contractor accountants
HMRC aiming to provide a more efficient service
HMRC are trying to improve their efficiency and various operations beginning with the way they deal with incoming calls. The revenue have come under much criticism over the last few years due to numerous errors, such as miscalculations on income tax, poor dealings with paperwork and slow responses to queries and other issues. The government cut a large amount of their budget last year, but with the hope that the organisation would learn to be more efficient. So following calls to become more approachable and better adapted to deal with workers issues, HMRC are overhauling their calls system so that taxpayers will be able to get through to them both quickly and cheaply. They will also improve operations to send out prompt responses to other letters and claims. This will make things so much easier for the millions of self employed workers and contractor accountants who have had to put up with countless problems in the past.
HMRC are also looking to work together with both professional bodies and other independent groups and charities, who will be able to provide scrutiny and advice towards ongoing operations. One of these charities is the Low Incomes Tax Reform Group (LITRG), who have been a long running critic of HMRC and before that the Inland Revenue. The LITRG have regularly attacked HMRC for not suitably acknowledging the needs of taxpayers in terms of service, and the group often referred to HMRCs operations as inadequate. HMRC will now be working alongside the LITRG amongst others in order to work towards a more efficient solution. Whilst the LITRG have certain aims that they would like to see implemented, HMRC understand that the most important area that they need to get right, and perhaps a pillar to their long term success, is their external communication. As although accountants can provide a certain level of advice for taxpayers and various resources, including things such as a contractor calculator, HMRC’s service is pivotal to millions of UK taxpayers.
Rising costs for businesses employing agency staff
With only a few weeks to go until the much awaited agency workers regulations, part of an EU legislation, are implemented there are still differing views on the best way for genuinely self employed workers to avoid being caught up in the red tape. The problem comes with the fact that the regulations are meant to protect the lower end workers; those on lower pay or performing lower skilled jobs, however the top end skilled workers are frustratingly also caught by them. To avoid the implications of the regulations, which might include the workers receiving lower pay to be in line with permanent employees, some experts are advising that contractors work under a personal service company, a form of limited company. Unlike an umbrella company this would see the contractor operate as the sole director and main shareholder of their own company, and would allow them to act as a fully self employed worker, therefore bypassing the AWR.
A recent report from a leading law firm has revealed that over half a million contract workers could see their contracts cancelled when the agency workers regulations come into place. With the regulations starting on October the 1st the firm have found that around a third of the medium to large businesses in the UK that employ a high number of agency contract workers aim to to heavily reduce this number due to the AWR. This would save them from the high costs when the 12 week qualifying period results in them having to match pay and holiday rates. The figures put forward in the report state that these costs may be well over £1 billion a year, with businesses on average having to pay an extra £90,000 each year. Although it is just contract workers operating under umbrella companies who will be caught by the AWR many businesses are worried about how they will be affected, which has led to this action of reducing agency staff.
EU Regulations could cost businesses billions
The upcoming Agency Workers Regulations, due in little over a month at the beginning of October, are set to cost employers £1.8 billion every year according to figures from the government’s Department for Business. As well as the higher costs of using temporary workers; who will receive equal rights in terms of holidays and pay after a 12 week period, there are also potential fines for not complying with the regulations. Cases brought against temporary workers could result in their agency facing a fine of up to £5,000; however they could face unlimited fines if there are any employment tribunal claims brought about.
This is why compliance and a proper understanding and awareness of the AWR is vitally important, for recruiters, employers, employees and contractor accountants. Some legal firms are preparing for the influx of AWR cases and tribunals by offering their services and some form of financial support. Agencies may face legal and professional costs, as well as initial fines, and so they need to be in the position to defend themselves against any claims.
Anyone who stands to be affected by the numerous implications of the agency workers regulations will be slightly pleased to see that the Prime Minister David Cameron and the government have considered legal advice into possible changes or reductions to the regulations. Their concerns have come about because of the growing feeling within businesses that they will reduce their agency and temporary staff levels, which would have a knock on effect on the recovery of the economy. Flexible staffing options have been praised as an effective solution to the current economic problems, and are key to growth, so any reduction could have huge implications.
Although these changes are hugely unlikely to come about before the regulations are launched at the beginning of October, it is important for those who are affected to remain up to date with the situation. Contractor accountants can offer regular updates for those who may be concerned as well as offering contractor working solutions and other resources, such as a self employed tax calculator.
Supporting growth of SMEs vital for UK economy
The future of IR35 legislation is currently in the control of the government created IR35 forum, who are reviewing which option to take; with suspension, abolition or an alternative business test the proposed suggestions. This follows the in depth review undertaken by the office of tax simplification before the budget, who having looked at all areas of the legislation put these 3 proposals forward to the government. The OTS were hugely in favour of an instant suspension of IR35 with a deliberation of their proposed business test. Despite this the chancellor and government opted to do nothing and instead set up the IR35 forum to carry out a further review.
