The Autumn Budget – the hardest to predict yet?

With the Tories suffering serious blows in the Election, Brexit negotiations under strain and constant political in fighting, predicting what will be in the Budget is tough this time around.

 

The current economy of mixed messages, talk that the PM and the Chancellor rarely now see eye to eye, and the first interest rate rise in 10 years, makes me wonder if even they have a clear plan?

 

2017 will see an unprecedented third version of the Finance Act in a year when the Chancellor announces his Autumn Budget on 22 November 2017. So amid all this uncertainty, how might contractors be affected by the Budget?

 

More IR35 reforms

Recently the contracting market reeled with rumours that the IR35 reforms, so poorly introduced for the Public Sector, will be extended to the Private Sector. Although HMRC continue to infer all is rosy with the reforms, it’s far too early for these rules to be properly assessed by government. It’s also clear they are not happy that the market migrated contractors from limited companies to Umbrella companies, something that HMRC were not expecting and definitely wanted to avoid.

 

The expected changes to NIC for the self-employed have just been delayed another year with confirmation they will come into effect 6 April 2019 on the back of the need for further consultation and there lies the clue of where we feel the Chancellor will go. For some years now contentious legislation has been preceded by formal consultations and it’s more likely that IR35 reform for the Private Sector will be in the form of a consultation of new legislation, rather than a roll out of the same system.

 

Our prediction is that the Chancellor will hold fire, consult and then change both Private Sector and Public Sector together in yet another stab at the reforms.

 

The Taylor Report

It’s possible that the Chancellor will introduce new legislation and formalise the concept of a ‘dependent contractor’. Although focused more on the gig economy / freelancer rather than the Limited Company contractor side, a change would bring some of the self-employed, (such as Uber drivers and Deliveroo delivery riders), into line with employment rights and possibly taxes.

 

Reduction in VAT threshold for small businesses

Remaining on a business theme, we could expect to see some reform of VAT for small businesses, reversing past practice and reducing the VAT threshold to pull in many more businesses. This would reflect a view that the Office for Tax Simplification holds that the limit is holding the economy back by discouraging growth. Of course making more businesses register for VAT could also add funding to the Exchequer as the goods and services provided by unregistered traders would generate net VAT gains.

 

And what about housing?

Alongside this, expect to see a big push into funding new housing, with a large investment in Help to Buy, reductions in stamp duty for first timers but a further attack on stamp duty and tax on second homes. Such measures reflect the view that too much wealth is tied up in second homes that could be better deployed in other investments that benefit the economy in the shorter term.

 

Pensions and loans

Pension tax relief will also be a target with the older generation being called upon to help finance the pension contributions of those in their 20’s and 30’s. And of course, highly likely will be a response to the opposition parties, with vote attracting changes for student loans.

 

These are the key areas we expect to see, but in the current political climate, we’ll be ready for some surprises too.

 

If you have any questions about how the Budget might affect you as a contractor, or to find out more about our contractor accounting services, get in touch now on 01202 375 562, or live chat / email us.

 

This blog has been prepared by Intouch Accounting. While we have made every attempt to ensure that the information contained in this blog has been obtained from reliable sources, Intouch is not responsible for any errors or omissions, or for the results obtained from the use of this information. This blog should not be used as a substitute for consultation with professional accounting advisers. If you have any specific queries, please contact Intouch Accounting.

IR35, the Budget and the Private Sector – a short story

There has been a lot of supposition lately about the Budget, IR35 and the Private Sector. But for those contractors who haven’t been around for the whole saga, here’s a snapshot of what’s happened, why it matters and what might happen next…

 

‘IR35’ refers to legislation intended to prevent contractors from reducing their overall  tax liability by working through their own Limited Company even though they do the same job as an employee. In other words it seeks to prevent “false self -employment”. Grey areas within the legislation have made it sometimes difficult for contractors to determine their position, and if HMRC or the contractor themself decides that their contract terms and working practices falls ‘within’ IR35, they will  have to pay tax and National Insurance on a very similar basis to  an employee.

 

Contractors find themselves financially better off working on contracts ‘outside’ of IR35, and whether in or outside of IR35, having their own limited company gives a better take home pay than an Umbrella company.

 

Until April 2017, the contractor was responsible for determining whether their contract was inside or outside of IR35, according to the rules set out by HMRC.

 

But then it all changed…

 

From April 6th 2017, legislative reforms meant that the burden and responsibility of determining IR35 status for Public Sector Contracting was now with the client, not the contractor.This legislative move is perceived  by some commentators as HMRC ‘testing the water’ in advance of potentially rolling out the reforms to the Private Sector, with rumours abound that next steps will be referenced in the November Budget. The sampling process was expected to highlight the pressure points in a partially controlled environment.

