PCG welcomes the Government's tightening of work permit

PCG, the voice of UK freelancers, has expressed disappointment at the findings of the Migration Advisory Committee’s (MAC) Report on the abuse of the Work Permit system. The Committee, tasked with advising ministers on immigration policy, has just released its recommendations on how to reform “Intra Company Transfer” (ICT) work permits, which are frequently abused by large companies. ICTs often lead to the displacement of skilled resident workers, such as IT contractors. Instead of tightening the rules to limit the use of ICT permits in the recession, the MAC called for stronger enforcement of the current rules. However the Government has decided to go one step further than this and now forbids the use of ICT permits where they will be directly replacing a settled UK worker.

PCG member's IR35 victory after five years

Despite the significant evidence of his business set up and the definite lack of control as to how he worked, the PCG member had been subject to HMRC’s gruelling fact-finding and questioning for five years – despite the fact the company had ceased trading with no way of paying the liability!

As with many IT contractors HMRC didn’t understand what the member was doing, how he worked, what the various projects were or how he interacted with the end client – yet they apparently knew enough to decide IR35 applied.

MP's Parliamentary question leaves a further doubt over IR35

PCG noted with interest that Labour MP Terry Rooney (Bradford North) asked this question in the House of Commons on 15th June.

Mr. Rooney: To ask the Chancellor of the Exchequer how many investigations concerning IR35 were launched in each of the last five years; and how many of them resulted in (a) prosecution, (b) an increase in tax due and (c) no further action.

Kitty Ussher: The intermediaries legislation, commonly known as “IR35”, was introduced with effect from 6 April 2000 to counter the avoidance of employed levels of tax and national insurance by individuals providing their services through intermediaries.

Disclosure of HM Revenue and Customs' compliance data relating to the legislation would result in a risk of non- compliance with the legislation. Accordingly I am not able to provide the data requested.

To our knowledge, it is unprecedented for a Minister of the Crown to refuse to answer a Parliamentary question because that answer would result in a risk of non-compliance with the legislation.  PCG does not see it as being in the public interest that the effectiveness of tax legislation should be shrouded in a veil of secrecy.

PCG lobbies directly for “serious reform” to the work permits system

PCG is calling for “serious reform” of the immigration system, particularly with regard to the use of ‘intra company transfer’ (ICT) work permits. It has done so in response to a review being conducted by the Migration Advisory Committee (MAC), the body which makes recommendations to Government on immigration policy.

PCG asserts such ‘ICT’ permits are displacing UK contractors, and it has been making a strong case for reform through numerous meetings with the MAC. PCG Managing Director, John Brazier, stated “We have been calling for such a review for some time, and our long history of involvement and action on work permit reform has no doubt contributed to the instigation of this exercise.” 

PCG exposes the truth of IR35's pitiful tax take

PCG is for the first time able to reveal the exact amount the restrictive IR35 tax regulation rakes in for the Government.

Following a request under the Freedom of Information Act to HMRC, asking just how much tax revenue IR35 raises for the exchequer, PCG can divulge that between tax years 2002/03 and 2007/08, IR35 directly raised just £9.2 million. This equates to an average of around only £1.5 million per tax year – a tiny sum in Governmental terms. The initial regulatory impact assessment for IR35 in 1999 stated that HMRC expected the measure to generate £220 million per year in National Insurance contributions alone, thus demonstrating IR35 has not lived up to the Government’s expectations.

PCG analysis: Budget 2009 offers nothing for freelancers

In PCG’s tenth anniversary year, we are reminded that Budget Day often brings momentous announcements for freelancers, seldom for the better: in 1999 it was IR35; in 2003 it was IR591 (neutered in 2004 after PCG lobbying); in 2006 it was the Managed Service Company rules (whose implementation in 2007 avoided the worst, again after lobbying by PCG); and in 2008 the Family Business Tax proposals were deferred after widespread criticism.

In 2009 the Budget did not address freelancers directly; rather, its main focus was on the economic crisis currently gripping the UK. Nonetheless there were some inclusions – and omissions – of significance.

Service company questions on the P35 and tax return

The topic of the service company questions that were introduced on the 2007-08 P35 and self assessment returns continues to a be a hot topic (issues of possible legality of these questions aside).

HMRC did acknowledge last year that their initial guidance had been inadequate and that the information on any 2007-08 returns submitted prior to their revised guidance being issued (in September 2008) would not be used to select businesses for IR35 enquiries.

