The legislation will be introduced in the Finance Bill 2011, and become effective from 6 April 2011 onwards. The inclusion of anti-forestalling measures that became effective on the 9th December 2010 mean that from now payments of this type fall within the scope of the new measures.

The proposed legislation states that sums earmarked by trusts or other intermediaries will be treated as though it is a payment of income that is liable to PAYE tax.

Because of this ruling we believe that use of an EBT is no longer an option for your contractors.

If your contractors are using an EBT Company, then they should immediately consider their options as they have now been made a target by HMRC and with the wide ranging MSC legislation this could also prove risky for agencies who are continuing to use these services.

Be aware that EBT providers are trying to find a quick solution which could represent further danger!

How can Redego/Tempo Accounting help?

We will contact your contractors and give them a personalised assessment of their options and the likely impact on their take home pay within a few hours. Click here to request a call back.

The services that we can supply you, subject to your requirements, will all meet the criteria below;

• No off-shore ‘tax avoidance schemes’; UK based services only
• Either limited company or umbrella company services
• No set up or leaving fees and no minimum contract period
• Unlimited advice for contractors by specialist consultants and accountants covering many different technical aspects

Please call 0203 137 64 62 now for a free consultation.

The conventional approach to signing and returning contracts (a combination of post / fax and email) is often the ‘bottle neck’ in an otherwise efficient placement process.

Larger big-budget agencies have been using “electronic signatures” to sign contracts for years, however SignatureSense’s low monthly subscription fee for agencies makes this modern business practice available to even the smallest of companies.

Alan Whitford, industry veteran and founder of RCEuro.com, the Pan European community site for recruiters, commented on SignatureSense:

“I think that this offering should be a ‘no brainer’ for recruitment businesses, where the time lost in the administrivia of contract administration can lead to lost revenue and poor client service.  The electronic signature ‘wrapper’ is ideal for confirming NDAs, Terms of Business and Contractor Agreements, all in real time. We will certainly be using the service for our future agreements at RCEuro.”

Jon Richardson, Founder of SignatureSense added:

“We are really excited to see that Agencies find such a direct benefit in using our service.  It’s only a matter of time before electronic signatures are common-place, so the ‘early adopters’ are making the most of a great competitive advantage.”

Redego are now able to offer real-time reporting of working hours to agencies.  This enables agencies to ensure that the Working Time Regulations (WTR) are being complied with and the added ability to plan future projects with reference to hours worked.

Agencies can view reports showing which contractors are close to exceeding their maximum average hours.  This makes compliance and planning much easier for agency consultants.  Whilst we always ensured our workers are given their statutory rights, this new system shows agencies and their clients that we are doing this and gives them the ability to use the data to plan future work.

The new online system is especially useful for workers on project rates where it has been difficult to monitor rest breaks.

Its proving particularly popular with agencies who engage manual workers on project rates – the risks of injury and reducing quality of work are much greater for these categories and end-clients want to know its being managed properly.

The new online system lets workers input their rest breaks with the click of a mouse as they submit their timesheet and is very simple for contractors to use.

Under the WTD regulations, all employers have to ensure that workers have adequate rest-breaks:

• maximum hours worked – avg 48 per week in 17 week rolling period
• adequate rest breaks, so workers do no more than:
  • 13 hours in any 24 hour period (day) – cap of 13 x 6 = 78 hours
  • 1 days off (rest days) in every 7 day period (week)
  • statutory minimum holiday periods (28 days not working in addition to ‘rest days’)

Whilst this is the responsibility of the employer (the umbrella company), most clients and agencies reckonise their responsibilty in ensuring they only use compliant umbrella companies that can show they are acting responsibly to protect workers’ welfare.

Another benefit of the new system is greater accuracy when calculating contractors’ National Minimum Wage (NMW) which is a key contractual element of remuneration in most umbrella companies.  Getting this wrong, can attract attention from HM Revenue & Customs (HMRC) both on breach of NMW legislation but also PAYE/NIC compliance as contractor expense claims are invariably affected by minimum wage.

Unlike a permanent employee, many Contractors pay both employer’s and employee’s National Insurance on earnings.  This means that the 1% hike expected in April will have a noticeable effect on a Contractor’s take home pay.

The good news is that the Redego Pension Scheme provides a great opportunity to reduce a contractor’s total tax deductions.

By transferring a portion of your income into the personal pension scheme a basic rate tax payer saves upto 39%. Higher rate tax payers can save between 49% and 69%.

This ‘Salary sacrifice’ can counteract the 1% increase by reducing the Income Tax and NI normally paid on earnings.

Why Choose Redego’s Pension Scheme?

