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

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

New guidance from HM Revenue and Customs now defines tax avoiders as those seeking to pay less tax than “if Parliament turned its mind to the specific issue in question”.

The rules are likely to lead to tens of thousands of people who arrange their financial affairs in perfectly legal ways being investigated by tax inspectors.

Last night, accountants and lawyers described the rules as a “wholly unwarranted extension” of HMRC’s powers which threatened to undermine the democratic right of Parliament to set the law.

The new “code of practice” for tax inspectors was reissued last month without public announcement.

In the key passage defining tax avoidance – and therefore which practices may be pursued – it now states: “Avoidance is not defined in the Taxation Acts…One definition is ‘a situation where less tax is paid than Parliament intended, or more tax would have been paid, if Parliament turned its mind to the specific issue in question’. At a practical level the problem is then essentially one of deciding what Parliament would have intended and identifying who should be asked to decide this.”

“Inspectors need to have in simple terms a working concept of ‘avoidance’ in order to properly identify cases which can be worked…The starting point should be that one would normally expect taxpayers to pay tax on their income or profits…It is reasonable to assume that where a commercial transaction is carried out in a particularly convoluted way, then avoidance is afoot.”

It is understood that leading accountants and tax lawyers have met to discuss the potentially sweeping nature of the new guidance. The legality of the rules may be challenged in court if a taxpayer is pursued for breaking a law which does not yet exist.

HMRC has already faced criticism for applying new tax laws retrospectively. Thousands of families who had established trusts were recently hit by retrospective rules.

Last night, Mike Warburton, an accountant at Grant Thornton, said: “We live in a democracy where the law is supposed to be set by our elected representatives.

“In disputes, the courts are entitled to consider what Parliament intended but it is a wholly unwarranted extension of this principle for HMRC to decide what Parliament would have intended if they had bothered to think about it. It is the start of a slippery slope towards a police state.”

However, a spokesman for HMRC defended the advice. “There has been no change in what HMRC sees as avoidance,” he said. “The updated guidance explicitly states that there is no definition of avoidance but offers a short and simple starting point for staff.”

Telegraph Online

As a Contractor, you may not have replaced your lost ‘death in service’ benefits that you used to benefit from as a ‘permi’. But when you become a parent the safety net that this cover provides becomes vital to protect your children if the worst should happen.

With this in mind, we can now offer life cover worth £10,000 absolutely free to new parents.

The joy of becoming a parent is often accompanied by an overwhelming feeling of responsibility for your new born. You begin to consider how you will create a safe home environment for your baby and how you will protect it if anything should happen to you. It’s easy to forget the importance of life cover when you get caught up in the excitement of a new baby, but with free cover for new parents it need not be a financial burden. Redego Financials can help you to arrange the cover without any hassle so you have more time to enjoy the important things.

How does the cover work?

Life cover offers an essential safety net to Contractors because if you die then it will pay out a lump sum or an agreed income to cover your families expenses and pay off any debts. At an already traumatic time, life cover offers the peace of mind for your dependents that they are protected financially and prevents them from being liable for any debts you leave behind.

You can insure yourself for a certain period in your life, for example until your children leave home, or you can choose a whole of life policy that will pay out no matter how old you are when you die. The insurance can be inflation proofed to ensure that the amount paid out upon death will be worth the same amount in spending terms as when you decided to take out the policy. This is particularly important for a whole of life policy as £100,000 now would hold a very different value in 30 years time.

The offer of £10,000 free life cover applies to new parents and as such you need to register for the cover before your baby is six months old. The offer applies to both parents and is per child so when you and your partner have a baby you can claim £20,000. If you are lucky enough to have twins then you can claim £40,000 free life cover and so on.

It is possible to take out excess cover on top of your free cover which you will need to pay monthly premiums on. We would advise Contractors to have enough cover in place to pay off any outstanding debts and also provide a safety net for your family to fall back on if the worst should happen. The free cover will end on the child’s first birthday by which time you should be back on your feet financially and able to take on the repayments which will be relatively low on this level of cover. Our advisers will be on hand to help you arrange an affordable cover to suit your individual needs.

In last week’s Money Section of The Sunday Times the focus was very much on what all the main parties may take away in terms of ‘tax breaks’ if they form the next government.  One of the eight key areas that the various tax luminaries interviewed thought would be on the political agenda was Setting up Companies because of the more favourable tax rates where profits are less than £300,000.

It is true that with previous recessions people have been forced out of careers and into freelancing, nevertheless it is difficult to agree with The Sunday Times view that to take advantage of lower tax rates we will “see a rush of high income earners to incorporate”, because as was pointed out in the article, one will need to be able to demonstrate that one is self employed.

However, it was interesting that one expert specifically referred to the Government potentially looking to tighten up the distinction between self employment and employment.  The recent “False Self Employment in the Construction Industry” consultation paper which would spell the end of the labour-only subbie suggests that this is more than speculation.  Can we therefore expect HMRC to try to reverse its poor yield from IR35 enquiries and start a new campaign against the freelancer?  Or should we anticipate that Labour, or indeed whoever wins next year’s election, has something even more draconian in mind?

Also of concern was a reference to the Arctic Systems case being revived by Labour.  Does this mean we will see Income Shifting make a return in the Chancellor’s autumn Pre-Budget Statement?  The Government would love to stop small businesses distributing profits between husband & wife in favour of the spouse with the lower tax band, but can it come up with any legislation that is more workable than the 2008 draft which was dropped allegedly because of the recession?