There are no such guarantees for any 2008-09 returns so it is important for freelancers to take advice on their position (especially as penalties can now be applied where an individual has been negligent by not taking advice).

PCG urges Chancellor to repeal IR35

PCG, which represents the UK’s freelancers, has made its submission to this year’s Budget, calling on the Chancellor “not to let the ‘tax tail’ wag the ‘business dog’”.

PCG chairman, Chris Bryce, commented: “Freelancers have an important part to play in the economic recovery of the United Kingdom. The flexibility, skill, and knowledge they provide will be instrumental in meeting the needs of businesses, generating future wealth for the economy. Therefore the tax and regulatory burdens upon them must be removed.

PCG welcomes Commons Early Day Motion on IR35

PCG, which represents the UK's freelancers, has welcomed Liberal Democrat MP Lorely Burt's Early Day Motion to remove unnecessary barriers to enterprise and abolish IR35 at the earliest opportunity.

The Motion comes just weeks after the measure marked its tenth anniversary.  Over the last ten years, PCG has continuously appealed to Government to admit its mistake and repeal one of Gordon Brown's most ill conceived tax laws ever.

Out of work freelancers given a helping hand by PCG

PCG, which represents the UK's freelancers, has published a new guide to claiming Jobseeker's Allowance for freelancers and contractors.

"In these difficult economic times, it is essential that all freelancers who wish to access the support available to them from the benefits system are able to do so," commented PCG's managing director, John Brazier. "Regrettably, eligibility rules are particularly complex for freelancers, to the point where there is confusion over whether they are entitled to claim at all. PCG's guidance gives clear advice on freelancers' eligibility."

Tax status and s660a case wins for Accountax

On 2nd February, Accountax won the JL Windows and Doors tax status case. They have also just concluded an astonishing s660a win for an old age pensioner.

Freelancers group kicks off tenth anniversary year with marketplace survey

The Professional Contractors Group (PCG), which represents the UK’s freelancers, has launched its tenth anniversary year with an important new survey to find out more details about the UK’s freelance workforce.

The survey is open to PCG members and non-members. PCG members can go to www.pcg.org.uk/membersurvey and log into the PCG website; freelancers who are not yet PCG members can complete the survey at www.pcg.org.uk/freelancersurvey. 

PCG publishes new edition of Guide to IR35

PCG has stressed the need for its members to take good advice on tax matters, or they could face thousands of pounds in an unexpected tax bill.

A new edition of PCG's Guide to IR35, the tax rule that governs whether freelancers are taxed as employees, has been published. The new publication comes at a key time following the Dragonfly case in which one freelancer unsuccessfully contested a £99,000 tax bill from HM Revenue and Customs. 

Read more...

Pre-Budget Report analysis: Family Business Tax Dropped

This year’s PBR brought more significant announcements than many regular Budgets, so it is not surprising that it contains numerous items that will affect the tax position of the UK’s 1.4 million freelancers. The headline for freelancers is that the proposals for a Family Business Tax have been dropped for at least this year.

Freelancers welcome Cameron's call for credit crunch aid

The Professional Contractors Group, which represents the UK’s freelancers, today welcomed David Cameron’s call for a 1p cut in national insurance to help small businesses weather the financial storm.  Cameron is also calling for a six-month VAT holiday for small and medium-s ized businesses.

High Court finds against Dragonfly Consultancy Ltd in IR35 case

The High Court has rejected the IR35 appeal by Jon Bessell, owner of Dragonfly Consultancy Ltd. The Court's judgment, handed down late on Wednesday September 3rd, ruled that the original decision by the Special Commissioners was correct in law.

PCG supported Mr Bessell in his appeal and has expressed its shock at the outcome.

Practical advice to freelancers facing debt disasters

PCG has issued some practical guidance for freelancers should they be faced with unpaid invoices as the credit crunch looks set to impact further on UK businesses. According to figures released by the Insolvency Service, the number of companies in administration rose by more than 54% in the first quarter of this year. The number of companies liquidating their business also rose, as did the number of personal insolvencies.