 

However, the implications of the Public Sector reforms have been more wide-reaching than anticipated, with Public Sector entities like the NHS blanket-applying IR35 across all contracts, for fear of getting it wrong and incurring fines, or perhaps just taking the path of least resistance. Not wanting the associated administrative burden of payroll management, they also insisted on their contractors using umbrella companies. This double whammy of having the Employer’s National Insurance costs passed down to the worker (and not borne by the Engager), not resulting in an increase to the day rate plus the cashflow disadvantage of being taxed at source and still having to pay the umbrella fee left contractors substantially out of pocket. Many decided to work elsewhere, return to permanent employment or work only in the Private Sector in future if their skills were transferrable. Although HMRC are insisting that they have yet to see any adverse effects on large government projects, anecdotal evidence suggests otherwise, with reports of under-resourcing and project delays.

 

So, in short, that’s why those of us who champion the rights of UK contractors will be watching the November Budget very closely. As our MD Paul Gough says “The ‘IR35 experiment’ in the Public Sector has not delivered the outcomes Treasury and HMRC expected and that is even under the favourable conditions where the engager is part of their team! Imagine the chaos should the ill-considered, poorly defined outcomes be forced upon the vital and fiercely independent Private Sector.”

 

You can read more of Paul’s opinions on the matter in his recent article for Contractor UK.

 

If you have any questions relating to IR35 or want to find out more about our Contractor Accounting service, call us now on 01202 375 562.

 

This blog has been prepared by Intouch Accounting. While we have made every attempt to ensure that the information contained in this blog has been obtained from reliable sources, Intouch is not responsible for any errors or omissions, or for the results obtained from the use of this information. This blog should not be used as a substitute for consultation with professional accounting advisers. If you have any specific queries, please contact Intouch Accounting.

Can Limited Company contractors claim for Christmas party expenses?

Christmas party expenses

The festive season will soon be upon us and whilst you may not officially start preparing for a few weeks to come, if you’re currently contracting in an office it will be tough to escape the office Christmas party chit-chat. As contractors aren’t usually invited to the festivities, it’s only natural to feel a little left out…

Even though HMRC is the Grinch throughout most of the year, they do allow even the smallest Limited Company to enjoy the festivities, by permitting a tax exemption for the allowable costs of a Christmas event. So if you’re a one-person band you can still give yourself a festive celebration for working so hard throughout 2017.

 

What is the tax exemption allowance?

HMRC allows a 19% tax exemption via corporation tax relief for all festive entertaining costs, as long as this meets the criteria as listed below.

And should you be a one-person band you don’t have to party alone. Read on to find out how you can invite others to your party.

 

HMRC’s rules for festive partying

For your event to qualify for the tax exemption, it must be:

1. Available to employees in one location

If your Limited Company has employees in various locations, the event must be held in one central location, which is accessible for all. The event must be available for both directors and staff, or director’s guests (such as spouses or civil partners, and children of the directors and employees).

 

So in theory, as the director of your own Limited Company you could hold a Christmas party for your immediate family.

2. A maximum of £150 per person

For each person who attends the event an additional £150 per person is allowable. The £150 is an absolute maximum which HMRC strictly applies.

The £150 limit must include VAT, transport costs to and from the event, and the total cost of any overnight accommodation. These costs are then combined and divided between the number of attendees, to arrive at the cost per head.

Should the total amount per head exceed the £150 limit, the maximum exemption will not apply and the total amount will be taxed. HMRC are very strict about this allowance so if you’re unsure, speak to your Personal Accountant to ensure your calculations are correct.

 

What happens if you have more than one event per year?

Hosting company events isn’t just exclusive to the festive period, you are able to host events throughout the year. You could choose for example, to host a summer event as well as a winter event. So long as the total combined amount does not exceed £150 per head per tax year, the exemption will still apply.

Should any individual event cost exceed this limit, HMRC will only apply the exemption to expenses for the events that fell within the allowable limit.

 

Final thoughts – have fun!

Regardless of whether you will host a festive event, it’s a fantastic allowance that every Limited Company director is entitled to, so ensure you make the most of it. Why not start planning your next event today?

If you have any questions surrounding the annual events expenses, or any other type of Limited Company expenses, be sure to email/live chat us or call our expert team directly on 01202 901 385.

 

This blog has been prepared by Intouch Accounting. While we have made every attempt to ensure that the information contained in this blog has been obtained from reliable sources, Intouch is not responsible for any errors or omissions, or for the results obtained from the use of this information. This blog should not be used as a substitute for consultation with professional accounting advisers. If you have any specific queries, please contact Intouch Accounting.

