News

15th October, 2012

The new “Off Payroll” legislation is starting to impact on contractors working through their own limited companies within the public sector.

Following widespread media reporting that thousands of public sector workers were being paid via their own limited companies, the Treasury have issued guidelines to all public sector bodies showing how they must deal with “off – payroll remuneration.”

The Chief Secretary to the Treasury, Danny Alexander told the recent LibDem conference that he intends to take action against companies who contract with Government. Put simply he said “if you are paid by public money, you should pay your taxes.”

Any public sector worker not employed directly through PAYE, who is paid above £220 per day where the contract lasts for over 6 months, will be affected. We are also seeing evidence that some public bodies are choosing to apply the guidelines to contracts of any length and rate. Contractors working through their own limited company and providing a service to a public body will be caught by the new rules.

Ignoring IR35 is not an option.

The public body will require assurance and proof from the contractor that they are operating outside IR35.

You, the worker will need to:

 

• Take the HMRC business entity tests. 

• If Low risk – you will be asked for a signed declaration to state that you have taken the tests, the number of points you scored and that you have gathered and retained enough relevant and reliable evidence to support your score as required by HMRC.  The engager should do nothing more other than to record the number of low risk cases for statistical purposes and to keep your signed declaration.

• If Medium or High risk AND you believe you are outside IR35. You should provide evidence of an IR35 contract review undertaken by either HMRC or another acceptable provider and you will be asked to sign a declaration that you have taken the tests and are medium or high risk, the number of points you scored and that you consider yourself as outside the scope of IR35.

• If Medium or High risk AND you believe you are inside IR35.  You should sign a declaration that you are medium or high risk and that you consider that this engagement is inside IR35 and you will commit to provide evidence that you have operated IR35 after the end of the tax year.  As this is not declared until 19^th May you may be asked to provide this by say 31^st May.  The engager should do nothing more until the agreed date.

A considered review of your IR35 status, based on professional advice is both time and money well spent. Each and every assignment, be it your first or a renewal needs to be considered and your IR35 status under it determined on an assignment by assignment basis. You should seek expert, specialist help in reviewing both the written terms of your contract and your actual working practices at your end client.

As a firm of specialist contractor accountants OrangeGenie work closely with Bauer & Cottrell to provide contract and assignment reviews for our contractors. Whether you are new to contracting or are an established business, working in the public or private sector call your dedicated accountant today to discuss IR35 and how this could affect you.

9th October, 2012

It is time to lift your head out of the sand and face IR35 square on. Gone are the days of HMRC’s apparent lack of focus on IR35 and after years of what can only be described as complacency amongst contractors and many advisors, HMRC are sharpening their teeth and increasing their investigations into many contractors’ affairs.

The question of IR35 is one that impacts all existing and potential Limited Company contractors alike. It is the most IMPORTANT decision you will ever make and can be both costly financially and emotionally if you get the decision wrong.

The legislation was introduced with the intention of properly taxing “disguised” employees whilst allowing those genuinely in business to trade within the rules and take full advantage of tax planning opportunities.

Many contractors have not sought professional advice in relation to their IR35 status; some have taken advice but chosen to ignore it; whilst others believe it will never affect them!

Recent figures received by Bloomsbury Publishing, via the Freedom of Information Act, support the view that the Government and HMRC have re-launched their IR35 attack and many commentators, including Kate Cottrell (a leading advisor on IR35 and a member of the IR35 Forum) believe this is just the beginning.

IR35 investigations in recent years have been few in number but they are currently rapidly increasing and evidence suggests that HMRC have been targeted with increasing these further over the coming months.

Investigation Statistics

TAX YEAR	INVESTIGATIONS OPENED	TAX YIELD FROM IR35 INVESTIGATIONS
2006/07	158	£1,906,619
2007/08	104	£1,730,640
2008/09	25	£1,430,358
2009/10	12	£155,502
2010/11	23	£219,180
2011/12	59	£1,250,000
2012/13*	600 Private sector and 2,400 Public Sector Contractors	?

NB The tax yield recovered each year is not in line with the number of enquiries opened in the corresponding year, as investigations might begin in one year and be concluded in another. * Figures are estimated based on comments byHMRC.

