What the Pre-Budget Report Means For You

Posted on 17 December 2009 by icsanna

Last week Chancellor Alistair Darling unveiled the Pre-Budget Report. Across the contracting industry there were gloomy predictions of what it might contain, but the good news is it wasn’t the disaster many thought it would be.

Below we have highlighted how specific measures will affect contractors. If you have any questions or would like more information about how our services for contractors can help you please contact us on 0800 195 3750. 

Corporation Tax

In his final Budget, in 2007, Gordon Brown had announced that the small firms’ rate of corporation tax would rise in three increments to 22%, the final increase being due in 2009. As many contractors who work through their own limited companies will be pleased to hear the planned increase in Corporation Tax has been deferred again until 2011, and the small firms’ rate will remain at 21% until then. 

 Income Tax and NICS

The new top rate of 50p on all earnings over £150,000 will come into force in April 2010, and 42.5% on dividends. The starting point for employers’, employees’ and self-employed NICS will be maintained at £110 per week. The upper earnings and profits for Class 1 and Class 4 NICS will be kept at their current levels of £844 per week, for the self-employed, the rate of Class 2 contributions will continue to be £2.40 a week. Class 3 contributions will also remain at their current rate of £12.05. 

 A further 0.5% increase on all National Insurance contributions by those earning over £20,000 was announced. Therefore many National Insurance Contributions will go up by 1% from April 2011, but by only 0.5% for incomes under £20,000. For freelancers within the scope of IR35 – if it is still in force at this time – this will be a double whammy, as IR35 obliges them to pay both employers’ and employees’ NIC.

  VAT

VAT will return to 17.5%, effective from 1st January 2010. This ends the 15% VAT “holiday”. 

Self-Employment in the Construction Industry

Following on from the blanket proposal to deem construction workers as employees unless some very restrictive tests were met, the Government announced that they would be publishing a summary of consultations in the New Year. No other commitments have been made.  

 Infrastructure

The Government announced a series of infrastructure projects and stressed its commitment to improving markets frameworks along with best practice in management and procurement. 

 The oil and gas sector is one of the focal points. In particular, changes to the criteria for the Ultra High Pressure, High Temperature field allowance have been announced. These changes, it is believed, could support the recovery of up to 300 million additional barrels of oil and gas from the North Sea. The Government is currently considering developing an infrastructure in the largely underdeveloped area of west of Shetland and the case for any fiscal support. This may represent very positive news for oil and gas freelance contractors.

 Overall, the industry seems to agree that this has been a neutral Pre-Budget Report for contractors, with only the very highest earners likely to be drastically affected. 

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Contractor Values – Why Hire Them?

Posted on 16 December 2009 by icsanna

Contractors are very different to permanent employees and can bring a lot of benefits to the client organisations that hire them.

An article by Contractor Calculator further explores this topic. They discuss how when clients hire a contractor, they are engaging the services of a supplier and not starting a contract of employment with an employee. Employees have rights under employment law, contractors don’t.

Contractors are hired to do a specific task or project and as soon as they step through the door, they are prepared to do that task. They don’t need to be eased into a position gently and have no learning curve or training requirements. When very specific and specialist skills are required only for a short time, contractors are ideal to plug the gap.

Contractors are business services suppliers, providing predominantly knowledge-based services to clients on a business-to business basis. They are not permanent employees, or even on a fixed-term employment contract.  Contractors are not entitled to any sick pay or holiday pay. If they make a mistake, they have to fix it in their own time at their own cost. And should they totally mess up, they are also likely to have professional indemnity insurance, which employees don’t have.

Contractors can be hired and fired very quickly, as long as contractual termination notice periods are adhered to.

Contractor Caluculator goes on to say that many contractors cite the main reason they started their contracting career was to get away from office politics and all the hassle and stress that employees have with managers, staff and career paths.

Contractors don’t care about office politics or office gossip. Typically, they put their heads down and work steadily and effectively on their project, because that is what they are being paid to do. For most contractors, it is also what they love to do.

There are many benefits to hiring a contractor as they can bring a huge number of benefits to the client organisation. They are valued in many industries now, particularly IT and Engineering, but people are increasingly contracting their services out to many different and growing sectors and this trend is likely to continue.

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PBR Not As Gloomy For Contractors As Predicted

Posted on 10 December 2009 by icsanna

Chancellor Alistair Darling yesterday unveiled his second pre-Budget report of this economic downturn.  Across the contracting industry this week, there were gloomy predictions of what the report would announce but as Contract Eye discusses, the Pre Budget Report really wasn’t the disaster many thought it would be.

 Although there was no promise to repeal IR35 as some had hoped for, equally there was no threat to reintroduce ‘income shifting’, as some had feared.  Shout 99 also added that there was no recognition of the role the contracting sector can play in the economic recovery, but equally, there were no further measures targeted at what the Government likes to call ‘false self-employment’.