Ask us anything!

Ever had a tax or accounting question that you’ve always wanted to ask an accountant, but didn’t want to pay the associated hourly fee that comes with it? Well now you can! Simply ask us your question here, and our team of expert Personal Accountants will respond – it’s that simple! No associated fees, dodgy advice or questionable answers from unskilled account managers, just an honest, clear and precise response from our team of experts – that’s The Intouch Promise.

Take a look below at the questions we’ve already been asked.

How much can I pay myself?

There are ordinarily two methods of taking money from your PSC – salary and dividends. You can pay yourself whatever level of salary you choose, but you may want to choose a mix of low salary and high dividends. The most tax efficient level of salary for the current tax year is £8,164 for a director where that person is the only “employee” of the company. As a director you are not really an employee and your salary is remuneration for your services as a director. This is why you aren’t bound by national minimum or living wage legislation.

 

Can a company pay for pension contributions?

Your limited company can contribute pre-taxed company income to your pension. Because an employer contribution counts as an allowable business expense, your company receives tax relief against corporation tax, so the company could save up to 19% in corporation tax. The current annual allowance is £40,000, but you can carry forward up to 3 years if required.

 

How can I reduce my tax?

The simple answer is, legally by either earning less or paying more. A very common way to reduce your tax is by paying into a pension from your company direct, but sometimes depending on your circumstances might not be worthwhile if you require to take all of the profit generated out of the company.

Speak to our team of expert Personal Accountants to find out more about how you can legally reduce your tax by becoming an Intouch Accounting monthly client.

 

Why should I register for VAT?

There are several reasons to register for VAT. Firstly, you may have to. If your turnover in the first twelve months of trade is likely to exceed £83,000 then you will have to register for VAT.

Even if you don’t have to register, it may be beneficial to do so. As a VAT registered business you may be able to reclaim any VAT on purchases, which is significantly more tax efficient than claiming corporation tax relief of 19% on that portion of your costs. There may also, at least in the first year of trade be advantages to being registered under the flat rate scheme.

Registering for VAT can be a complicated topic, therefore we encourage you to call our team of expert Personal Accountants for more information.

 

Should I be on the standard or flat rate VAT scheme ?

This depends on how much you spend on standard rated supplies each year versus the VAT retained by your company under the flat rate scheme. Since the introduction of the Limited cost Trader category in April 2017 a lot of business have found that the standard scheme is the best scheme for them. This may not always be the case and we would be happy to discuss this further with you.

 

How can I be more tax efficient?

From a corporate point of view, you should only spend money on items that qualify as genuine business expenditure. Spending £100 to save £19 doesn’t add up! There are expenses such as pension contributions which can be met by the company and do reduce the company’s corporation tax liability while increasing your future income potential.

In terms of personal tax efficiency, being aware of the tax thresholds is a good start but there are other things that you can do personally such as saving in an ISA that would help. We always advise speaking to a contractor accountant to find out exactly how it could affect your circumstances.

 

Should I be on the standard or flat rate VAT scheme ?

The answer will depend on how much you spend on standard rated supplies each year versus the VAT retained by your company under the flat rate scheme. Since the introduction of the Limited cost Trader category in April 2017 a lot of businesses have found that the standard scheme is the best scheme for them.

This may not always be the case for you personally, and we would be happy to discuss this further with you.

 

What will my take home pay be?

The amount of income that you take home, after accounting for tax will vary greatly between individuals and depends on your day rate and the level of costs that you incur.

These costs may be linked to travel and subsistence, for those outside IR35 or not subject to Supervision, Direction and Control. They may also be linked to those who have not / are not aware that they have been at the same location for more than 24 months, as well as other business costs such as insurance, equipment purchased, communications costs, etc.

For a detailed discussion on take home pay please contact us with details of what you expect to earn and what you expect to spend.

 

What is IR35?

IR35, or Intermediaries Legislation is aimed at identifying the nature of the relationship between those operating through an intermediary (such as a PSC) and their end client. The aim is to judge whether that individual is a deemed employee or not and three main areas have emerged after years of legal precedent as being fundamental to this argument.

Control – this considers how much of a right to control the end client has over the individual, particularly with reference to the method by which they perform services. The less of a right to control they have, the better and the more you decide how you do, what you do the more that would point away from IR35 and deemed employment.

Personal service- this considers whether the individuals company (PSC) has to provide the individual to perform the contracted services or whether that company has the right to send whomever it deems appropriate. If the individuals company can send whomever it chooses then that would indicate that the individual’s personal service is not required and therefore that IR35 may not apply.