During 2012 HMRC have strengthened their specialist IR35 teams and have confirmed they will increase this further over the next 12 months. Resources do not appear to be an issue in this re-energised review by HMRC. Government ministers are also publically promising tough action. So what are contractors to do?

Ignoring IR35 is a high risk business strategy!

It is no longer advisable to keep your “head down” and hope IR35 wont effect you – it is already affecting other contractors.

Evidence is emerging of IR35 investigations where contractors have been reduced to tears as they contemplate the enormity of having to explain to loved ones that they are going to loose their family home in order to meet HMRC’s demands for unpaid tax and associated penalties..

A considered review of your IR35 status, based on professional advice is both time and money well spent. Each and every assignment, be it your first or a renewal needs to be considered and your IR35 status under it determined on an assignment by assignment basis. You should seek expert, specialist help in reviewing both the written terms of your contract and your actual working practices at your end client.

As a firm of specialist contractor accountants OrangeGenie work closely with Bauer & Cottrell to provide contract and assignment reviews for our contractors. Whether you are new to contracting or are an established business, working in the public or private sector call your dedicated accountant today to discuss IR35 and how this could affect you.

21st March, 2012

Chancellor George Osborne today delivered his Budget which he says will "reward work", support working families and "unashamedly backs business." Much of the budget detail has been pre- empted by commentators but the key announcements were:-

Economic and fiscal

• The Office for Budget Responsibility (OBR) has slightly upgraded its GDP forecast for 2012 from 0.7 per cent to 0.8 per cent
• Public sector net borrowing is forecast to total £126 billion or 8.3 per cent of GDP this year, £1.1 billion less than forecast in November

For businesses

• Corporation tax will drop 1 per cent faster than expected, to 24 per cent this year, reducing to 22 per cent by 2014. Small companies rate remains 20%
• Consultation on simplifying the tax system for small firms with a turnover of up to £77,000 to be introduced in 2013
• New enterprise zones to receive enhanced capital allowances in Scotland and Northern Ireland
• The National Loan Guarantee Scheme has launched

For individuals

• The highest rate tax of 50 per cent will be reduced to 45 per cent from April 2013
• The personal income tax allowance will increase to £9,205 in April 2013 – this is an acceleration in the move towards a personal tax allowance of £10,000
• A higher rate stamp duty of 7 per cent will be imposed on properties worth more than £2 million
• The threshold for the removal of Child Benefit is to be set at £50,000 from 7 January 2013. If both partners have adjusted net income over £50,000 the partner with the higher income is liable for the charge. The charge will apply at a rate of one per cent of the full Child Benefit award for each £100 of income between £50,000 and £60,000. The charge will equal the Child Benefit for those earning in excess of £60,000.

The introduction of personal tax statements to be sent to every taxpayer containing a detailed annual breakdown of exactly where their income is spent, due to come into force by 2014.

A full copy of our 2012 Budget Review is available here.

21st March, 2012

The national minimum wage for 16- to 20-year-olds is to be frozen next year, while the adult rate will increase by 11p to £6.19 an hour from October.

The government has today accepted the independent Low Pay Commission’s (LPC) recommendations for this year’s National Minimum Wage (NMW) rates.

The following rates will come into effect on 1 October 2012:

The adult rate will increase by 11p to £6.19 an hour

The rate for 18-20-year-olds will remain at £4.98 an hour

The rate for 16-17-year-olds will remain at £3.68 an hour and

The rate for apprentices will increase by 5p to £2.65 an hour.

19th March, 2012

As part of HMRC’s mission to improve the service it provides to taxpayers, HMRC has agreed to advise employers earlier if they have not filed their end of year return, P35 etc.

HMRC has tended to only let employers know if they have not received a return, by sending out a penalty for £400 in September, this has been much criticised by accountants.

In a recent case, Judge Geraint Jones effectively brought the credibility of the penalty system into question with his ruling in HOK v HMRC, a decision which has subsequently been followed by other tribunal chairs. HMRC appealed Hok, but essentially Judge Jones had ruled that the penalty system was unfair in seeking a £400 penalty at the first point. Employers were not able to rectify their mistake when the penalty was £100, which the Judge ruled unfair.