The PCG called the PBR a political event which did nothing to help the UK’s nano-businesses and self-employed community. They said that it was apparent that the Chancellor had put off the difficult decisions until after the next General Election.

John Brazier, MD of the PCG said:

“There was a lot of talk by the Chancellor today about fairness, however this PBR has failed the fairness test for the UK’s 1.4m knowledge based freelancers. IR35 was not abolished, National Insurance Contributions are to go up in 2011, by double what he previously said and the only crumb of comfort is that the small business corporation tax rate rise is to be deferred. The borrowing figures are huge and the public expenditure cuts in years to come are bound to be savage, affecting all sectors of the economy and ordinary people.”

It has been good news for limited company contractors, with Alistair Darling announcing that the proposed 1p rise in corporation tax is to be deferred. The announcement on increasing National Insurance Contributions is going to affect everyone. Some contractors and freelancers may decide they want to incorporate rather than be part of an umbrella company, as this may make savings for them in the future. Only the very highest earning contractors are likely to be significantly affected, with the top rate of tax for people earning more than £150,000 rising to 50% as of April next year.

Overall, the industry seems to agree that this has been a very middle-of-the-road pre-Budget report where contractors are concerned, with only the very highest earning contractors likely to be drastically affected.

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HMRC Increasingly Relying on Substitution Clauses

Posted on 8 December 2009 by icsanna

Contractor UK this week warned contractors who work via an agency that HMRC were beginning to rely on right of substitution clauses to launch IR35 investigations.

Right of substitution is the ability of a contractor to send someone else in their place to complete a role, and is one of the official tests used to establish employment status. Twenty contractors were recently deemed employees after the Appeal Court said that their substitution clause was a sham, partly due to them not knowing it was in the contract.

Following this, HMRC are launching a growing number of probes into the employment status of contract workers where the substitution clause may be too flimsy.

Former Inland Revenue tax inspector Kate Cottrell, who started IR35 firm Bauer & Cottrell, told Contractor UK that the clause was “too flimsy” to meet HMRC requirements. Since the Appeal Court’s ruling, the firm says that all the signs indicate that more contractors will be deemed employees due to their substitution clause not standing up.

“We are seeing more and more IR35 investigation cases where a claimed substitution clause has simply been treated as one clause amongst many carrying little weight in the status argument,” Ms Cottrell told the news provider.

Addressing all contractors, she added: “It all comes down to educating all the parties in the contractual chain and ideally at the outset” and advises that a contractor should seek the views of the client if they are planning to rely upon a right of substitution to take them outside IR35.

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Female Interims Begin To Increase

Posted on 7 December 2009 by icsanna

According to the Interim Management Association’s (IMA) latest Ipsos MORI report, women make up 31% of interim executives. This latest finding confirms that the male/female gap in interim management has narrowed yet again.

The IMA represents the majority of established and leading Interim Management recruiters currently operating in the UK market. Ipsos MORI are a leading UK research company who compiled the data on their behalf.

The Recruiter said that only 18 months ago, women accounted for only a quarter of interim managers, however, 2008 saw the number increase by 16%.

Paul Botting, IMA chairman believes that interim management is a dynamic and rewarding sector which provides access to a number of differing roles spanning all sectors and industries. They have seen interim become increasingly popular with experienced senior individuals — both male and female continuing to enter the marketplace — and they are active in encouraging a diverse mix to the industry.

Karen Oddey, director of interimwomen.com believes interim management offers a serious and challenging career for women and for many, a more flexible way of working.

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Demand Expected to Exceed The Supply Of Engineers

Posted on 2 December 2009 by icsanna

The Engineering and Technology Board warned us of the acute shortages of engineers in the report , Engineering UK released yesterday. The report said that the UK must find almost 600,000 new engineers over the next seven years and remove the male-dominated image of the sector to attract new recruits.

The UK needs an extra 587,000 engineers between now and 2017, all with advanced skills, so that the country can compete with other developed economies. Graduates looking to enter engineering roles may be encouraged by the comments, along with contractors who already have the necessary skills and experience.

The review stated: “The UK has great potential to rebalance its economy by drawing on its strong manufacturing base.

“However, shortages of new engineers and of the further education lecturers to train them could seriously jeopardise this, impacting on successful British industries including manufacturing, aerospace and construction.”

One highly qualified engineer with over 30 years experience, however, questions whether the UK needs engineers as he has been unable to secure an engineering job after applying for over 500 posts. He questions whether that demand does exist.

Paul Jackson, the board’s chief executive, told the Guardian: “Manufacturing is incredibly important to the UK, and engineering important to manufacturing. The question is whether we are doing enough soon enough.”He also added that the future of the industry looked promising, with the average engineering salary increasing 2.2 per cent this year as perceptions of a career in the sector show signs of improvement.

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PCG Lobby To Appoint A Minister For Freelancing

Posted on 1 December 2009 by icsanna

In the PCG’s first ‘Manifesto for Freelancing’ which was submitted to government last week, they have called for “fairness, clarity, and recognition” for the UK’s freelance workforce.