Mutuality of obligations – this considers whether the end client has an obligation to offer work to the individual / company and whether the individual company has an obligation to accept such offers, where they are made. The less obligation the better. We do of course offer free IR35 reviews of contracts under our monthly service so please do contact us if this is of interest.

 

Is my Directors Loan Account balance correct? What is included in that balance?

The balance on the Director’s Loan Account will be correct if you have maintained the Intouch portal accurately. The balance on this account reflects the balance of transactions between yourself and the company.

Director’s Loan Account is the name that we give to the nominal code where we record all transactions that are processed between you and your company. We record all salary processed, expenses and mileage claimed and dividends declared as amounts owed to you through your Director’s Loan Account.

Any payments that you make to yourself are also recorded through the Director’s Loan Account and reduce the amount owed to you.

 

How often can I pay dividends?

As the director of your Limited Company it is up to you to decide how frequently and at what rate the company declares dividends.

Every contractor will take a slightly different approach, and your approach will be individual. It may be that your dividend income needs to form part of your monthly budgeting, or it may be that you are comfortable taking dividends on a less frequent basis.

More importantly, you should only declare dividends where the company has profits to do so, and the Intouch portal dashboard contains advice around the maximum dividend payable. This information is based on the retained profit in the company, as at the end of the most recently closed month. If you are using the Intouch portal dashboard as a basis for making dividend payments, then it is imperative that the portal is up to date to avoid you declaring dividends in error.

 

What is the most tax efficient salary?

The most tax efficient salary depends on your circumstances i.e. if you are a one man band Limited Company, then the optimal salary would be up to the secondary NI threshold, which for 2017/18 is £8,164 per annum. This would mean that no NI or income tax is payable on the salary level, and the left over personal allowance amount can be used for tax free dividends or other income from property, pension etc.

If there were two employees including yourself then you can take advantage of the employers NI allowance of £3,000. This would then make a salary level of up to the personal allowance more tax efficient, because the amount above the secondary NI threshold would be taxed at 12% (employees NI), and the employers NI at 13.8%, would be offset by the annual allowance, so only an additional tax to pay of 12% over the £8,164.

The company make a saving of 19% from the increase in salary, and save on corporation tax, therefore making this more tax advantageous. We at Intouch would look at your individual circumstances and establish what level of salary would work best for you.

 

What will my personal tax liability be?

Your personal tax liability will depend on the income that you have received during the year. This may have come from a range of sources including; salary from your PSC, salary from other sources if you’ve been employed elsewhwere, dividend income from either your PSC or other sources, income from investments, rental properties and any other income that you might have.

The 2017/18 personal allowance (the amount that you can earn before incurring income tax) is £11,500. This plus the next £33,500 of income forms the basic rate band. You can have income of up to £45,000 then without any of that income being taxed at the higher rates. Once your income exceeds this threshold then any marginal income is taxable at the higher rates.

 

Coming out of contract so what is the next step

There are a few options, which are voluntary closure, liquidation or keeping the company open in a non-trading status. But which one you choose will depend on your circumstances in the future and the profits in the company.

If the company has retained profits of below £25K we can deal with this for you entirely, however if the company retained profits are over £25K you would also need to appoint formal liquidators to deal with this for you.

Depending on what you will be doing instead of having a Limited Company will depend on how the final funds are treated, but in short there is legislation in place that states if you go into the same business activity within two years of closing down your company, you will no longer be able to receive the profits as a capital gain. Instead the profits will need to be received as income, being dividends. The rules around what falls within ‘the same business activity’ has not been specified and whether this solely relates to setting up another Limited Company or whether it includes permanent work too.

So, if you choose to receive the funds as a capital gain, you are at risk of HMRC disallowing this in the future and the income will be treated as dividends. We advise that you receive the funds as income (being dividends) if you are going into the same business activity. We can of course look at this again if you do want to close the company. Generally it may be better to keep the company dormant if there’s a chance you’ll use it again in a year.

 

We have more tax and accounting Q&As that we will be posting next week, so keep an eye on our social channels for a chance to see if your question has been answered. If not, feel free to ask away! We will then post the answers here in our blog.

 

This blog has been prepared by Intouch Accounting. While we have made every attempt to ensure that the information contained in this blog has been obtained from reliable sources, Intouch is not responsible for any errors or omissions, or for the results obtained from the use of this information. This blog should not be used as a substitute for consultation with professional accounting advisers. If you have any specific queries, please contact Intouch Accounting.

Intouch’s MD, Paul Gough has been announced as new Chairman of FCSA

We are pleased and proud to announce that our MD, Paul Gough has been appointed as the new Chairman of FCSA (The Freelancer & Contractor Services Association).

 

Since early 2014 Paul has had an active role in the work carried out by FCSA, and takes over the position from David Mount who has been the Chairman for the last 18 months.