ICAEW, revealed that HMRC will undertake to:

• Change the notification date for 2011/12 P35 annual returns from mid-February to mid-March 2012, so that employers will receive it much nearer to the end of the tax year.
• Annual return reminders will be sent out from 28 April 2012, where HMRC thinks there are outstanding P35s for the year.
• From 31 May 2012, HMRC will introduce a “P35 Interim Penalty Letter” that will go to employers within a month of the filing deadline. The letter will tell employers they have incurred a late return penalty and explain what to do to avoid it increasing.
• For next year, improve the information on the P35 and the reminders to include a warning that the first penalty notice will cover four months. “Taken together, these measures should help employers to avoid incurring unnecessary penalties and significantly reduce the number of cases where penalties in excess of £100 are charged,” HMRC said.

The problem arises because HMRC is unable to be absolutely certain which employers have failed to file their P35s before the final update of the files on computer which happens around mid-September. This led to many employers receiving penalty notices in September showing a penalty of £400 or £500 because the penalty accrues at a minimum rate of £100 per month from 19 May.

Although official penalty notices will still not be issued until September, the measures announced today address the main issues and try to ensure that employers have every opportunity to sort the issue out while the penalty is still £100.

15th March, 2012

From April 2012 HMRC will be able to collect debts up to the value of £3,000 by amending the tax code of individuals in PAYE employment or receiving a UK pension. HMRC are able to use this method to recover both income tax debts and tax credit overpayments from April 2012.

The coding notice adjustment will be described as an ‘Outstanding debt’ with a note to say whether this relates to a tax underpayment or a tax credits overpayment or both. Tax codes will not be changed in-year to recover these debts or overpayments as they will be included in the code issued for the start of a tax year.

Employees who are to have their debts recovered in this way should have been advised by HMRC of the procedure to be adopted. HMRC should have previously written to these individuals at least once asking for payment. A further letter will advise them that their debts or overpayments may be collected by a tax code adjustment from April 2012 and they should then be given a final chance to either pay in full or to contact HMRC to discuss other payment options.

13th March, 2012

OrangeGenie have had a long standing relationship with SThree Group appearing on their Umbrella PSL for some time. We are proud to announce that we have additionally been chosen to be one of their preferred partners for Accountancy Services to contractors. This appointment means we are the only organisation recognised by S Three Group on both PSLs.

Announcement of the new partnership was made at the beginning of March by S Three Director of Commercial Process, Andy Hallett, who commented that “all companies chosen to appear in the PSL are best in class and members of APSCo – the Association of Professional Staffing Companies, meaning they will have passed stringent compliancy audits.”

Julian Ward, Sales & Marketing Director, of OrangeGenie said “We are extremely pleased to have been chosen to by SThree to appear on their PSL. Our organisations have worked together for some time ensuring exceptional and compliant service is provided to all contractors. The creation of the new Accountancy PSL means we can continue to offer best bespoke advice to contractors. Since we are the one firm recognised to offer both services we can truly ensure we put the contractor first and provide them the right solution.”

OrangeGenie should be the first choice for all contractors. Our ratio of qualified staff to clients is lower than many in the industry allowing time for bespoke personal service, supported by UKAS ISO 9001 approved quality systems and a modern online approach to managing your finances.

To celebrate OrangeGenie becoming the only supplier on the SThree PSL offering both Umbrella and Limited Company services, for the first three months we will be offering SThree contractors free membership of HSE Passport for one year. This includes on-line Health and Safety training, an on-line competency test, ID card, lanyard and holder. The card will demonstrate that the contractor has successfully passed a course in Health & Safety, but also that SThree take their clients’ responsibility to Health & Safety seriously.

12th March, 2012

The Bank of England (BoE) is keeping interest rates at 0.5% for the 36th successive month.

This month marks three years since the BoE’s Monetary Policy Committee first cut the base rate to 0.5%.

During that time savers have seen the value of their money shrink as interest rates have failed to keep up with inflation.

The average savings rate in September 2008 – before the BoE started slashing rates – was 2.46% for instant-access accounts and 5.92% for fixed-rate bonds. Now the same accounts pay an average of 0.2% and 2.48% respectively.

In contrast, the freeze on the base rate has been great news for homeowners. In September 2008, the average two-year fixed-rate mortgage with a loan-to-value of 75% charged 5.96% interest, tracker mortgages charged 6.12% and the average standard variable rate was 6.95%. These are now 3.27%, 3.57% and 4.36% respectively.

