Crystal Umbrella

Small business issues pertaining to unfair banking practices are not new. However, as the credit crunch and subsequent recession hit, small businesses were faced with increasing difficulty obtaining lending from their banks. Once again, last month, figures from the British Banking Association showed that business lending was in decline. There has also been much frustration regarding the length of time small businesses and contractors have had to wait to find out if their application has been accepted or declined.

Now the Forum of Private Businesses is asking small businesses to take part in a survey, which will ask for their banking experiences. This is being conducted on behalf of the Office of Fair Trading. They want to know how the big banks are treating small businesses. The Forum is trying to encourage as many small businesses as possible to participate in the survey to provide the OFT with plenty of evidence of unfair treatment.

Thomas Parry, FPB Research Manager, commented: “Clearly, the issue of the way banks treat small firms has received an enormous amount of attention recently and sparked a lot of debate.

“One the one hand, groups like the Forum have been arguing that viable smaller firms are being unjustifiably denied credit, or offered it at an extortionate cost, by risk-averse banks which often don’t understand their needs.

“On the other hand, the banks and their industry groups have claimed that lending is down simply because demand is down and they are doing everything they can to increase the flow of finance to business. There is also a wider debate about competition between banks, with some critics arguing that smaller firms, particularly in Scotland, face a limited amount of choice in the marketplace.”

Mr Parry concluded: “We hope this survey will provide the OFT with clear, empirical evidence and reinforce the valid concerns many small business owners have over their relationships with their banks, and the banking industry in general.”

UK contractors working in the IT industry, particularly those working as limited companies or sole traders have been boosted by a new report from an advice website.

The report claims that a wholesale changed in attitude means a larger amount of businesses do not know view IT as an area they can cut back on. This is a drastic sea change from previous economic downturns where IT budgets were among the biggest cutbacks for many organisations.

Of course the importance of IT is growing all the time. There are huge numbers of contractors working in the IT industry, and that number is expected to grow significantly in the years ahead. Whilst many businesses and organisations will have to make IT cutbacks, the fact that they will only do if absolutely necessary is a major boost to contractors in the industry.

“This time round IT was seen as both a cost-cutting enabler and as too crucial to the business,” said Gerry McLaughlin, spokesman for Itcontractor.com.

“In the new information age, access to business information is seen as the biggest differentiator and companies didn’t want to come out of recession a couple of years behind their rivals in terms of the software components of their products and services.”

Contractors out of work or looking to retrain would do well to consider the benefits of the IT industry. Whatever the effects of the upcoming spending review, the IT sector should continue to grow in the next decade.

There is a widely held opinion that opportunities for contractors are rapidly dwindling as a result of the extensive public sector spending cuts. However, there could actually be some exciting times ahead for skilled IT contractors.

FTEN are an American technological company who are responsible for innovating a new system, which will be rolled out across the financial services sector. This, in turn, will create an abundance of job opportunities for skilled contractors who will be required to set the new system up. FTEN have just had a patent granted on their new technology, which is ground breaking within the sector. It is believed that this system, which analyses systemic risk-management in real time, will actually revolutionise financial services.

The question appears to be whether the contracting market will actually be able to meet the demand because it is expected that there will be no shortage of opportunities once this project gets underway. All market-based firms will require updates to their existing technology to allow the installation of the new technology. Eventually the public sector will have to update their systems in order not to be left behind. This will create further opportunities.

This is not just a possibility. This new technology is currently being purchased by the banking sector. IT contractors are sure to benefit from these developments and should look to financial services for these new opportunities.

HMRC are continuing their campaign to track funds held offshore in a bid to reclaim any unpaid taxes. This month alone, HMRC have issued letters to 600 taxpayers who have taken up the Offshore Disclosure Facility in a bid to understand how the accounts operate. They have asked the taxpayers to provide them with information regarding how the accounts were set up and how they operate.

HMRC are also planning to follow these initial investigative letters up by telephoning the individuals. They have stated, however, that the information gleamed from these conversations will not be used when assessing an individual’s tax liability but will be treated in the strictest confidence.