 

As Chairman Paul will support Julia Kermode, CEO of FCSA and the FCSA team in their continued work to support the UK’s flexible workforce and be their voice when it comes to representing this valuable group of professionals. His role will ultimately involve helping the FCSA to achieve its mission to continually increase standards.

 

The wealth of knowledge Paul brings to the position

Paul founded Intouch Accounting in 2010, and his career as an accountant spans almost 30 years. Paul had the following to say about his new role as Chairman of the FCSA:

 

“FCSA has come a long way since it was set up in 2008 and is going from strength to strength. I am delighted to be taking up the responsibility of supporting Julia and FCSA in our mission to drive up standards in an industry that is working hard to support the UK’s freelancers and contractors. The last couple of years have been challenging ones for our sector as the government has continued to seek to target the UK’s contingent labour market and impose legislation like the IR35 reforms in the public sector that has undoubtably been damaged for all parties. I am looking forward to working with our members to get their voices heard by policymakers and steer them awayfrom imposing more rules and regulations that will hamper the UK’s flexible workforce, that is propping up the UK economy. Our industry has come a long way but there is still a lot to do in our efforts to drive up standards, stamp out unethical behaviour and promote best practice.

 

I would also like to thank David Mount for all his work as chairman and I look forward to continuing his good work.”

 

This blog has been prepared by Intouch Accounting. While we have made every attempt to ensure that the information contained in this blog has been obtained from reliable sources, Intouch is not responsible for any errors or omissions, or for the results obtained from the use of this information. This blog should not be used as a substitute for consultation with professional accounting advisers. If you have any specific queries, please contact Intouch Accounting.

Are you still using spreadsheets for your contractor accounting? It’s time to change

We know that as a contractor you’re busy, and even when you’re not, the last thing you want to be doing with your time is managing your accounts, whether that’s with the help of a contractor accountant or on your own. So you want a process that’s smooth and will take up as little of your time as possible. But sadly, not all accounting systems and methods work the same.

 

When looking for a new contractor accountant or considering going it alone, it’s worth understanding whether you’ll be using spreadsheets, and what that will actually entail. Whilst spreadsheets can be a familiar method of keeping track for some, it can pose a number of issues, such as:

 

  • Inaccuracy – as a spreadsheet does not automatically update or flag up incorrect figures when inputted, there’s a chance you could go months without noticing a mistake that could lead onto bigger problems.
  • Limited access – if you’re commuting to a client’s office, trying to access a spreadsheet on the go is less than ideal.
  • Reduced / no support – if you’re using an accountant as well as a spreadsheet, you’ll need to have 100% trust that they will be able to spot any mistakes you may have made. If you’re going it alone you’ll have no support at all.
  • Zero visibility – with spreadsheets you’ll have to save the most recent version, then email it to your accountant (if you’re using one). It’s then a waiting game until they get back to you with a response before you can edit your data again.

 

Cloud based portals – for painfree accounting

A much more user-friendly means of managing your accounts as a contractor is to use an online portal in conjunction with an experienced contractor accountant who also has access to that portal.

 

You’ll be able to access your accounts online from anywhere, 24/7. Most portals allow you to do day to day accounting tasks like adding expenses or creating invoices, and your accountant can access your files to review where you’re at and process your accounts.

 

Interfaces are user-friendly and you’ll be able to see real-time information without clumsy spreadsheets.

 

With a wealth of online accounting options out there, it’s hard to understand why a serious contractor would waste time using spreadsheets. But whilst there’s plenty to choose from, it’s important to get the right fit for you. Many offer a free trial, so you can try before you buy.

 

The Intouch Promise: No spreadsheets – just an online portal (or FreeAgent friendly)

We’re proud to offer all clients use of our in house built cloud-based portal, as part of our monthly fee. With 24/7 access to your accounts, it only requires 15 minutes per month to update. The dashboard gives you an exact overview of where you are, what’s due and how much money you have in your business account. Plus it gives you the ability to raise invoices, claim mileage, pay dividends and upload bank transactions.

 

Request your free portal demo now, or take a further look at our portal’s functionality and what it can offer you.It’s all part of the Intouch Promise.

 

If you’re already using either FreeAgent or Xero, we’re also able to support both. Simply let us know which solution is right for you and we will be able to advise the monthly cost for using both.

 

Simply email / live chat our team of experts to find out more, or call us now on 01202 901 385.

 

This blog has been prepared by Intouch Accounting. While we have made every attempt to ensure that the information contained in this blog has been obtained from reliable sources, Intouch is not responsible for any errors or omissions, or for the results obtained from the use of this information. This blog should not be used as a substitute for consultation with professional accounting advisers. If you have any specific queries, please contact Intouch Accounting.