Fairness, because the “iniquitous” IR35 tax legislation puts an “unreasonable” burden and stress on freelancers, and loses the economy an estimated £1.2billion a year.

Clarity, because the distinction of who is, and who is not, an employee is unclear, as is the distinction between a ‘contract of service’ and a ‘contract for services.’

And recognition, because freelancers are a “unique sub-set of self-employed workers” who do not necessarily seek growth or employees and should be recognised as such.

The PCG think the government should create a new post of Minister for Freelancing, or nano-enterprise, to act as a champion of UK freelancing, at home and abroad. They want freelancing to be acknowledged as a business model and as such, feature on the small business remit rather than on the state’s employment and social agendas.

John Brazier, PCG’s managing director reflected: “We know that freelancing is helping business cope with the worst recession we have seen for 60 years. But this has to be a fair deal. Freelancing must be recognised as a legitimate business model. Measures such as IR35 continue to place an unfair burden on nano-businesses.”

Alongside the appointment of a minister for nano-enterprise, and the abolition of IR35, the group said it wanted the government to drop the proposed legislation on ‘income shifting.’

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Recruitment Sector Is Slowly Recovering

Posted on 30 November 2009 by icsanna

The Recruitment and Employment Confederation (REC) have claimed the recruitment sector is recovering, albeit at a slow rate. In a statement released earlier this week, they believe it will take at least three years for employment figures to reach 2007/8 levels.

They also commented that REC figures from the last three months show that the sector has been showing good signs of recovery. British employers are increasingly opting to end their freeze on recruitment, with a number of new jobs, including those in the construction sector set to be created as a result.

Speaking at the organisation’s first national convention, Kevin Green, REC chief executive, said:  “If you start looking at the data, there are some good signs for the last three months. We’re just starting to see growth in vacancies and placements in both temporary and permanent positions. I wouldn’t say there were huge volumes coming through but it is certainly slightly better.”

Earlier this month, figures released by the Office for National Statistics showed that the third quarter of this year saw the smallest quarterly increase in unemployment rates since the start of the recession and the largest quarter-on-quarter fall in the number of redundancies.

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Lasting Impressions Created Following National Freelancers Day?

Posted on 27 November 2009 by icsanna

National Freelancers Day appears to have achieved PCG’s multiple objectives which were; to stimulate debate and generate publicity for, and recognition of, the contribution that contractors, freelancers, interims and consultants make to UK PLC.

On Monday, the PCG organised a series of events up and down the country to mark the day as well as a web seminar which saw influential professionals discuss the values of freelancing. A number of companies also hosted events, launched competitions and much more, all to celebrate National Freelancers Day.

Dave Chaplin of Contractor Calculator jumped off the highest building in the southern hemisphere. He made the 192 metre 83 km/h jump from Auckland’s Sky Tower in New Zealand, to celebrate National Freelancers Day and to encourage others to make the jump into contracting. Contractor Calculator also commented that the PCG’s Manifesto for Freelancing has put the flexible workforce firmly on the political agenda in the run-up to the next election, while other activities on the day and the CBI report have put the benefits of flexible workers on the maps of businesses and end-user clients.

The PCG also chose to launch its rebranding on National Freelancers Day. Formerly the Professional Contractors Group – they have rebranded themselves as, ‘PCG, the voice of freelancing’. The rationale behind dropping ‘contractor’ is that researchers deemed it ‘confusing’ and ‘alienating’.

As Contractor Calculator comments, whether you call yourself a contractor or something else, you are likely to benefit from the positive ripples created by National Freelancers Day.

Independent Contractor Services (ICS) offer accountancy and administration services to the contractor marketplace. If you would like any more information about all the options available to you, you can visit our website, email info@ics.me.uk or alternatively telephone 0800 195 3750.

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Demand For Freelance Managers From The Public Sector

Posted on 25 November 2009 by icsanna

An article in The Guardian newspaper today discusses how freelance managers offer diverse skills and deliver efficiency and that is why the public and voluntary sectors are turning to them for support.

For the first time, the demand for freelance senior experienced executives to work in the public sector is higher than the private sector. And all the indications are that the trend is likely to continue. Interims who have traditionally worked in the private sector but have seen their freelance opportunities disappear because of the recession, are now turning to the public and voluntary sectors instead.

Tom Brass, chairman of the Institute of Interim Managers, which represents those working in the profession, says: “While the market has been very tough, that’s been confined to the private sector. The general feeling is that public sector has held up pretty well and, if anything, has grown.”

Specialist agencies that recruit interims in the public and voluntary sectors believe the future is bright for these highly skilled managers, because one of their key roles is to go into organisations and help them run more efficiently.

IMA chairman Paul Botting says: “The most important thing is that for the first time the public sector has seen a dramatic growth over the private sector. I think the public sector generally sees interims as a solution – that they get pragmatic, experienced individuals who can hit the ground running who have the experience, the scar tissue and credibility to take the team with them.”

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