Now, the lib dems, who are part of the current coalition government, have issued their own party policy paper focused on the IT sector which also covers the impact of IR35. They have said that the legislation should be abolished as future merging of national insurance contributions and income tax will mean it will become redundant anyway.
The liberal democrats support for the abolition of IR35 legislation also came alongside a call to fully support the thousands of small and medium sized businesses within the UK. They had a real focus to reduce the current red tape and other legislation that is stopping SMEs from growing. However, with the likes of IR35 still under review, little is currently being done to tidy up burdening legislation. The government launched a ‘red tape challenge’ which prompted SMEs and business owners to bring any legislation which they were concerned about, with the idea that the government would then review and look at scrapping it. This scheme doesn’t seem to be generating many visible results and has looked like another wasted government initiative. With more legislation coming into force in coming months, like the agency worker regulations which will impact on recruiters and contractor accountants as well as contractors and businesses, it is about time that the government actually fulfilled their policy promises.
Union slate rising permanent job cuts
There have been disputes this week between a leading workers union and an industry body after a recruitment agency accidentally released confidential information regarding contractor’s daily rates. Despite the massive error from recruiters Hays, which saw them sending a document with personal contractor information attached to an email to workers at RBS bank, the REC and union Unite have clashed with each other.
Unite were disappointed to discover just how many contract and temporary staff RBS were employing, despite cutting thousands of permanent jobs. They said that the bank, who are more than 85% state owned, should support the permanent workers rather than rely on temps. They were particularly annoyed to discover some of the umbrella company contractors earning up to £2000 per day. The REC, as the leading recruitment industry group, countered the claims denouncing the use of flexible contract staff, and instead praised the important role that they can offer, especially at times like this when their skills and working method are invaluable to companies seeking to grow.
Nearly one in twenty workers in the UK are now believed to be operating as a freelancer or contractor; with figures estimating that nearly 1.5 million of the 30 million workforce do so. The value of the expanding flexible workforce in the UK has been highlighted by recruitment companies and also by the government. They know the important role that freelance and contract workers can provide, especially at at the moment as businesses are wary about taking on full time staff yet cannot afford to lose the productivity gained from having extra workers.
So, although some umbrella company contractors demand high daily rates, as seen through the recent news about RBS contractors, they do so because they are skilled enough to provide a high level of service. Contractors are not classed as employees either, because of not receiving holiday pay and other rights, and so the initial high cost is offset against the long term savings that the company makes.
Self employed workers face IR35 tax investigations
Following a government review into HMRC operations last month more details have emerged about the findings of the treasury sub committee. They quote a catalogue of failings, which resulted in close to six million pounds worth of PAYE bill errors, which led to the call for a full review.
Problems within HMRC were described as widespread, and it is not hard to uncover numerous stories about errors and problems that they have made in recent years. In the last 12 months they have started to improve operations; and due to a budget cut in the autumn, cuts have been made within the organisation which have helped to improve efficiency.
Part of the efficiency boost included specifically allocated funds designated to target those who have underpaid tax, whether by avoiding or evading. They are looking over records from as far back as 7 years to try to catch those who have underpaid, which may encourage self employed workers to speak to specialist contractor accountants to check where they stand.
Given the reports of some self employed workers being investigated for unpaid tax bills, some which go up to £100,000; other contractors may be starting to worry about what implications that this will have on them. Workers with contracts that fall within the IR35 legislation have had to deal with investigations into their operations, which have been ongoing over the past couple of years and have led to some lengthy court battles and subsequent appeals from contractors. These investigations look for circumstances where workers avoid some tax payments by claiming to be self employed when they are actually found to be an employee of the company they were contracting for. With the news that underpaying self employed workers are facing arrest and charges relating to tax fraud; contractors will be worried .
A basic self employed tax calculator can provide a quick and accurate figure for the amount of tax that should be paid through a PAYE, umbrella company or limited company payroll solution.
Reduced employment burdens would help employment levels
With unemployment contuning to rise this month, underlining the fluctuating nature of the current UK labour market, some workers will be worried about their chances of employment. The private sector has managed to create jobs but only just around the rate to counter public sector job losses. The level of unemployment this month has also not been helped by the slowdown in growth in the temporary jobs market. Whilst this remains an attractive option for most workers, due to the flexibility and tax efficiency that working through a limited or umbrella company offers, the market has slowed down in the past few months. This can be explained by the fact that we are currently in a typically quiet period, but many recruiters have also spoken about the slowdown and believe it to be more a case of the timing of end of contracts. As many contracts lengths tend to be 3 to 6 months, there will be typically less available between June and September; this cycle follows the fact that the majority of contracts end in March before the tax year ends.