Contractor accountants – do you get what you pay for?

Not all Contractor Accountant services are the same.

Regardless of whether you’re new to the contracting game or have already been playing awhile, at some point you’ll probably have considered enlisting the services of a contractor accountant.

But which services should you be looking for and is it really true you get what you pay for?

 

Service vs price – delve a little deeper into what you’re really getting

When shopping around you may initially be attracted by price, and it’s tempting to go for the cheapest option. Whilst this can be appealing, (especially if you’re first starting out) it’s worth considering how much bang you’re really getting for your buck.

 

Afterall, a cheap service will soon lose its sparkle if you discover it doesn’t provide all the things you actually need. There’s a reason why some contractor accountants charge more than others, and it’s all down to what’s included and the level of service you can expect.

 

Are the essentials included?

Consider the services you really need – both personally and professionally. There are some basics every accountant should provide, and we advise that you ask each whether they’re included as standard within their monthly price or at an extra cost. These include:

 

  • Unlimited expert advice and support from a dedicated Personal Accountant (not an account manager or call centre)
  • Immediate access 24/7 to a cloud-based portal for day to day tasks
  • Unlimited IR35 advice including risk assessment & a fee protection service
  • Management and yearend accounts including quarterly VAT returns
  • Calculation of company’s tax liability and personalised tax health checks
  • Monthly & annual payroll returns (2 people)
  • One simple Self Assessment Tax Return; dividend advice and paperwork, plus filing all HMRC and Companies House returns
  • Use of their office address as your official registered office address

 

Your accountant managing your accounts vs you managing your accountant

Your contractor accountant should be a qualified expert who can keep your accounts in check, be there to remind you when things need to be done, but also make you aware of any opportunities for better tax efficiency and optimising your contractor take home pay.

 

Sounds simple? Sadly not for every accountant! Having a direct line to your own personal accountant is not a given, and you could find yourself being passed from pillar to post through a call centre, or end up in the hands of an unqualified account manager.

 

Not ideal when it’s your business and personal finances you need instant advice and support about. You should always feel safe in the knowledge they’re ready to talk to you, whenever you need them, and never feel like you’re having to manage them.

 

The Intouch Promise – No hidden chargeable extras – just a fixed monthly fee

Here at Intouch we provide all of the above, plus much more! From speaking to your own dedicated Personal Accountant from the outset to being transparent about what’s included in our monthly service for £105+VAT, we pride ourselves on informing all potential clients exactly what they can expect with us from day one – so nasty surprises! That’s part of the Intouch Promise.

 

Our team of experts are ready to answer any questions you may have about our service and how we can help you achieve your contracting goals. Call them today on 01202 375 562, or live chat / email them here.

 

This blog has been prepared by Intouch Accounting. While we have made every attempt to ensure that the information contained in this blog has been obtained from reliable sources, Intouch is not responsible for any errors or omissions, or for the results obtained from the use of this information. This blog should not be used as a substitute for consultation with professional accounting advisers. If you have any specific queries, please contact Intouch Accounting.

Do you have a direct line to your contractor accountant?

Imagine going to your doctor’s surgery, only to speak to an unqualified person who can’t help and can only pass your questions onto a doctor as and when they’re free. Now imagine paying for that service and constantly having to wait for an answer.

 

Frustrating? Absolutely! But sadly some contractor accountants offer this exact level of service, whereby your questions and queries are directed through a call centre or unskilled account manager. And at the end of the day, you’re left no closer to having your questions answered…

 

Account manager and call centre vs Personal Accountant – so what’s the difference?

When hunting for a new contractor accountant, it’s important to ensure you understand how you will be supported during your time as a client. Along with understanding what service you can expect, always ask the question, ‘will I speak to a call centre, account manager, or have a direct line to my Personal Accountant?’

 

Account managers are just that, they manage correspondence between you and an accountant. When it comes to offering support this is usually on a simplistic level, so for the most part you’ll find yourself waiting for an answer, regardless of how basic your question may be.

 

Whilst for some this level of service may be satisfactory, for the majority who want detailed and accurate responses right away, this is less than ideal.

 

Call centres are there to answer the phone and ensure you’re passed onto the correct person. In most cases, this will be an account manager, who will only be able to assist you as far as we’ve outlined above.

 

Again you’re left in limbo without the answer you need, wondering when an accountant will pass your answer down the chain of contacts – and who will eventually get it to you.

 

Personal Accountants are exactly what their title implies – you get a qualified expert accountant who is allocated to you from the get go. They’ll familiarise themselves with your accounts, listen to what you want to achieve financially from your contractor pay, and be able to offer advice and guidance based on your goals.

