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New legislation has come into force which will allow HMRC to publicise the names and details of individuals and companies who evade tax.
This will be effective from 1st April 2010.
Commenting on this new legislation. Financial secretary to the Treasury, Stephen Timms said: “It is only right that people pay their fair share of tax, which supports vital public services. We know that law-abiding taxpayers will want to see the results of HMRC’s investigations into tax cheats. This new approach should make people think again about trying to get away with tax fraud. As well as having to pay the tax, interest on the tax, plus penalties of up to 100 per cent of the tax lost, they also now risk being identified publicly.”
The new legislation follows on from the New Disclosure Opportunity which gave taxpayers a deadline of 4th January to inform HMRC that they were planning to disclose unpaid taxes in exchange for a reduced penalty as long as HMRC had not already requested such a disclosure. The reduced penalty stood at 10 per cent as opposed to the 100 per cent if investigated by HMRC and found to have owed taxes. It is believed that this disclosure opportunity was taken up by around 10,000 people.
Now HMRC are planning to investigate those who have not made disclosure and who they believe to owe taxes. This will commence on 12th March with information which has been provided to HMRC from over 300 banks.

As demand for IT services continues to recover, IT recruiters believe that contracted IT staff could be tempted to leave their current projects for better rates elsewhere. Many IT recruiters, who spoke to Contractor UK, stated that the increased demand for skilled IT contractors was resulting in increased pay.

Many contractors were actually hired last year when rates were particularly low. Many actually accepted pay cuts of between 5 and 25 per cent in a ‘take it or leave’ deal. Now these contractors are the ones most likely to ‘jump ship’.

Managing director of Jenrick IT, Philip Fanthom, commented: “Now that the demand is returning, this kind of approach may ‘come home to roost’ with IT contractors opting to move to other [richer] projects/clients.”

He also believes that the treatment of contractors during the recession will now “come home to roost” as poorly treated contractors move on to better paying projects.

This is a sentiment echoed by Bernie Potton of SQ Computer Personnel, who said: “There is no loyalty to a client that has itself cut rates mid-term (or) at contract renewal time mid-project.”

He continued: “The increase in demand as the market improves will certainly result in contractors who have had their rates cut, sometimes brutally and excessively, jumping ship mid-term for more money.”

Mr Potton concluded: “We have already started to notice a trend in contractors currently in the public sector sending their CVs around to find different roles. Perhaps they have already, internally, got wind of cut-backs and project cancellations.”

The government have formally responded to the Intra Company Transfer petition. Their message is that the scheme does not allow cheap migrant workers to be employed in place in UK workers. The petition aimed to highlight the unfair use of the scheme and called for its abolition by the Prime Minister.

The government’s response was as follows:

“Thank you for your e petition about the Intra Company Transfer scheme and non-EEA workers in the IT industry.

In November 2008, the work permit arrangements were replaced by Tier 2 of the Points-Based System. Tier 2 ensures that those who benefit most directly from migration, such as employers, play their part in ensuring the system is not abused. To employ an overseas worker an employer must be licensed by the UK Border Agency to act as a sponsor. Tier 2, like the work permit arrangements it replaces, is demand-led and not based on numerical targets or quotas. Overseas workers are granted permission to fill a specific skilled vacancy for a specific period of time.

Unless certain exemptions apply, employers must advertise their vacancies to UK workers, and demonstrate that they cannot fill the post with a suitably qualified or skilled settled worker, before they can sponsor a migrant under Tier 2. One exception is if the job is a recognised shortage occupation. The independent Migration Advisory Committee recently recommended that certain posts within visual effects and 2D/3D computer animation for film, television or video games should be added to the shortage occupation list. There are no other IT occupations on the list. Another exception is the intra-company transfer (ICT) route, which is designed to enable employees of multinational companies to transfer to skilled posts in this country and to enhance the UK’s competitiveness in attracting inward investment by overseas companies.

Currently, an ICT post requires that the migrant has had a minimum of six months previous experience working for the sponsor and will fill a genuine vacancy in the UK for an established employee that cannot be filled with a suitably qualified or skilled settled worker.

However, on 7 September 2009, following advice from the Migration Advisory Committee, the Home Secretary announced a number of changes to the ICT rules in Tier 2 of the Points Based System. From the spring of 2010 companies will only be able to transfer staff through the ICT route where they employed the individual for at least 12 months, doubling the existing 6 month threshold and the route will no longer lead to permanent residence in the UK. An additional route will be created to allow graduates on global graduate programmes to transfer to the UK for a period of no more than 12 months where they have three months experience of working for the company.

The off-shoring of IT work is not an immigration issue. The immigration arrangements do not prevent employers from outsourcing work to another company or bringing migrant workers into the UK for either short or lengthy periods of time, provided the relevant criteria are met. These are business decisions for employers to determine. Fair access to migrant labour can help to encourage large multinational firms to invest in the UK. In such cases, access to migrant labour encourages growth in the industry to accommodate both UK and migrant workers. UK workers also benefit from working with the most highly skilled workers from around the world and sharing expertise.

We do not allow migrant workers to be used as a source of cheap labour and undercut UK workers. Employers must pay salaries at that are least equal to those paid to resident workers with similar skills, as specified in the UK Border Agency’s guidance for sponsors. Sponsors must confirm the salaries and allowances of all migrants that they sponsor. This is checked when the migrant makes a Tier 2 application and verified through later compliance checks. If the company does not pay the stated salary, they risk losing their sponsor licence.