With experts predicting that the base rate won’t rise for another 18 months, things aren’t going to improve for savers any time soon.

'A fourth year of interest rates at 0.5% looks highly probable and a fifth is far from impossible given the difficult domestic and international conditions that the economy faces,' says Howard Archer, chief UK economist at IHS Global Insight.

'Our current view is that interest rates will not rise before late 2013 and the BoE could very well delay acting until 2014, given likely extended muted economic activity and the need to offset tight fiscal policy.'

1st March, 2012

Contractors and freelancers can be reimbursed for additional household expenses – such as gas or electricity charges - incurred because you have to work from home, probably in order to complete your limited company administration work.

From 2012-13 onwards, for payments of up to £4.00 per week, you do not need to provide any records of the household expenses you are claiming. For amounts above £4.00 you need supporting evidence to show that the payment is no more than the additional household expenses you have incurred.

The guideline rate for 2008-09 to 2011-12 was £3.00 per week and for 2007-08 and earlier years it was £2.00 per week.

15th February, 2012

On how many occasions have you been asked to prove your identity with financial institutions and professional advisors? In an age where we are becoming very used to these procedures perhaps we should take some time to consider how well we know those advisors.

A recent case, reported in the Telegraph, highlights the need for Contractors to really know the advisor they are appointing. Dave Upton, a contractor accountant, stole more than £250,000 from 33 contractor clients over a period of time by providing them his bank account details, instead of the taxman’s, when they came to pay corporation tax. Mr Upton now faces a 6 year jail sentence and a £495,000 confiscation order.

When choosing an advisor for your business consider their marketing material carefully, seek personal recommendations and better still meet your prospective accountant. OrangeGenie strongly believe in developing honest and open relationships with our contactors. We positively encourage that you meet with your dedicated accountant face to face to build those bonds that will allow us to provide you with an exceptional service that leaves you safe in the knowledge that your business is compliant whilst you concentrate on what you do best.

14th February, 2012.

Please Click Here to view the full Spring Newsletter as a PDF

8th February, 2012

Oil and gas contractors look set to enjoy a buoyant 2012, as hiring returns to the UK sector following a difficult recession. Day rates for oil and gas contractors working in the North Sea are among the most competitive worldwide, with rates averaging £540-£900 a day.

The Oil & Gas Global Salary Guide 2012 also reports that contractor rates rose by 30% in 2011. Further rate increases are expected as the rapid recovery of the sector stimulates acute skills shortages, particularly in upstream disciplines as exploration and production activity ramps up significantly.

“Average oil and gas salaries in the UK are around 8% more than the worldwide average,” notes Duncan Freer, managing director of the guide’s co-author, Oil and Gas Job Search. “Greater activity is scheduled for 2012 and beyond following a difficult period during the recession.”

Matt Underhill, managing director of the guide’s other co-author, Hay’s Oil & Gas, is equally bullish: “Last year we reported a 30% rise in contractor wages for UK professionals. This was particularly encouraging for UK-based oil and gas professionals, as the rates are a good indicator of the state of the job market, being more reactive to short-term changes in demand for skills.”

The report, which includes detailed salary and contract data on 24 disciplines from over 50 countries, says that conflicting hiring trends are currently proving to be of benefit to contractors. Greater investment certainty is resulting in a larger proportion of permanent hires as companies gain the confidence to make long-term recruitment decisions.

However, contractors are being used in new regions and countries where the fluctuation in revenues from these markets can be matched to the flexibility resulting from hiring contractors. So the use of contractors has become more widespread compared to previous years.

Contractors can be found, and are in demand, across all core operating areas within the sector, including engineering, geoscience, drilling, construction and project controls. Over 45% of survey respondents confirmed plans to increase the use of contractors in 2012, and 37.2% had more than one in five of their workforce hired on a contract basis.

Freer concludes: “Despite some forecasts, many oil companies are continuing to invest in the North Sea, so it is a time to look forward with confidence.”

Published by ContractorCalculator

14th December 2011

An IT contractor has been handed an unprecedented yet unenviable verdict of both outside and inside IR35 at a single workplace - meaning he wasn't but then was a 'disguised employee', despite trading as a limited company for nearly two decades.

