A positive spin on the autumn statement

With the growth forecast increased and borrowing revised down, everything looks rosy for the government. A drive to enable the public to share in the remaining privatisation of RBS next year also indicates that a general election must be right around the corner.

However, what about the details for our industry? Well…

You’ll have seen reports of reactions to the government clamping down on onshore intermediaries to prevent them from using contracts to disguise employment as self-employment. This will impact contractors who currently receive their pay as gross – a scheme that popped up after offshore was investigated.

The Office of Tax Simplification has also been asked to release some more quick wins, specifically with travel and subsistence. More clarity and guidance will be provided to ensure we at last have a level playing field with limited companies and gross schemes.

From 2015 under 21s will get a tax exemption from employer’s national insurance, which will hopefully encourage employment for younger individuals. A welcome tax break I’m sure.

In my opinion, the autumn statement is a big win for the economy, umbrellas, and, from 2015, under 21s.

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Thompson v Paymaster

A recent employment tribunal found that six workers paid by the now gone bust Paymaster were not in fact considered to be the umbrella company’s employees.

Clearly this immediately raises questions in relation to the treatment of workers employed through umbrella companies, but before we all get carried away, we should understand some of the facts behind the case and why the judge took that decision.

Firstly the umbrella company in question operated a “pay day by pay day” model, offering no employment in between pay days and therefore no ongoing employment rights.

This is not how compliant umbrella companies work and I can only assume it is one of the reasons that Paymaster ceased to trade.

Secondly the six workers, who were owed payment when Paymaster went into receivership, were not represented and were asking the tribunal judge to ask the secretary of state to pay the unpaid remuneration, in line with Section 182 of the Employment Rights Act. Under normal employment this would be the case, however, due to there being no control through obligation on either party, the judge ruled that they were not in fact employees.

So how can agencies ensure that their umbrellas are compliant once again? Unfortunately it comes down to understanding the umbrella’s actual model and asking for clarity. Additionally, an umbrella which is a member of a professional body such as Professional Passport would be audited to ensure that they do employ workers compliantly.

Within my companies – Atlantic Umbrella and Crystal Umbrella – we take the employment of contractors seriously. We have an in-house HR department and provide all employment rights regardless of whether the worker is on assignment or between and therefore working under mutual obligation and a truly overarching agreement.

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Have you met Atlantic Umbrella?

So, carrying on from my last blog in which I talked about Crystal Umbrella, I would like to introduce another member of the Unitum Group, Atlantic Umbrella.

The group acquired Atlantic Umbrella in June 2011 because it had a similar ethos to Crystal Umbrella.

Modelling itself on helping others and providing an excellent service, Atlantic Umbrella works closely with every contact, whether they are agency clients or contractors. Its mantra is to be relationship-focused and to always go the extra mile.

With its own bespoke dispensation, which is vigorously checked week in week out to ensure compliance, Atlantic Umbrella is also audited and approved by Professional Passport. This gives it the added endorsement and assurance that the company’s processes are compliant and that contractors and clients remain protected.

Atlantic Umbrella operates from its new offices in Mayfair, London, and shares full head office resources at the parent company’s residence in Hertford.

Feel free to pop in for a coffee and meet the London team to experience the warm welcome of Atlantic Umbrella for yourself.

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Take the Business Entity Tests, get 3 years IR35-free

At a recent providers’ meeting, HMRC presented an update on how things are changing in relation to the enforcement of IR35.

What was astonishing was the low number of enquiries previously undertaken, and the length of time they were taking.

The main message? This is unacceptable.

Moving forwards, HMRC has planned to increase the number of enquiries three-fold. It’s also looking to dramatically reduce the length of time each enquiry takes, and asking for reasons to support the worker’s status in the first letter should speed this up.

If evidence such as the Business Entity Tests can be provided to show that the worker is outside of IR35, HMRC has committed to closing an enquiry within eight weeks.

After this, if the decision goes in the worker’s favour, HMRC would commit to not investigating them for another three years.

Well, that’s a get out of jail card if ever I saw one.

If I were a contractor using my own limited company for the past few years, I would take the tests and have their results effectively draw a line under my previous years’ taxes and give myself a three year respite. Happy days…

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An employee or a freelancer? Inconsistency at the BBC

It’s funny that contractors seem to be getting all the headlines, even when the US election was going on.

So the BBC has undertaken a review of its 2,400 workers who had “off-payroll” arrangements, with some 800 earning over £50,000 now having to undertake a business entity test to ensure that they are legitimate freelancers, and 131 of them likely to be offered permanent contracts.

Interesting that only the higher paid workers have to do this test. Why not all workers?

I would have thought that the lower paid workers would be more likely to be caught by IR35, as the business entity tests revolve around control and supervision. After all, the higher up the earning chain, the less control and supervision you would get.

Danny Alexander said: “It’s essential that the public has confidence that publicly funded institutions have in place arrangements to ensure their staff pay proper tax.”

It would seem he’s now getting his wish, but aren’t the government missing a trick?

With the BBC admitting that its payroll arrangements are ”inconsistent”, resulting in on-air talent doing similar work but being classed as staff, self-employed or contracted through a personal service company, it begs what else was found in the reports prepared by Deloitte, and the reasons for off-payroll arrangements – if the BBC’s CFO is to be believed…

The union mentioned that all its members use legitimate tax arrangements – rather than personal service companies to avoid paying it – but I think he’s missing the point!

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Pension auto-enrolment dates in discussion. Are you ready?

The Department of Work and Pensions is now revising its consultation on pension auto-enrolment.

From 6 September until 17 October, it will be looking at the earning thresholds at which employers will need to enrol their staff. With the first round of enrolment due to kick off next month, it’s interesting to see the rest of the dates still in discussion.

Initially it was planned that all companies would auto-enrol at the same time. Now it will be phased in over a few years, dependent on company size, which is a good indication that the consultation process is working and that government is listening.

As of October, employers with 10,000 or more staff will be obliged to enrol all workers who meet the age and earnings criteria into a workplace pension, and this will need to be completed by March 2013. The thresholds currently being discussed determine who contributes and how much this will be. When this was originally introduced as an idea, the plan was to ask for contributions of 11%. This is expected to ramp up after the consultation.

The date for companies with 250 staff is still being discussed, and they will get their date in 2013/14.

For most umbrella companies, the auto-enrolment date will be next year, but it’s best to be prepared now. Thinking about how this impacts umbrella and contract workers is interesting, and our initial thoughts would be that the majority of our staff will opt out, rather than suffer the full brunt of the cost, choosing private pension schemes instead.

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