What is evident from this line of thinking is that the second decade since the introduction of IR35 is likely to start off just as taxing for the freelancer.  And as ever, it is important that contractors continue to take sound advice and be vigilant about how they protect their livelihood from an unhealthy interest by the taxman.

Abbey Tax Protection

PCG, which represents the UK’s freelancers has declared Monday 23rd November 2009 National Freelancers Day in drive to encourage everyone to acknowledge all freelancers, consultantsand contractors and the contribution they make to the UK economy.  The Day has been launched as part of PCG’s tenth anniversary celebrations.

John Brazier, managing director of PCG, commented: “We have seen a significant increase in the number of people opting to go freelance over the last ten years and today there are 1.4 million freelancers in the UK.  PCG wanted to establish a special day for them and on National Freelancers Day we can recognise freelancing and celebrate the talents, achievements and worth of freelancers up and down the country.”

PCG’s vision is for freelancers to enjoy the optimum environment in which to operate and thrive.  As such, National Freelancers Day will highlight five key themes:

• Fair and equitable taxation
• The right to work freelance
• Government to make it easier for clients to engage freelancers
• Recognition that freelancers are in business on their own account
• Freelancing to be respected as a valid career choice and essential ingredient in the success of UK Plc.

National Freelancers Day will see a number of events taking place UK-wide for freelancers across all sectors and PCG will be calling on its members and well-known freelance celebrities to talk about what it means to be a freelancer.

National Freelancers Day

This new breed is far removed from old-style locums. They are coming together in virtual law firms — models differ but a popular one involves solicitors working on an earn-as-you-work basis, from home or sometimes the client’s office, with the practice providing centralised administration, support and marketing.

The recession means that the future is encouraging for such firms. Redundancy rounds have led many solicitors to rethink their lives, while in-house lawyers face big pressures to cut costs. This increases the appeal of a firm where you pay for the advice but not the fancy City office.

When not forecasting the weather — a role that grew from winning a staff talent competition while she was an in-house lawyer at Sky — Denise Nurse runs Halebury, a City firm. It is a group of nine freelance solicitors who work non-exclusively on projects that either they or Halebury bring in (this determines the income split between lawyer and firm).

The flexibility that the lawyers enjoy works both ways, Nurse explains. Some clients simply have a one-off job, while others may need someone for a longer-term placement. Unlike with a locum, “you build up a relationship with us, meaning that even if you don’t need us for a bit, the knowledge doesn’t go away”, she says.

Tellingly, many of the pioneers are former in-house lawyers. Oliver Brice, for example, was group legal director of the Macmillan Publishing Group before establishing Virtual Law, which sells itself to companies as an outsourced in-house legal function.

Excello Law has recently been launched by George Bisnought, formerly the global legal director of Systems Union, a software company. His experience as a buyer of legal advice is that “on the whole clients are satisfied with the service but the bugbear has always been the spend”. Also, he finds that many private practice lawyers love the law but not the working environment — whether it be the macho culture, the glass ceiling or simply the pressure.

The appeal of this new way of working for lawyers with childcare responsibilities is obvious, while for others, particularly men, “I wouldn’t call it a midlife crisis, rather a reflection of where they are in their lives”, Bisnought says. They may want to travel, pursue hobbies (one of Excello’s lawyers is also an author), develop other business interests or perhaps work from the South of France.

One of the first on the scene, in 2002, was Keystone Law, although the founder James Knight describes the firm as “dispersed”, not virtual, because there is a staffed central administrative office. Its 85 home-based lawyers are consultants, rather than freelance, but while the way of working is not traditional, the service itself should be, he explains.

“We make no bones about being dispersed and clients need to know why their rates are so favourable when the solicitors are no less qualified ,” Knight says. “But in all other respects, to be very successful the future is not a dispersed network of individuals because you won’t get good-quality clients. The future is a seamless law firm, even if it does offer its solicitors a different remuneration and lifestyle package.”

Berwin Leighton Paisner (BLP) is one traditional City firm to wake up to the opportunity and threat that this method of practice represents. Its Lawyers on Demand service is aimed at clients looking for an in-house secondment or locum-style arrangement. A pool of 28 freelance lawyers (only one of whom is former BLP) work with clients on a contract basis, vetted and supported throughout by the firm.

Simon Harper, the partner in charge, explains that Lawyers on Demand aims to handle more routine work that companies cannot resource in-house but for which they do not need a City firm. Apart from some profit, the non-financial benefits for BLP are obvious — the service both retains existing clients and attracts new ones, such as Orange and Gucci.

A recent recruitment trend is lawyers who want to continue working a five-day week but as freelancers, Harper says, so they can have more control over their lives and financial affairs.

Going freelance, or virtual, is not just an option for commercial lawyers — Woolley & Co, for example, is a virtual family law practice — or only for those with a client following (although that undoubtedly helps). But clearly you need experience in your field and a certain type of character; for example, you cannot be afraid, Nurse says, of marketing. But this way you see your children, or maybe your piano, and get a far greater reward from your efforts.

“You can get complacent in employment,” she adds. “This is a wonderful opportunity for people to shake themselves out.”

Times Online
31st July 2009