However, despite the promises, former tax inspector Phil Berwick has issued a stark warning to taxpayers about such informal chats with HMRC. He points out the risks of volunteering to provide the taxman with information which could be used against them in the future if the answers they provide are in any way incriminating. Mr Berwick advised that questions should really be answered via an accountant.

The aim of its current programme of investigations is to obtain information regarding particular banks and advisers who are operating schemes that are unofficial. However, there are many legitimate schemes, such as the Liechtenstein Disclosure Facilities that has seen 700 contractors and independent taxpayers declare their offshore savings with more and more people disclosing every month. With further Liechtenstein legislation expected in September, the number of disclosures are expected to rise even further since this legislation will place a responsibility on all Liechtenstein banks to make contact with any clients suspected of holding undeclared sums of money offshore.

The Federation of Small Businesses have stated their position on the automatic pensions enrolment scheme which is due to commence in 2012. They believe that micro businesses should be exempt from this scheme as it would be a financial and administrative burden for firms with less than 10 employees.

FSB Policy Chairman, Mike Cherry, stated: “The FSB welcomes initiatives to help people save for their future in a pension but we are still concerned the new automatic enrolment pension scheme is going to be an administrative headache for small firms – particularly micro firms – and will cost them in time and money.”

The FSB also believe there are issues regarding the expertise that is required to select a pension and put the proposed changes in place for employees. They have researched this issue and 70% of small business owners said they did not feel confident choosing their employees’ pension.

They have proposed, instead, a default scheme which employees without other savings or pension provision would be enrolled into. They believe such a scheme should be collected through PAYE or similar and the money invested in low risk funds.

He continued: “We know that small firms do not feel confident in choosing a pension scheme because of its complicated nature and we are thoroughly disappointed that five years on from the original proposals, the pensions industry has yet to come up with an efficient system to cater for micro firms. The FSB is calling on the Government to make micro firms exempt from the automatic enrolment scheme and improve proposals for small firms.”

Recently, some unions have been critical of recruitment agencies that supply staff to hospitals. They have claimed that these recruitment agencies have been charging exorbitant fees. Unison’s Head of Health, Karen Jennings, stated her belief that private companies should not be invited to invest in the National Health Service. Her argument was that the reason managed flexible services provider, NHS Professionals, is in existence was in order to counteract the issue of hospitals being ripped off and effectively held to ransom by the outrageous fees charged to hospitals by recruitment agencies.

NHS Professionals actually has approximately 50,000 individuals on its books and therefore ranks amongst the largest temporary worker suppliers in the UK. On an average year NHS Professionals successfully fills more than 2 million shifts.

However, on the other side of the argument, medical recruitment specialists Healthcare Locums commented through a spokesperson who said that the NHS Professional data supplied by Unison was misleading. They said that, actually, NHS Professionals has been far from successful, having lost £100m of public funds. They said this figure considerably outweighs profits made by even the largest and most successful medical recruitment agencies.

This opinion is seemingly backed up by independent research, which shows that a doctor recruited through a private agency costs on average £4500 less than an equivalent doctor recruited through NHS Professionals.

The REC have responded by reinforcing the need for flexible staff within the healthcare sector. They also believe that the government asking for private sector involvement shows a commitment to this model. The REC also support sale of NHS Professionals as announced by the Department of Health. Any prospective investors from the private sector have a deadline of August 27^th to register their interest.

We all know HMRC are dedicated to collecting unpaid taxes and legally challenging anyone who misinterprets the law. This has been proven once again in a s660A case. This may seem of little relevance to many contractors since it relates to ‘husband and wife’ businesses but, if nothing else, it shows there is nowhere to hide from HMRC when they believe you owe money.

Speaking about the case of Patmore v The Commissioners for HM Revenue & Customs, co-founder of Bauer & Cottrell, Kate Cottrell, stated that HMRC are “still considering and trying to apply the Settlements legislation (s660A) despite their defeat in the Arctic Systems case.”

She continued: We must not forget that it is still open to HMRC to simply change the law where the law does not adequately deal with perceived tax advantages.”

HMRC valued Mr Patmore’s tax advantages at £20,000, which they believe, occurred as dividends were taxed at Mrs Patmore’s lower rate instead of his higher rate.

