Crystal Umbrella

Specialist accountancy firm SJD Accountancy has joined forces with specialist IT recruiter Technojobs to create a rate checker for contractors. This new service will cover the most up to date IT contracting including Java, SQL and C++. The rate checker will be a useful tool for those considering a working as a contractor as well as experienced contractors.

Information available on the web page will include average national and daily rates of pay across all skill sets within the sector.

Managing Director of SJD Accountancy, Simon Dolan, stated: “SJD focuses on giving as much advice and guidance to contractors as possible. We’re specialists and have been helping IT contractors make the transition from permanent work to contracting – we hope our new contract rate checker can make the transition that little bit easier.”

SJD Accountancy is a sector leading company providing accountancy services to freelancers and contractors. They are accredited by the Professional Contractors Group as a Quality Accountant. Meanwhile, Technojobs is an award winning IT recruiter, advertising over 12,000 contracts every month.

Sales and Marketing Manager of TechnoJobs, Anthony Sherick, commented on the new partnership service: “The page has huge value for those entering the contractor market as well as experienced IT contractors’. This project seeks a natural fit between the two companies. We have a number of other projects on the go and have plans for future partnerships that will further benefit both contractors and recruiters alike”.

The Professional Contractors Group will be present at Embedded Systems Conference UK (ESC UK) in Farnborough between the 6^th and 8^th October. Visitors to their stand (451) will have access to an abundance of information pertinent to contractors; whether you are an existing contractor or you are thinking of becoming one. This will include information on insurance, tax issues, accounting, personal finances and plenty of practical advice

There are currently 1.4 million contractors working across all sectors in the UK. The current economic climate, coupled with redundancies, means that many more people are choosing to set up in business for themselves.

John Brazier, Managing Director of PCG said: “In many ways freelancers are the embedded system of the workforce, often brought in to fulfil a specific function vital to performance, but receiving little recognition of the value that they contribute; they are the unsung heroes of the workplace. Irreversible structural, social and economic trends mean that freelancing is here to stay – it is a valid career choice and not just a stopgap for many and the growing number of professionals who are opting to go freelance is proof of that.

“Moreover, freelancers are increasingly being recognised as an immensely important, contributing group by major organisations and crucial to the success of UK plc. PCG has a wealth of advice and support available to anyone managing or thinking about setting up a freelance business and we encourage anyone considering freelancing to visit our stand at the exhibition to find out more.”

The Professional Contractors Group (PCG) held a round table event yesterday, chaired by their managing director, John Brazier. The key issues on the agenda were the legal definition of the term ‘contractor’, how to influence political parties ahead of the general election and how the negative effects of the ‘Agency Workers Directive’ can best be tackled.

This event was attended by stakeholders from sector, industry and national bodies along with recruiters and industry commentators. There were speakers from the Recruitment and Employment Confederation (REC), the National Union of Journalists (NUJ), tax specialists and an Emeritus Professor of Employment Law. The PCG had invited a government speaker to attend but the invitation was declined.

The different terms for contractors were discussed as used in different industries such as freelancers, interims, locums and supplies. Information gathered at the event suggests that politicians view only full time employment as the ‘proper course’ and therefore contractors are seen as ‘deviant’ for not following this route. With regards to defining contractors in the employment law statute books it was agreed that they must make a distinction between contractors and traditional small businesses.

It was agreed that contractor bodies hoping to influence political agendas must reach agreement now as manifestos are currently being created. One speaker, however, warned that no political action on contractors will happen quickly as it will take until the next election – to be held no later than 3^rd June 2010 – for pledges to reform legislation to be written into manifestos and then at least another year for implementation by the victorious political party.

The EU has driven the Agency Workers’ Directive and this was widely recognised at the meeting. This has been particularly problematic as there is no understanding of the flexible workforce which is represented by freelancers and contractors in the UK using agencies who effectively act as sales and marketing departments to contractors. Also, it is difficult to reach an understanding of what constitutes a ‘vulnerable worker’. The implementation window for this directive is April 2010-October 2011. A consultation is in process by the Department of Business, Innovation and Skills on its implementation.

The consensus of the day was that contractors continue to be poorly defined and understood despite providing a necessary and valuable service to UK PLC.

An investigation by Radio Four’s File on 4 has discovered that British IT contractors have been losing out on jobs to non-EU workers because they are cheaper. This programme had previously uncovered BT’s large-scale use of ‘onshore offshoring’ in their quest to reduce costs. A former BT contractor was told that he was being replaced by a worker from India who would cost about half of what he was costing. BT themselves said that they were trying to stop depending so heavily on contractors and that the Indian company was merely providing them with specialist staff.