 

You should be able to speak directly to them whenever you wish, meaning you can always expect an accurate and expert answer straight away, allowing you to get on with what you do best whilst they take care of your accounting. After all, that is their profession!

 

The Intouch Promise: No call centres or unskilled account managers – just a direct line to your Personal Accountant

Here at Intouch you’ll only ever deal directly with one of our expert Personal Accountants. From the moment you become an Intouch client your accountant’s first job is to get to know you on a personal and professional level. We specialise in contractor accounting and take the time to understand what you want to achieve, explaining how we’re going to help you get there. That’s part of the Intouch Promise.

 

If you’re ready to speak to our team of expert advisers, give them a call directly on 01202 901 385, or email / live chat us. We look forward to getting you started on your Intouch Accounting journey!

 

This blog has been prepared by Intouch Accounting. While we have made every attempt to ensure that the information contained in this blog has been obtained from reliable sources, Intouch is not responsible for any errors or omissions, or for the results obtained from the use of this information. This blog should not be used as a substitute for consultation with professional accounting advisers. If you have any specific queries, please contact Intouch Accounting.

Taylor Review could mean more rights for gig-economy workers

The Taylor Review, a major report on the UK’s working practices, has been published.

 

Produced by a panel led by Matthew Taylor, a former adviser to Tony Blair, the 115 page document recommends how employment practices need to change in order to keep pace with modern business models.

 

The report covers all types of work in the UK but could have the most significant impact on the predominantly technology-based businesses such as Deliveroo and Uber, that enable people to work on a per-job basis – known as the gig economy.

 

The main thrust of the proposed changes is the suggestion that people working for gig economy firms should be treated as ‘Dependant Contractors’ rather than as self-employed, and receive more employment rights as a result.

 

A ‘Dependant Contractor’ would be someone who “is not an employee, but neither are they genuinely self-employed”. “Ultimately, if it looks and feels like employment, it should have the status and protection of employment,” the report explains.

 

In reality, if the changes were followed by the Government, it would mean those working for Uber, Deliveroo, TaskRabbit and other similar platforms  should be entitled to sick pay and holiday leave.

 

Paul Gough, MD of Intouch Accounting shares his thoughts on the Taylor Review:

 

“Intouch are supportive of the key findings of the Taylor report and consider the provision of employment rights to vulnerable workers a good thing. In the same vein it’s clear that some of the state benefits enjoyed by the self employed are not supported by their National Insurance contributions and an equalisation is equitable.” Intouch’s clients  are predominantly “Knowledge workers” and most unlikely to be under the “Control” of the engager. We also expect that they will fall outside the definition of “Dependent Contractor” which we also think is the right answer. Well done Mr Taylor.”

 

This blog has been prepared by Intouch Accounting. While we have made every attempt to ensure that the information contained in this blog has been obtained from reliable sources, Intouch is not responsible for any errors or omissions, or for the results obtained from the use of this information. This blog should not be used as a substitute for consultation with professional accounting advisers. If you have any specific queries, please contact Intouch Accounting.

Accounting software – Great up to a point, but then let people take over

For many years some specialist contractor accountants have developed their own technology solutions to help clients provide data in a format that would enable those providers to deliver great service at a reasonable price. Some use spreadsheets whereas others created their own cloud based systems. The common objective has been to reduce the time spent on obtaining and processing data and to improve the accuracy of input. For the more serious providers this meant more time for personal service (advice and guidance based on personal circumstances). Over time it expanded to meet the ever increasing need for vigilance in an environment where HMRC are increasingly challenging the data.

 

Technology was simply deemed to be one of the tools of the trade, with some providers having sharper tools than others. As a contractor accountant, and with more than  18 years’ experience I have always believed that if we can harness  the means to deliver compliance work efficiently, by this I mean the outputs that every adviser delivers such as accounts and tax returns, then the door is wide open to broaden personal service to provide value added  advice and guidance. I’ve previously used the explanation of 80% personal service supported by 20% technology many times, to explain what I and we at Intouch consider to be the best “balance” for contractors.

 

With the growth in online accounting services such as FreeAgent and Xero or the plethora of new entrants such as Pandle coming to market, there is an undeniable change occurring to how clients and accountants rely and depend upon technology to capture and then process data. This will continue to evolve as Making Tax Digital becomes a reality and by 2020 I would expect all small companies to be fully within the embrace of MTD. It’s exciting times, as well as challenging.