Speaking to Contractor UK Paul Spindler from Kingston Smith LLP commented: “The tribunal concluded there had actually been a gift of income,” the chartered accountant said. [Even then] the actual amount of the gift of income was much lower than HMRC had contended because Mrs Patmore was jointly liable for a loan, which had been secured on the family home and used to buy ordinary shares. Mrs Patmore had not received 50% of these shares, as most were acquired by Mr Patmore, so the tribunal considered this a constructive trust in favour of Mrs Patmore.”

He continued: “The tribunal did criticise HMRC, though it is clear that individuals who would like to split their income and take advantage of the exemptions [to s660A] must ensure that they have taken professional advice before creating new shares or altering the rights of existing shares.”

Ms Cottrell concluded: “With the recent creation of the new Office of Tax Simplification, Section 660 could now be back in the spotlight as part of the Small Business Tax Simplification Review. Contractors who have entered into such arrangements should remain vigilant.”

There has been a feeling of ‘at last’ amongst the contracting community following the news that IR35 will be reviewed as part of the coalition government’s review of small business taxation systems. This is to be the responsibility of the Office of Tax Simplification which is newly formed. There is a fear, however, that contractors are labouring under the misapprehension that IR35 is set to be abolished.

The newly appointed tax director at the Office of Tax Simplification, John Whiting, has been talking to Taxation magazine with the aim of correcting some of these myths which are flying about. Mr Whiting confirmed to the magazine that no decisions have been made at this juncture and they were keeping all of their options open. He did confirm, however, that the analysis of the wider taxation system will be the first step for the OTS.

This, of course, is not to suggest that there is no hope for the abolition of this contentious tax rule. Mr Whiting has acknowledged that the intermediaries legislation has been ineffective to date. He will be looking at the reasons why it did not work as expected, since its introduction was as a result of severe abuses of the previous taxation system. The fear is that these loopholes and subsequent abuse of the system would resurface if the rule was abolished without appropriate replacement legislation.

Mr Whiting has promised an all encompassing review of IR35 but contractors will have to wait until next year’s Budget for the conclusion to his analysis.

Despite the absence of a formal announcement so far, accountants have been informed by government officials that all businesses will be required to file their VAT returns online as of 1^st April 2012.

Larger businesses with annual turnovers of £100,000 or over have already been introduced to the electronic VAT-filing. These firms must submit their returns online by July 31^st or they incur a penalty. The only exception to this is individuals who have a “conscientious objection to using a computer”.

The electronic filing will now be rolled out to businesses who are below the VAT-registration threshold. The CIOT have already stated their belief that the same exception should apply but another should be added – “people who have disabilities that make it difficult, if not impossible, to use a computer.”

The CIOT are already anticipating these forthcoming changes by consulting and informing small businesses about the new process. They have been particularly dedicated to offering their advice to those small businesses who do not employ the services of an accountant. However, they are also looking for information from these individuals. They want to know about any difficulties which these taxpayers experience when using the electronic system.

CIOT have set up a dedicated email account and they are asking taxpayers to answer questions such as: “Have any businesses had to appoint agents where they had not done so before because the owner/proprietor/partners could not cope with online filing?”

They would hope to share this information with HMRC to improve the service for everyone.

HMRC have publicised details of a telephone scam which could be targeted at contractors and small business owners. The fraudsters have been calling taxpayers posing as members of HMRC staff. HMRC have received several reports about this scam where taxpayers were asked to provide the caller with their bank account details in .order that a tax rebate could be paid in.

HMRC also stated that taxpayers have been receiving an increasing number of phishing emails. These emails claim to be from HMRC and often they have been sent from a plausible-looking email but  their sole purposes to obtain personal info, mainly bank details. These are then used to empty victim’s bank accounts. Despite 180 websites responsible for these emails having been shut down by the relevant authorities over the past quarter, more keep appearing.

Director of customer contact at HMRC, Chris Hopson, confirmed that they would only ever confirm a tax refund by post – never by email or telephone. He concluded: “We only ever contact customers who are due a tax refund in writing by post. We never use telephone calls, emails or external companies in these circumstances. We strongly urge anyone receiving such a phone call not to give any information to the caller, but report it to the police straight away. If customers receive an email claiming to be from HMRC, we recommend they send it to us for investigation before deleting it permanently.”