Businesses can use intra company transfer visas to employ staff from outside the EU, permissible through immigration law if the staff can provide skills which are not available in the UK. BT said that they have a “long standing relationship” with Tech Mahindra and are now just tapping into their “highly skilled workforce”.

The Professional Contractors Group (PCG) has condemned this situation. Their managing director, John Brazier, said: “We had been hearing for some time from contractors that BT may perhaps be one of the worst offenders, replacing contract staff with workers on Intra-Company Transfer visas. Such behaviour reduces opportunities for IT contractors that exist in the UK, and in a recession opportunities should be created, not limited.” He continued, “We believe the system should be amended, and Professor David Metcalfe’s recent comments stating that the Migration Advisory Committee (MAC) will be exploring potential options for doing so are encouraging. We will shortly be making our submissions to the MAC calling for significant amendments to the system. Ideally we would like to see no position filled by Intra Company Transfer without first enduring that no UK worker is available to fill the post.”

The Professional Contractors’ Group (PCG) has been lobbying the government to get rid of the tax rule IR35 as the cost of enforcing the controversial rule has been proven to be greater than the tax income it creates.

Freedom of Information rules allowed PCG to access accounts which showed that IR35 had only raised £9.2m in tax for the tax years 2002/3 until 2007/8. Originally the government had predicted that the IR35 rule would bring in £220m per annum.

John Brazier, managing director of the PCG said, “IR35 makes very little money for the government, and given the cost of enforcing it, and the number of failed investigations for HM Revenue and Customs (HMRC), it may even cost more to implement than it actually brings in. IR35 restricts the flexibility of the labour market and is difficult to enforce. It should be abolished at the earliest opportunity”.

The introduction of IR35 was to counteract non-payment of tax by using personal service companies. The government said that freelance workers on long-term contracts should have the same tax responsibilities as permanent staff. Opposition to the rule has always stated that the rules penalised freelancers as they ended up paying higher levels of tax than permanent employees.

The Professional Contractors Group said that they had been involved in 1,468 IR35 investigations and only six resulted in tax being owed to HMRC.

Tax avoiders and evaders alike have cause for concern as Her Majesty’s Revenue and Customs have dedicated £1billion – a quarter of the Budget – toward enforcement of the rules and coming down hard on those who break them. The investment is estimated to return a £2.4bn profit to HMRC.

However, even law-abiding and tax-paying contractors may have reason to worry, as the threat of investigation becomes much more of a reality. Limited company contractors are urged to ensure their business lies outside of IR35, and that all their tax affairs, dividends, payments, expenses receipts and other paperwork is fully in order.

The Professional Contractors’ Group told Contractor UK: “It’s legitimate for HMRC to enforce the law; our concern is that they tend to do it very badly, with destructive repercussions for innocent taxpayers.”

In an effort to end the out-of-court settlements, HMRC has pledged to pursue their cases through the courts until receiving whatever they feel is owed them. Also scheduled for application are new IT tools, expertise and penalties to identify and punish the guilty. IR35 adviser Bauer & Cotrell warned that IT contractors who fail to make their appeal after paying the tax demand following an investigation may be promptly blacklisted by the HMRC.

Contractors using offshore solutions should be especially careful, as many tax loopholes and avoidance schemes are targeted for elimination in accordance to the new HMRC business plan, which also promises to simplify existing anti-avoidance laws.

It has been 10 years since the United Kingdom introduced the ‘IR35’ tax legislation through a press release issued by Her Majesty’s Revenue and Customs (HMRC), the British Government’s non-ministerial department responsible for collecting taxes. IR35 ensures that so-called ‘disguised employees’ (contractors and freelancers) are subjected to the same taxation laws as people who do similar work under Pay As You Earn (PAYE) conditions. PAYE pertains to the amount collected from the employees by their employers on behalf of the government.

IR35 has been criticised in an article posted on 9^th March entitled, ‘Ten Years On and IR35 Tax Still Damaging the Economy’. In the article, the leading business representative group, Professional Contractors Group (PCG), discusses the disadvantages of IR35 and why the government should eradicate it.

PCG condemns the failure of the government to abolish the legislation. According to the group, the law damages the economy, and freelancers continuously face costly and stressful IR35 investigations. PCG also says that the government has already admitted its unsuccessful implementation of the law.

According to PCG, the problem of ‘disguised employees’ needs to be addressed by employment law, rather than by tax law. Such a law must recognise that freelancers and contractors are in business on their own account. John Brazier, a member of the group, commented that IR35 remains one of the most ill-conceived tax laws. PCG calls for the law to be repealed and for political parties to support its abolition. The continuous implementation of the law, PCG goes on to say, is an affront to the contractors and freelancers who give an invaluable dynamism and flexibility to the economy.