 

The critical question is: “Will technology alone ever to be enough to protect and advise the needs of contractors using personal service companies?” Respected online providers such as FreeAgent have a great product, but alone all it can only ever function as a data collection tool with various levels of integration between the business and personal requirements to file returns online. Without appearing to criticise these providers, the problem I see with current technology is the lack of validation which leaves people with a false sense of security and the risk of filing inaccurate information. This is especially true for new entrants to the sector as experienced contractors are historically more savvy- but even then they must work hard to remain up to date in an ever changing landscape.

 

Allow me to explain with a very simple example using FreeAgent (whom Intouch respect hugely), you can declare a dividend in FreeAgent and create the necessary documentation. Great news! It even flows through to your tax return data. However, the dividend is not validated against shareholdings and so any amount can be paid and declared as a dividend. If you have more than one shareholder and only one payment it’s very easy to fail to record the dividend correctly. In this example technology can fail unless the user has adequate understanding of the wider ramifications of what they are doing and intervene manually to correct the error.

 

In my example, a lack of validation allows the data to be recorded incorrectly albeit totally innocently and whilst it is recorded very effectively, it’s still incorrectly reported. It’s the danger with all technology, and often described as “rubbish in rubbish out”. (No offence intended).

 

So, whilst technology does not fully address the issues of validation and verification at the point of entry we are left with accountants that check the data, wasting expensive resources or poor service providers, simply accepting any data warts and all.

 

Allow me to cite another common problem. Adding an expense into an accounting system is easy, as is allocating it to one of the nominal expense categories provided. But when are any of the questions asked?

 

1. Is the expense allowable as a tax deduction?

2. Does the expense include any personal element?

3. Does it count as Relevant Goods for Limited Cost Trader issues?

 

There are providers in the market that won’t bother asking, they will assume the original answer is correct (even if it looks dubious) and automate the result. This places the entire burden for accuracy, and risk of challenge by HMRC, firmly with the contractor. There are other providers in the supply chain who ask the questions at the end of the year when they do accounts, or when returns are prepared. (Far too late in the day to advise on what amounts are available to draw out safely) there are a few of us who  firmly believe the best time to ask and check for error is when the data is input in the first place.

 

We therefore resurrect the debate over who is responsible for the validation of data, the client or the accountant or nobody? Is it better to ignore validation altogether, leave it to the last minute, hope for the best, or get it right first time?

 

I vote for get it right first time.

As pure accounting technology solutions proliferate, and I see the value in this, accountancy providers are likely to fall somewhere between the carers and the care not’s. The caring variety will continue to try to get the right answer, even if it takes more effort, or requires more complex technology, whilst the others can offer a cheaper service and a ‘who cares?’ approach.

 

You will find increasingly that HMRC care!

I find that when you ask a client “do you want the right answer, or the easy answer?” the answer is “the right answer”; and if clients want the right answer then someone must take the extra steps necessary to understand all of the specific circumstances. This solution is not always delivered by technology, though in time I hope it will be. What it does mean for all of us is that if you (the client) want the right answer, and HMRC expect the right answer, you need to be prepared to provide the right information and have it validated by both the software used for data capture and more importantly by the accountant being paid to protect you. I believe technology should make things easy, but not at the expense of the right answer.

 

So I conclude that if you require quality answers, alongside planning and guidance, you need personal service in addition to, and supported by technology. If you are experienced and have the time to “self-diagnose”, or worst case the right answers are not important to you, or value of service is measured only in terms of price, then go with a technology only solution. Forget about needing the input of a professional accountant, but you need to recognise that you won’t always get the best result, and may attract unwanted attention from the taxman if he notices.

 

As always there is a compromise. Personal service and technology should work hand in hand. But I believe that the minute you escalate technology to be your deemed adviser directly at the expense of personal service (the human factor), you risk the wrong answer.

 

At Intouch our strategy has always been one which provides our clients with 80% professional service from our dedicated personal accountants, supported competently with 20% tailored and contractor specific, self-validating technology.

 

It does mean a little more effort when you enter data, but actually not that much more, for what you lose on entry you save later on. The balance we have created between technology and the provision of personal service is something we are very proud of and hope to continue. We know it works very well for serious, career and financially minded contractors that hope to get the most out of their contracting lives.

 

To us, technology is a valuable tool that lets us do our real job of protecting and advising. It allows us to deliver the best personal service whilst we continue to strive to make our technology the sharpest tool in the toolchest. If you’d like to find out more about our comprehensive monthly service, get in touch and speak to an expert adviser today.

 

This blog has been prepared by Intouch Accounting. While we have made every attempt to ensure that the information contained in this blog has been obtained from reliable sources, Intouch is not responsible for any errors or omissions, or for the results obtained from the use of this information. This blog should not be used as a substitute for consultation with professional accounting advisers. If you have any specific queries, please contact Intouch Accounting.