In ruling that John Spencer was outside IR35 for the first three years of a contract - though not the four subsequent years, a Bristol Tax Tribunal made the UNIX expert with a 17-year trading history the subject of IR35's first ever "split case".

"This is unprecedented as far as I'm aware," Paul Mason of Abbey Tax reflected to CUK yesterday. "I've not heard of a case like this because normally your status is your status; you're either one thing or the other but not both.

"However I can see sense in what the judge said [to Mr Spencer]: 'Up to a point you were doing specific bits of work and projects, after that point you were really no different to being a permanent employee.'"

Employment status advisor Kate Cottrell, seconded to the Office of Tax Simplification for the IR35 review agrees. "This case is indeed the first time we have ever had a split", the Bauer & Cottrell co-founder told CUK.

"It clearly highlights the need to consider IR35 for each and every contract, [at both] extension and renewal. I know of similar scenarios where there was an original project and then the same contractor was offered another role to cover for maternity leave.

"So our opinion [of that worker's employment status] was originally outside IR35, but the subsequent change [to their working reality] put them inside IR35, for that particular contract."

In Mr Spencer's case, lodged as an appeal to HMRC's demand that he pay £140,000 under IR35, the "precise point" at which the change in his employment status occurred "is not easy to define."

However the judgement adds, "at the end of December 2003 there were various indications that the relationship did then change," Judge Howard Nolan said, addressing Mr Spencer, his limited company JLJ Services Ltd and the end-user, Allianz.

"Our decision is accordingly that in the early period, prior to the end of 2003, Mr Spencer would not have been regarded as an employee, but that from the start of 2004 onwards, he would have been regarded as an employee."

Positively, then, for Mr Spencer - as he approaches his 67^th birthday, his seven-year liability under IR35, as alleged by HMRC, has been almost cut in half by the tribunal, prompting claims he snatched a 'partial' victory.

"[Generally speaking] I always think that the strongest argument against IR35 is Control," Mr Mason at Abbey Tax said. "This is simply because that's where you can really show that you are an independent [business].

"Indeed, the argument [that Mr Spencer won] for the earlier part of the contract was that it was for labour on discreet pieces of work; where he had more control."

The judgement is supportive. When at the workplace (Allianz's premises), JLJ's owner-manager did not 'clock in' as the organisation's employees were required to. Plus, there was "little intervention with the day-to-day work that Mr Spencer would then be doing."

Handed down in October, the judgement adds: "Obviously Allianz would enquire about progress, particularly if a project was over-running the expected period assigned for completion of the project.

"Furthermore, Allianz also said that it had the right, if some emergency arose, to require Mr Spencer to pause in work on a particular project if some other matter needed to be attended to first."

Another Control issue - whether Mr Spencer's work was subject to a 'quality control' process, did not prove to be a determining factor, partly owing to conflicting evidence from the worker and the client.

"Understandable" sympathised the judge but still, "nobody in the company [Allianz] would have had the detailed knowledge of Mr Spencer's field of expertise to judge whether in every respect he was tackling his projects in the best way."

Such a lack of control is "fine" when the worker is providing expert services (judgement point 23) - on a unique project (point 42), but not, explains Ms Cottrell, when "the engager needs work undertaken repeatedly, and when you are working generally within the organisation."

Given that the classic tests of employment status have not changed, and therefore remain as significantly determining as they were before the case, the advisor believes such a work pattern is the "main" warning contractors should heed.

Mr Mason agreed: "For a contractor, the central message being sent by the courts is that if you're going to engage over a long period, then you really need to be able to show that you're engaged on specific projects.

"[To be outside IR35 you can't] just basically get on with whatever work crops up [from the end-user]. Do that and you risk ending up becoming very much part and parcel of their organisation.

"So if you're not doing separately identifiable and discreet projects, then it's very easy over an extensive period to be perceived as part of the client's furniture. That's what happened here and to my mind, that's Mutuality of Obligation."

This personal distinction is necessary because the judge, who had not previously heard an IR35 case, said MOO, or 'mutuality of undertakings' as he called it, had "diminished importance" as one of the classic tests.

Language in the judgement, pertaining to the second part of Mr Spencer's duration at Allianz - the IR35-caught part, suggests otherwise.