Unemployment trends over recent months have led to a number of concerns about the UK labour markets ability to make up for the full extent of the ongoing public sector job cuts. However, recent reports from employer surveys, undertaken by recruitment agencies, have found that in order to combat some of this uncertainty more businesses are actively looking towards flexible, temporary staff. The demand for flexible contract staff to fill positions in both the long and short run is outweighing that for permanent staff. This level of demand continues to increase as more employers understand the real impact that temporary workers can bring their business.
Throughout the jobs market, from recruiters’ all the way through to specialist contractor accountants, this trend is becoming more apparent. The UKs temporary workforce is currently thought to be at around 1.5 million workers, and despite numerous employment legislation putting off some people, this number is growing and quickly expected to rise.
Less permanent jobs as businesses cut costs
With unemployment levels having fluctuated over the last few months there is currently a lot of uncertainty across the UK labour market. This has meant there has been little surprise that figures from the office for national statistics report record highs; with both youth and female unemployment surpassing previously unseen levels.
Despite this trend, the rising levels of temporary workers within the UK have actually led to employment figures which are helping to counter the unemployment numbers. Whilst short term employment does not provide stability within the UK economy, it is a much needed short term boost to workers and employers, and is of course important in order to see any level of economic growth.
This rise has also been seen by specialist contractor accountants due to the increasing enquiries about the various self employed options that workers can take when opting to work on a temporary or contract basis. Both accountants and recruiters are confident that flexible working is the best way to support the UK economy post recession.
With the temporary workforce becoming a larger part of the overall UK working population, businesses, workers and even the government are taking attention. Businesses are realising that investment is needed in order to expand; this can come in the form of short term contract workers, hired for specific projects, such as upgrading IT operations, and really represents a solid return on investment without bringing long running costs. Workers who are having difficulty securing permanent jobs are also trending towards this way of work; short term contracts can provide them with a foothold back into the jobs market, whilst also giving them a greater chance to secure a job compared to if they were after something permanent.
The government have welcomed the efforts of those who support temporary workers, as shown through their parliamentary group on freelancing. For those who are considering the a contracting position, a self employed tax calculator can provide an estimate on potential earnings as well as a summary of the various self employed options.
Government must review employment laws
A report into the UK jobs market from a leading industry business group has highlighted the growing burden and issues with current employment legislation. The increasing number of employment laws and regulations are making it more difficult for UK businesses to grow whilst also creating other problems for recruitment companies and specialist contractor accountants.
The report was on the wider issues in the UK jobs market; one of these was the reliance on the public sector, which will require a massive effort from the private sector to help make the UK economy more efficient. In order to see this succeed the report made it clear that current UK employment legislation needs to be addressed, as there is currently far too much red tape preventing UK businesses from moving forward. Many employers are worried about both the financial burden and regulatory compliance in employing new staff, which is having a detrimental effect on both the UK jobs market and the economic growth.
One of the employment laws that is currently causing worries for UK recruiters and employers is the Agency Worker Regulations, part of an EU directive that will come into play from October 2011. Some industry groups who have been involved in the report into the UK labour market have voiced concerns that the new regulations are just one of many that are burdening UK businesses. The government have however said that they will review the impact of the AWR after the first couple of years, which most people believe is a positive move.
There is a hope that this will lead to a commitment to review further employment laws, with the ongoing investigation into IR35 another example. This came following a general review of small business taxation in the UK from the government formed office of tax simplification. It is encouraging that the government want to address taxation issues but employment laws are the next challenge for them to look at.
Growing movement towards contracting
A number of market commentators believe that the current levels of employment, on top of falling unemployment rates, provides signs of business confidence picking up. There were concerns earlier in the year that a lack of job availability, down to a reluctance to take on staff from employers, would lead to a double dip in unemployment which would of course have had a severe effect on the economy in general. However, the fear of hiring staff has been overcome thanks to the growing attraction of hiring temporary and contract staff. This process offers a lower level of risk to the employer, as well as a greater level of service and skills from the workers.
With more businesses looking towards this route of employment, and with more backing from the government, more people are choosing to work this way. Advice on becoming self employed can be found from top contractor accountants, such as Independent Contractor Services, who offer a number of tax efficient services.
One area in which contractor accountants can specifically assist contractors is by providing an IR35 review. This is a piece of employment law which the government brought in to determine whether a worker is self employed or not. This is particularly important to the government, as it can help to clamp down on people who are avoiding paying the tax that they should by becoming a disguised employee. With the level of tax revenue lost through evasion, avoidance and fraud each year in the UK in the region of hundreds of millions of pounds, it is not suprising that the treasury is keen to try and reduce it.
There are also other employment laws which can affect contractors and freelancers, most noticeably MSC and AWR. Contractor accountants can offer support and guidance on the implication of these regulations, as well as offering a range of resources and services to guide people through the contracting process.
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