Crystal Umbrella

PAYE umbrella contractors and other freelancers who have put off taking out any form of income protection plan might do well to take heed of some new research from a leading cash plan provider. A survey by Medicash polled 400 self-employed people in the UK who were receiving hospital or outpatient treatment – and came up with some disquieting conclusions. On average, when a self-employed person is prevented from working due to ill health or hospital admission, he or she will lose approximately £3,000 in earnings. A third of respondents included in the survey reported an even more drastic loss of income at £5,000.

Shout 99 reports comments made by the Chief Executive of Medicash, Sue Weir, who said, “Self-employed people are particularly vulnerable if they are diagnosed with an illness and it’s worrying that so few have any sort of plan in place”. She went on to explain that many people simply “don’t take the time to think about how they would cope financially if they were unable to work and if this happens it can cause considerable strain for both individuals and their families.”

Many highly skilled people have turned to working through umbrella companies or limited companies over the last few years not simply for the better pay rates these options typically yield but to enjoy greater flexibility around work. However, illness can strike anyone, contractor or permanent employee, out of the blue. Needless to say, not having payment protection in place can add considerable hardship to what will already be an upsetting and stressful experience. Moral of the story? Get covered. Fast…

The rate of VAT was reduced to 15% at the height of the country’s economic downturn. At the time, the chancellor warned that it would revert back to 17.5% as soon as the economy showed signs of recovery. HMRC have now confirmed that this will happen on 1^st January 2010. This will affect the majority of businesses from the stroke of midnight at New Year. The only exception will be pubs and clubs who operate through the night. However, tax experts have said that such businesses can only expect a few hours grace period from HMRC before they will have to apply the full rate.

HMRC have issued guidance to support businesses through the transition of reverting back to the original VAT rate. It is expected that the change will cost businesses in the region of £125m.

Choosing to increase VAT on New Years’ Day has been met with criticism from business groups and economists alike.

George Bull, from accountancy group Baker Tilly, spoke to the Financial Times about the impending increase. He said that he believed that the VAT cut had failed to achieve an increase in consumer spending as had been hoped. He believes this is the reason why the reduction looks set to be cancelled at the turn of the year.

For many, it’s hardly surprising as recent indications suggest that the decrease barely impacted upon consumer spending. Although for campaigners wanting to postpone the imminent VAT rise, the refusal to prolong the period is seen as a significant disappointment.