Double Taxation Treaty Abuse

Abbey Tax is becoming increasingly aware from both its advice lines and potential claimants under the Professional Expenses Insurance policy that there are a number of contractors who have been tempted to operate through Offshore Solutions offering tax savings (usually the Isle of Man & the Channel Islands) that often promise a higher retained income, or other arrangements, such as invoicing and payment facilities which again promise savings. Whilst the higher retained income is considerably more attractive, it comes at a price. HMRC are clearly irritated by what they see as tax avoidance and are enquiring into contractors, often via the Special Civil Investigations Units (such enquiries because of their serious nature are outside of the scope of the PEI policy), and now it seems that retrospective legislation is to be introduced under the heading of "Double Taxation Treaty Abuse".

PCG Budget analysis 2008

As ever, this year’s Budget contained many warm words to reassure small businesses: it spoke of, “reforms that promote enterprise, support business growth, simplify the tax system, and enhance flexibility and promote science, innovation and skills,” and, “ensuring a modern and fair tax system where everyone pays their fair share of tax.”

Elsewhere, and less positively, the Chancellor covered his announcement on the Family Business Tax simply by saying, “We will continue to be vigilant against tax avoidance,” and leaving everyone to find the relevant paragraph in the Red Book. However, he increased the amounts that can be invested in ISAs, simplified reporting requirements for ISA managers and made special provision for ISAs held by Northern Rock customers who withdrew their funds amid the panic of last September: certain types of avoidance are evidently still not frowned on by the Treasury.

Whether the Budget really does offer a fair deal to the UK’s freelancers, who are a vital component in any strategy to promote enterprise, flexibility and opportunity, must be judged on the basis of the hard content within it. While there is one predominant headline where family businesses are concerned, beyond this the Budget can be characterised as one full of crucial little details rather than significant changes.

Freelancers get together for successful Maidenhead RLM

One of the most well attended PCG real life meetings of the year was held earlier this month, with around 25 PCG members, staff and management meeting in Maidenhead. Managing director John Brazier attended the evening (and a similar event in Bury during October) and heard the views of a wide cross-section of members on a range of subjects. There was discussion around the issues facing contractors, current and future PCG products and services, and how to better publicise similar events in the future.

Going forward, all confirmed real life meetings will be added to the online PCG events calendar, with members in the local area of the event being contacted directly where appropriate.

Thanks go to everyone who attended, and to Charles Berger for organising and publicising another successful event.

Find out about events in your area and talk about real life meetings with other freelancers in the PCG RLM forum >> 

PCG reaction to Pre-Budget Report

The big issue for freelancers, and many other small businesses, in Alistair Darling’s first pre-Budget is the proposal to take action against “income shifting”. PCG has stated its opposition to this proposal and will be presenting its objections to the Treasury during the forthcoming consultation.

The Report contains numerous other measures of interest to the UK’s freelancers. PCG’s analysis provides an overview of these and more details regarding what the Chancellor has to say on “income shifting”.

Updates to PCG expert guides

The PCG expert guides have been reviewed and updated to take account of the latest developments impacting freelancers, including details of MSC tax rules, the implications of the Arctic Systems case and the latest PCG benefits and services. The Guide to Freelancing is free to non-members, while PCG members also have access to the guides to pensions, IR35 and agency regulations.

PCG would like to thank Abbey Tax, Wealth Matters and Contractor Financials for reviewing these documents and recommending refinements and amendments.

Download the guides from the right-hand side of the PCG homepage >>

Tax disaster for family businesses: House of Lords rules in favour of Revenue in Arctic Systems case

The House of Lords has today ruled against Geoff and Diana Jones of Arctic Systems Ltd in a judgment that will raise taxes for thousands of family businesses throughout the UK.

HMRC will now be able to impose a tax hike on companies that are jointly owned by one revenue-earning partner and one non-earning partner more heavily than before, by applying the “settlements legislation” to them.

Full analysis will appear here shortly.

PCG tax victory for family businesses: Arctic win at House of Lords

The House of Lords has today ruled in favour of Geoff and Diana Jones of Arctic Systems Ltd in a judgment that has removed a tax threat from thousands of family businesses throughout the UK.

HMRC’s attack on companies that are jointly owned by one revenue-earning spouse and one non-earning spouse has been rejected. Geoff and Diana Jones, supported by PCG, have succeeded in their three-year struggle to stop the Revenue reinterpreting tax law retrospectively.

Arctic judgment imminent

The House of Lords will deliver its judgment in the landmark Arctic Systems test case on Wednesday, July 25th.

The judgment will affect the tax treatment of thousands of small family businesses throughout the UK. PCG will provide full news and analysis here as events unfold.

For background on the Arctic case, see PCG’s S660A page.