"At the end of 2003, if not before, it became clear that Allianz wanted Mr Spencer's services permanently. It no longer engaged him for projects. It either offered him employment, or permanent engagement, and even if he rejected that, he was thereafter engaged on an annual basis," it says.

"In other words he became one of Allianz's key computer experts, available for work that was likely to be available indefinitely. He certainly ceased to be engaged just for identified projects.

"By breaking the link with projects, and indicating that Mr Spencer would work generally within the organisation, we consider that from 2004 onwards, there was more reality to Control."

Abbey Tax reflected: "From that moment onwards - the inside-IR35 period, to us the judge is effectively saying there was mutuality."

Two other tests run by the court, the right of Substitution and Undertaking 'one's own business,' found insufficient evidence to back Mr Spencer's claim that he was a independent contractor for his entire seven-year stint at Allianz, not just the initial three years.

That's despite him enjoying no pension, holiday or sick leave rights during his Allianz contract, sourced by recruitment firm Highams. He had no company car and although he did join an Allianz workers' car pool, he never drove.

Affectionately referred to the judge as likely to be "one of the early computer specialists" in the UK, the now-retired programmer was not reimbursed for his business travel costs, and even had to pay for his own Christmas lunch.

Taken from ContractorUK

23rd November, 2011

The Prime Minister has applauded the growth in the freelance community as new research reveals a 12 per cent increase in the number of people opting to become freelancers.

Figures released by Kingston University and freealncer group, the PCG for National Freelancers Day show that the number of freelancers in the UK now totals 1.56 million or one in 20 in the UK workforce. This is up from the previous figure of 1.4 million, revealed by the University’s initial study in 2008.

This comes in a week when the sector is marking National Freelancers Day November 23 2011 and freelancers were given an endorsement by the Prime Minister David Cameron who said: "I have a huge respect for all those who make the brave decision to branch out on their own and take control over the way they work.

"This Government recognises the valuable contribution that freelancers make to the economy and, as more and more people choose to join your ranks, you have all our support.”

Flexible
Within the sector the survey reveals that the highest proportion of freelancers work in arts, literary and media occupations (265,000), followed by management (161,000), then teaching/education (110,000), with IT/Telecommunications (93,000) rounding off the top four.

PCG’s Managing Director John Brazier said:“The figures underline the steady growth in the sector in turbulent times, and confirm a widely held belief that more and more skilled and talented individuals are opting for freelancing as a work/lifestyle choice, or because of economic circumstances. Freelancers are offering industry and commerce a flexible talent stream when and where it is needed.”

Notably the research also flagged the rise of the ‘mumpreneurs’ as the 2011 figures show a 25 per cent rise in the number of working mums turning to freelancing. Around 210,000 working mums have chosen the freelance path against 167,000 in 2008. This is equivalent to one in 8 freelancers being a working mother.

The full research, including a breakdown of strong and weak sectors is under intense analysis and the final report will be released later this year.


Article taken from www.shout99.com

9th November, 2011

We have become aware of a scam which is targetting newly formed companies. An official looking document appears to come from "Intracom VAT Registry" in Brussels advising that you need to register for EU VAT at a cost of £320.

This is a scam and you should ignore this document.

We will discuss with you the need to be VAT Registered and will make the necessary application for you with HMRC. There is no charge to be VAT Registered.

31st October, 2011

A recent report by HMRC suggests that there has been a 300% increase in fraudulent emails alleging to be from the revenue. A common theme appears to be a request for the users bank details, in order for a "tax rebate" to be paid.

If you have doubts regarding the legitimacy of any communication you receive, please contact HMRC or your OrangeGenie Client Accountant.

10th October, 2011

31 October: all paper returns

If you send a paper tax return it must reach HMRC by midnight on 31 October.

You only have longer than this if you received the letter, telling you to send a tax return, after 31 July. In this case you'll have three months from the date you received that letter.

31 January: online returns

Your online tax return must reach HMRC by midnight on 31 January.

You only have longer than this if you received the letter, telling you to send a tax return, after 31 October. In this case you'll have three months from the date you received that letter.

There's an earlier deadline of 30 December if you want HMRC to collect any tax you owe through your tax code. You now can ask for this if you owe less than £3,000. Please show this clearly on your tax return. HMRC will try to collect the tax due through your code, but they can't always do so.