general election will be held on 6^th May as has long been expected. The belief now, however, is that the economy will be the main issue which the political parties will fight over and essentially seek to gain votes over. Setting the scene, Gordon Brown spoke yesterday to argue that a Tory government would further risk the UK economy whereas economic recovery would be protected by a Labour government. The week following the budget will surely see these arguments played out in parliament.

The expectation is then that the prime minister will approach Buckingham Palace following the Easter weekend to formally announce the general election. The announcement would then be made two weeks before the GDP figures are released.

Labour have pledged to do “whatever it takes” to safeguard economic recovery with a focus on “protecting and advancing the recovery”. The prime minister also stated an intention to ensure “Britain can succeed in new industries”.

The PCG have spoken out regarding their view that IR35 regulations should not affect contractors who are working on several different projects for the same client. It is the view of PCG that HMRC should only be concerned with the nature of the arrangement between the contractor and client and not the duration of the agreement.

The PCG believe that contractors must be able to prove that they are working on separate projects, even if this is for the same client, and that this is not the same as ongoing work. If the contractor can prove this, it is the belief of the PCG that HMRC will “not have a case”. It is also important that contractors can prove to HMRC, if necessary, that they have an “unfettered right of substitution” and that through their contractual agreement and subsequent working practices they have control over the work they carry out.

PCG said: “HMRC must prove that personal service, control and mutuality of obligations (the expectation that work will be offered and accepted) existed in the engagement.”

Managing director of Brookson, Martin Hesketh responded: “This news article confirms the importance of contractual documentation. Not only should contractors who work on multiple projects ensure that there are contracts in place for each, it is essential that you read the contracts and ensure that they are consistent with your working practices and accurately reflect your relationship as an independent contractor with your client.”

All businesses with an annual turnover of £100,000 will be required to file their VAT returns online as of 1st April 2010. They will also be required to make electronic payments in respect of any VAT due.

Businesses with an annual turnover of £100,000 as at 31st December last year should have received a letter from HMRC last month which would have explained that VAT returns would be online as of next month. The enclosed guide detailed the steps that all affected businesses would have to take to prepare for the changeover.

Although this change is currently only affecting companies with an annual turnover exceeding £100,000 it is expected that this will be rolled out to all VAT registered companies by 2012.

As for the companies who will be liable for VAT online services from April, there are some steps which they will need to take in preparation. First of all, the company will need to be registered for the VAT online service. You should receive an activation PIN by post within 7 days. To ensure you do not miss any deadlines you can also sign up to the free email reminder service. You should also speak to your accountant if he is the person usually responsible for filing your VAT return. It is also necessary to check your personal business processes to examine whether or not there is anything you need to adapt in light of these changes. You can also set up your preferred payment method when you register online, however, if you pay by cheque you will be required to order the HMRC Bank Giro slips for paying the cheques into participating banks.

Crystal Umbrella is dedicated to providing a professional service to all of our customers and clients. This is why, back in 2008, we launched our Recognition scheme to publicly praise and reward our staff who go that extra mile for our customers and client base. The aim, as always, was to ensure that those using our services can trust in the knowledge and expertise which exists within Crystal and that, irrespective of their reason for contacting us, individuals can expect to receive the highest standards of customer care.

The Recognition scheme has actually succeeded in refocussing the entire business, serving as a reminder to all staff that customer service and satisfaction is at the very heart of the service we provide. Overall the scheme has been a resounding success and we would like to take this opportunity to congratulate our 2009 winners: Sam Cayton, Suzanne Coombes and Christine Smith. In fact, Sam Cayton and his colleagues in Information Technologies deserve further congratulations as they were named Crystal Umbrella’s Team of the Year 2009.

Crystal Umbrella continues to promote excellence. We are dedicated to developing our staff and our business. We recognise and appreciate the skills and talents of each and every one of our employees and the opportunity to reward their dedication to the work that we do. Our Recognition scheme has now run its course but our commitment to customer service and staff development continues with our newly-launched scheme which aims to tap into the skills and knowledge of our front line staff to generate fresh ideas for the business as a whole.

The recession has had a detrimental effect on recruitment in the UK but new research conducted by ReThink Recruitment found that IT contractors were actually hit harder than anyone else, particularly as contractor rate reduction programmes were commonplace throughout 2009.

ReThink, a technology staffing company, found that during last year a massive 98 per cent of IT contractors were faced with pay cuts or pay freezes. The average pay cut was around ten per cent. This was in comparison to 71 per cent of their permanent counterparts. The research also found that over half of the IT directors surveyed were planning to freeze pay rates during the coming year and 83 per cent expect that contractor rates will stay the same. It is unlikely, however, that IT contractors will see their pay rates cut this year.

Research suggests that the demand for experienced and skilled contractors is now beginning to pick up again. This is particularly true of contractors who are trained and skilled in LINUX, .Net, Java and C#. Demand has increased for these skills sets over the past three months, which suggests that contractor opportunities are set to increase in 2010.

Director of ReThink Recruitment, Michael Bennett, commented: “Contractors are more vulnerable to market fluctuations, so it’s no surprise they have been hit hardest by the recession. That said, with the job market now tightening rates for contractors should rise ahead of pay increases for permanent staff.”

There seems to be a direct link between the recent demand for IT staff and the recovery of the banking industry. This is the belief of the Association of Recruitment Consultants (ARC) who believe that many companies are looking to upgrade their IT systems as the UK leaves recession. This means that skilled IT contractors are back in demand.

This increase in job opportunities was actually evident in the most recent Report on Jobs from the Recruitment and Employment Confederation, which showed that employment for both contract and permanent staff increased in February.

Chairman of ARC, Adrian Marlowe, said: “As far as IT is concerned, our members have also experienced an increase in IT employment requirements. At the moment, there is definitely an increase in work of that nature.”

He continued: “I think that having laid low for 18 months or so, those organisations that have larger IT requirements are taking the view that they need to upgrade their systems, hence the IT requirement in that regard.”

However, the REC have warned that there will need to be “radical reform” to ensure that the ongoing cuts in public spending do not have a negative effect on recruitment opportunities. Their Report on Jobs did show the sharpest increase in the number of vacancies between January and February through the past 30 months, however the report noted a slowdown in billing for contractors during that period.

Chief executive of REC, Kevin Green, believes that contractor opportunities in the public sector could be set to decrease: “Looking ahead, there are indications that recruitment in the public sector could drop off fast. A new approach to public sector resourcing is now critical and will have a direct impact on the wider employment outlook. We question whether the public sector has the right capability in place to lead the necessary transformation and put in place staffing structures that will keep costs down while improving public services.”