Redego works with IFA ContractorFinancials to provide a pension scheme with as much flexibility as possible, allowing contractors to change contributions to match a their contract’s earnings at any time. There is total freedom to decide how much is transferred and contractors can pause contributions at any time.

If a contractor decides to leave iBalance then the pension can either be left to grow, or closed completely with funds moved elsewhere.

The legislation surrounding annual allowances for pension tax relief are changing in April and the new allowance will be £50,000 (down from its current level of £255k).  However, this still offers significant scope for most investors.

Independent Advice Without Pressure

There are no set up costs when joining the Redego group personal pension scheme and the pension advisers at ContractorFinancials are independent of any one company. This allows Redego contractors to take advantage of a full review of any existing pensions in place.  Then, if it makes sense to do so, the advisers will assist in transferring any existing funds over to the Redego pension.

To speak to a pension adviser about the Redego group personal pension or for more information on the scheme, call 0845 062 8888 or email Redego@contractorfinancials.com and an experienced pension adviser will be in touch.

HMRC have issued a new press release on 6 August regarding their concerns about intermediaries offering services to pay temporary workers (such as umbrella companies).

Due Diligence

They have also published a ‘Due Diligence‘ guide for companies who use umbrella companies and other ‘labour provider’ intermediaries.

What agencies must do

In the guide, HMRC claim that it is the agency’s duty to check the operation of any intermediaries they use to pay their workers or face losing ‘the right to reclaim vat’.

Examples of such checks include:

• is the labour provider registered and operating in the UK?
• what is the directors background (ie. are they professionally qualified)?
• do they have employers liability insurance (have you seen the certificate)?
• do they guarantee to pay the National Minimum Wage (NMW), especially where expenses repaid to workers would otherwise reduce their salary to below the NMW?
• do they conduct statutory ‘Right to Work‘ checks?
• do they pay ’self-employed’ workers rather than through PAYE?
• do workers have employment contracts?
• do they pay expenses to workers without sight of receipts (ie. through dispensations)?

“HMRC are obviously fed-up with employment businesses using non-compliant labour payment services – ignorance will no longer be a defence.  In this latest press release, they now expect employment businesses to complete a certain amount of due diligence or suffer the consequences:  ‘(agencies) will lose the right to recover vat’. ‘ When you consider this in conjuction with the new construction clampdown, they obviously mean to focus more on agencies in the future.” Redego

The labour supply businesses seek to obtain a tax and National Insurance advantage by the creation of a purported overarching employment contract which is intended to enable temporary workers who would not otherwise be entitled to tax relief on travel and subsistence expenses to gain such tax relief.

In the last two years HM Revenue and Customs (HMRC) have seen a growth in arrangements which are variously described as ‘Travel and Subsistence Schemes’ or ‘Mobile Worker Schemes’. These schemes are operated by many businesses involved in the supply of temporary workers to end users: Employment Businesses and umbrella companies. The labour supply businesses seek to obtain a tax and National Insurance advantage by the creation of a purported overarching employment contract which is intended to enable temporary workers who would not otherwise be entitled to tax relief on travel and subsistence expenses to gain such tax relief.

These schemes often involve the use of salary sacrifice arrangements and rely for their effectiveness on the fact that HMRC have issued a dispensation in accordance with section 65 Income Tax (Earnings and Pensions) Act 2003.

In many cases such schemes are marketed to workers as representing a tax and National Insurance saving for the worker. However, the major saving is not to the worker, rather to the party who would bear the higher employer’s National Insurance contributions costs if it were not for the arrangement.

Following responses to the July 2008 consultation ‘Tax relief for travel expenses: temporary workers and overarching employment contracts‘, HMRC commenced compliance activity to identify and take action against those Employment Businesses and umbrella companies which are operating in contravention of tax, National Insurance or national minimum wage legislation.

Current compliance activity has identified a number of concerns that are the subject of more detailed, ongoing investigation. These include:

• Potentially ineffective overarching employment contracts
• Dispensations which are invalid, or which have been wrongly applied
• Not complying with the terms of the dispensation
• “Expense payments” made tax-free without that level of expense, or in many cases any expense, having been incurred
• Potential illegal deductions from workers’ pay
• Ineffective and sometimes unlawful management processes; and
• Breaches of national minimum wage

HMRC are working with other Government Departments, including the Department for Business Innovation & Skills, and Authorities, particularly the Gangmasters Licensing Authority, to identify businesses acting in contravention of legislation and will penalise breaches of the law as they are identified. In addition, HMRC are also working with end users of temporary labour to raise their awareness of the consequences of sourcing their temporary workers from businesses which act in contravention of the law.