Migrant workers benefit from international tax agreements in the same way that UK workers benefit when employed overseas. Further information is available on the Directgov website.

We support employers who ensure their workers are accommodated whilst in the UK, but we have set an upper limit of 30 per cent of the gross salary package for this type of allowance. This limits the amount of tax relief they are entitled to, as well as ensuring that the workers are paid an appropriate rate for the skilled job they are employed to do in the UK.”

A new survey of over 700 employers has shown a growing trend for IT companies relocating employment opportunities abroad. India is the most popular destination for relocating jobs abroad, although Eastern Europe is also proving popular.

The survey spoke to employers across all industries but, of those who claimed to have offshore intentions, nearly half were from the IT sector. Co-authors of the survey, The Chartered Institute of Personnel and Development, stated their belief that such offshore intentions represent a “medium-term concern” for the UK economy.

This is not news to the IT sector in India. In fact, at their principal IT conference, which took place just last week, the Indian IT body Basscom stated its belief that 150,000 IT jobs were likely to be created in the country this year. Their core markets are not currently growing as fast as their healthcare, utility and retail sectors therefore it is expected that IT jobs will be created rather quickly. Nasscom are of the belief that, over the next decade, Asia will account for over a quarter of the total IT and business consumption globally.

Jim Champy of Dell Services consultancy department believes that this year will see Indian companies purchasing more computer services than America and Europe. Speaking to the Financial Times he said that the money spent by Asian companies on IT will soon overshadow their Western counterparts.

TechMarketView analysts backed up this view, stating that IT firms in the West are already scrambling to “get a slice of the Asian action”.

The Cabinet Office and key industry figures have joined together to combat ongoing problems faced by IT contractors with regards to security clearance. Contractor group PCG told how many contractors are required to have clearance before they can even be considered for work.

John Brazier, PCG managing director, believes that such practice has a detrimental effect on the recruitment opportunities available to contractors. This sentiment has been echoed by cabinet minister Angela Smith, who said: “National security vetting controls are important, but must be applied proportionately and fairly. Where security clearances are necessary, an existing clearance should not be used as part of the selection criteria or inhibit access to jobs, except in rare cases where a contract is urgent or very short term.”

Director of REC, Tom Hadley, echoed: “Contract jobs in sensitive areas may require a security clearance; however this should not be seen as a pre-requisite for the posting. In many cases clients can wait for a candidate to be cleared and it is important that these jobs are open to as many contractors as possible.”

Speaking to Contractor UK, Mr Brazier concluded: “At the same time the Cabinet Office has written to the biggest 250 agencies in the country to draw their attention to this issue and remind them to observe best practice as well as having the guidelines published on the website of the Office of Government Commerce.”

Any concerns regarding security clearance can be relayed to the Cabinet Office at vettinggroup@cabinet-office.x.gsi.gov.uk.

SThree are one of the industry’s leading recruitment agencies. They have reported a sharp fall in their 2009 revenues in comparison with previous years. However, it is good news for contractors as they have announced that the contracts section has continued to do well despite difficult conditions.

In their Preliminary Results report they stated: “2009 was by any standards an extraordinary year and was without question one of the most difficult the Group has faced in its twenty three year history. The impact of the global crisis on demand for specialist staff was as tough, if not worse than the dot com crash.”

In actual fact, during 2009, SThree’s contract margin actually increased to 22.1%, up from 21.5% in 2008. You can actually see the difference between the effect on permanent placements, which were down 40.8% and contracts placements which were down 27.6%. It is inevitable that temporary placements are stronger during tough economic times.

With regards to the future, SThree are staying positive: “Towards the end of the year there were signs that certain markets were improving and that others were at the least stable and, so far, this has continued into 2010. Compared with what the Group has been used to in recent times, this was a welcome positive trend which was reflected in the Group’s return to headcount growth. Whilst there are indications that confidence is gradually returning to the market and this above all else is what is needed for a full recovery to gain traction, it remains true that in overall terms market conditions have yet to recover to anything close to normal.”

The industry as a whole is still digesting the BN66 ruling which was handed down at the High Court last week. Mr Justice Parker ruled that HMRC could retrospectively claim tax back as far as 1987.

Speaking to Contractor UK, Chartered Institute of Taxation’s John Whiting, said: “ think all tax practitioners will worry a bit about this judgement if it is seen as opening the door to retrospection. [This judgement is] of concern to all because tax systems should aim to give certainty. Retrospection is inherently unfair, creates uncertainty and risks damaging trust in the system.”

Meanwhile Simon Dolan from SJD Accountancy placed doubts on Mr Justice Parker’s claims that HMRC would be considering an individual’s financial position before making the decision to pursue tax from them.

Dolan stated: “Despite the judge’s warm words about the Revenue’s sympathetic approach to taxpayers suffering financial hardship, I’m sure that going forward the taxman will have no hesitation in approaching them for the tax owed. This is obviously a disappointing result for lots of contractors who have been caught out by the promises of the scheme provider, resulting in uncertainty and worse for many of the provider’s customers.”
He continued: “What will happen now is that the tax demands will now become payable, up to the point that an appeal to yesterday’s ruling overturns them [But] this is not taxpayers falling upon hard times, rather HMRC will see it as taxpayers choosing to get involved in a complex, anti-avoidance offshore scheme that, for some, saved hundreds of thousands of pounds”.

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.”

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

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.”