HMRC are concerned that many lower paid workers being paid through such schemes do not understand the arrangements and in many cases are given little choice as to whether or not they are paid through such schemes. There are also concerns about low paid workers in such schemes opting out of the Conduct of Employment Agencies and Employment Businesses Regulations 2003 without fully understanding the implications of what the opt-out means.

End user businesses which use temporary workers paid though Employment Businesses and/or umbrella companies which do not fully comply with their statutory obligations, clearly run a risk of damage to their reputation and their business if HMRC takes action.

HMRC will continue to investigate and challenge non-compliant Employment Businesses and umbrella companies and will report to ministers in due course on the outcome of that action and the extent of issues being discovered. Ministers will then be able to consider the extent to which compliance action is able to address the undesirable effects of these schemes and whether further measures are required.

HMRC

Nine former ministers today rounded on Gordon Brown’s plans to cut childcare, warning the prime minister that he is threatening marginal Labour seats in the runup to the election by axing popular support for hard-working parents.

The warning came from normally loyal former ministers – including Patricia Hewitt, Estelle Morris, Hilary Armstrong, Beverley Hughes and Caroline Flint – who say the plans to cut childcare vouchers for more than 340,000 parents are “greatly unfair” and “mark the undoing of one of Labour’s landmark achievements”.

Brown announced he was removing tax relief for employer-based childcare vouchers, arguing that too much of the money was going to the middle classes. He has outlined plans to switch the money to provide 10 hours of free childcare for 250,000 two-year-olds by 2015. But removing vouchers, which are thought to save parents up to £2,400 a year on the cost of nurseries, nannies or childminders, would strip “effective and popular childcare support from hard-working parents”, the former ministers said.

In their letter to Downing Street, the former ministers, including former women’s minister Meg Munn, urge the government to review the decision: “Carefully considering the full impact of removing the tax relief on parents, employers and the childcare sector.”

“Surely this is not the time for us to remove a key support from hard-working families at the very point we need them at their most engaged and productive to fuel the recovery from recession. Crucially, in the runup to an election, it will remove support for working parents and for businesses in key marginal constituencies.”

More than 70,000 people have signed a petition on the Downing Street website criticising Brown’s decision and urging him to reconsider. Some of the signatories to the letter have likened the revolt to the way the government was caught on the hop over opposition to the abolition of the 10p tax band.

The authors, notably Hewitt, believe the Treasury has mistakenly seen the childcare voucher as a middle-class perk.

The letter said: “Childcare vouchers are an essential support to over 340,000 parents enabling more than 33,000 employers to help their employees, especially women, balance family and work responsibilities. It added: “Withdrawing them will penalise a significant number of lower-rate taxpayers, reduce the overall amount of funding available for childcare, reduce parental choice and impact negatively on the economy as the UK moves towards recovery.”

The vouchers can be used to offset the cost of childcare from Ofsted-registered providers, saving higher-rate taxpayers £1,195 and basic-rate taxpayers £962 a year. Both parents can use the vouchers, potentially saving couples £2,390 a year.

The government maintains that existing beneficiaries of the tax break will not lose out, and that the current scheme is badly targeted by providing too much relief to higher-rate taxpayers.

Downing Street said it would look at the criticisms carefully in advance of the pre-budget report. The critics said the government’s belief that the relief is regressive was based on out-of-date figures, and that the latest surveys suggested 74% of the users of the scheme are basic-rate taxpayers. Other signatories include the former Scotland Office minister David Cairns, former Europe minister Denis MacShane, and the former international development minister Sally Keeble.

Guardian Online

Speaking to the House of Commons, Austin Mitchell MP declared a need to stop consultancy and IT suppliers targeting the public purse as a source of easy profits.

He explained that, since 1997, such consultancies have “grown fat” off the taxpayer, partly thanks to “impulsive gestures” and “idealistic” thinking by the government.

But the member of the Public Accounts Committee said the other cause was state officials being taken in too easily by the IT sector’s sales and marketing teams.

“All too often, departments seem incapable of dealing with the wily stratagems and sales patter of consultancy salesmen,” the Labour MP for Grimsby said last week.

These salesmen, particularly those at the big IT consultancies, “over-praise” their product or service and “forecast that it can do more than it actually can,” he said.

It is not the first attack on IT’s drive for business by a Labour MP. Targeting EDS for its C-Nomis project, Jack Straw said officials were victim to “snake oil salesmen.”

But Mitchell believes the “failure” is actually on both sides of the contract – on the part of the IT supplier’s sales team and the government body engaging that supplier.

He said: “Departments…try to set too many objectives to be accomplished, which always leads to failure in IT contracts. When we try to do more with an IT system than it can bear, it inevitably breaks down and performs inadequately.”

To evidence his claim, he pointed out that the MoD’s defence information infrastructure programme was running 18 months late, and that the NHS care records system was also behind schedule, by four years.

He believes government departments need better advice to “put them on a more secure and effective platform for controlling the suppliers of IT systems they deal with.”

He added: “No taxpayer pound should be the source of easy profit. That is an absolute maxim. However, in consultancy and IT services, the taxpayer pound has been a source of far-too-easy profits.

“We need to control that, exact penalties where necessary and blacklist firms that are over-selling in that fashion to see that they do not make the same profits and mistakes in future.”

Part of Mitchell’s vision includes giving the Office of Government Commerce a stronger and more effective role than that of an advice service, allowing it to push its choices for IT contracts.

“It should have an audit and control role over those contracts, and it should ensure that performance is adequate,” he said. “If it is not, it should demand sanctions and penalties.”

Contractor UK

Dave Hartnett, HM Revenue & Customs’ Permanent Secretary for Tax, appears in a hard-hitting two-minute video warning that people “fiddling” their taxes could face jail.

It is the first time that HMRC has used social media to communicate with the public. Previously it has run television campaigns to encourage people to file their tax returns on time and to collect their tax credits.

A spokesman said: “We are looking to use social media, alongside more traditional communications to reach as wide an audience as possible. YouTube is clearly a popular platform for brief, to-the-point communications and that is why we have decided to post the video there.”

Mr Hartnett, who masterminded this crackdown on offshore savers, said that his message was “blunt”. “For some people, offshore bank accounts and tax havens typically conjure up images of exotic and faraway places, well out of the reach of the taxman at home,” he said.

“Well, life’s just not like that any more. And here’s a blunt message from HM Revenue and Customs: times have changed. The taxman now has more powers and more information … If you evade tax on your offshore assets, you’ll be found out and you could be prosecuted.”

He urged savers to take advantage of HMRC’s tax amnesty launched in July this year, which limits the penalties for those who come forward to notify the Revenue before November 30 that they have offshore interests.

Under the terms of the New Disclosure Opportunity (NDO), those who declare that they have savings or other income from overseas, for example from renting out property, will pay all the tax they owe plus a 10 per cent penalty.

Savers who notify HMRC by phone or in writing must pay the tax and penalty by January 31. Those who alert the Revenue online have until March next year to settle their bill. Those who fail to come forward face penalties of up to 100 per cent of the tax they owe and could face prosecution.

This is the second such amnesty that has been offered by the taxman, but HMRC says that it will be the last.

The initial disclosure regime, which closed in 2007, raised £400 million for the Treasury coffers after 45,000 savers came forward.

At that time, HMRC had obtained details of all Britons holding money offshore from five leading banks. Since then HMRC has collected information on thousands more British savers from hundreds of smaller banks. Accountants say that the taxman could have details of as many as 100,000 people. HMRC would not reveal how many people had come forward under the NDO, but it said that it expected a flood of disclosures ahead of the November deadline.

A spokesman said: “We do not expect to have a full picture of the amount of tax, interest and penalties recovered until the deadline for payment has passed in March 2010.”

Appealing to savers’ consciences, the video points out that “by fiddling your tax, you’re robbing public services of much-needed funding”. In a line reminiscent of a gangster movie, Mr Hartnett adds that the possibility of jail for those who do not declare their income “is not a hollow threat”.

Accountants say that HMRC has become more hardline about chasing tax payments as the income from tax has dwindled during the recession. Angela Beech, tax partner at Blick Rothenberg, the accountant, said: “The Revenue are getting more threatening as they have a huge black hole to fill because of plummeting tax receipts.”

In May it emerged that HMRC would use debt collectors to chase individuals and businesses who have failed to settle their tax bills.

Times Online

Unsurprisingly, young people are the least likely to have made a will, with 88% of people in their 20s failing to write one.

But one in four people in their 60s has also failed to set out who they want their money and belongings to go to, rising to 41% among those aged between 50 and 59.

If people die without making a will their assets are classed as being intestate and are divided up according to set guidelines.

Under these guidelines, married couples automatically inherit only £250,000 of their partner’s estate.

In the past, this has led to a mother having to sue her young children to access money that has been passed on to them when there was no will.

The main reason people gave for not having a will was that they had not got around to writing one yet, cited by 43pc, while 24pc said they had nothing of any value to leave behind.

Around 14pc of people admitted it had never occurred to them to write a will, while 13pc said they could not afford the cost of setting one up and 11pc said they had not yet decided who they wanted to leave money to.

Just under one in 10 people admitted they had not written a will because they did not know how to go about it.

Karen Barrett, chief executive of Unbiased.co.uk, said: ”By having a will in place families can avoid worry and stress at an already difficult time.”

Telegraph Online

If you need help writing a will, please get in touch with Redego Financials