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Your specialist freelancer and contractor accountant

Fancy being your own boss?

Easter has now passed, the weather is getting better and the days are becoming longer and people tend to be thinking more about the future and new business ventures and job opportunities.

Maybe you are thinking of leaving your corporate life and becoming your own boss, the media is full of success stories to tempt you into the world of self employment.

The reasons we find, as canary wharf accountants, people embark on self employment are less company politics, appraisal systems, independence and more money. What is seldom mentioned are the drawbacks which include loneliness and isolation, financial difficulties and the inability to make sales and market your business.

There are many ways to get around these difficulties, business hubs are great places to reduce the isolation and loneliness whilst often coming into contact with businesses that need your services, so you can make a few sales as well.

Also perhaps a fundamental of running your own business is understanding your own strengths and weaknesses, to be able to exploit your strengths and manage your weaknesses. Thus for example if you are a great salesman but weak in keeping your records in shape you need to ensure you have a bookkeeper you can call upon and a good local accountant who can assist you. The insight into your own strengths and weaknesses and managing them is fundamental in creating a good business.

A low risk of starting into self employment is freelancing or contracting using skills you already have and creating a business around it. Many successful business people started this way. If you are thinking of freelancing or contracting, contact us and we can advice you on the accounting and taxation implications of running a freelancing/contracting or small business.

Tax Free Childcare

Childcare can be a headache for working people and every little bit of help with costs is appreciated by working parents.

HMRC currently offer a childcare vouchers scheme which will continue, but here is also a new scheme, Tax Free Childcare, which will be introduced in the autumn of 2015.

The key features of the scheme is eligible parents will receive a government top up of 20p for every 80p towards their childcare cost up to a limit of £2000 per annum per child.

The intention is to try to make the scheme simple with just one scheme provider National Savings and Investments and to make it available to a much wider range of working parents with income of up to £150,000 per annum which is expected to make it available to up to 1.9m working families.

ISA reminder

A last minute reminder for 13/14 personal tax year. The personal tax year ends on the 5 April 14, if you have not already done so, then you should consider making use of your ISA allowance before it is too late.

You should of course also review any previous ISA investments regularly to ensure you are getting the best returns for your investment. It is generally possible to transfer your ISA’s to a new cash or investment ISA.

How do I set up as a freelance contractor?

This is a question we often get asked as we are specialist freelancer accountants and look after the accounting and taxation affairs of many freelancer and contractors.

First thing is find out whether there is any demand for your services? Do you work in an office where they use other freelancers or contractors? Maybe chat with them to see how they find the market. Register with a recruitment agency who specializes in the area of work you do, who covers the geographical area s that you will be prepared to work in, and also ask them about the state of the market, then wait for the offers to arrive.

One you have tested the market, perhaps have an offer of work, then it is time to consider how you should set yourself up from a tax and accounting perspective.

Your options are sole trader, partnership, limited liability partnership, limited company or umbrella company.

Most freelancers and contractors would use a limited company as some companies will not allow you to contract as anything else or use an umbrella company.

Umbrella companies can be useful if the contract is inside of IR35 or is a short term contract, they tend to be very practical vehicles for getting contractors, contracting quickly, the downside is they are not particularly tax efficient especially if you are outside of IR35.

The option most freelancers or contractors take is form their own limited company and use that vehicle for their contracting. A company can be formed relatively quickly but will need its own business bank account and the appropriate registrations with HMRC for corporation tax, payroll and VAT, so if you are wanting to use a limited company for your contracting then it is better for you to start this process three to four weeks before you need the company so that it is ready for you to use with all the necessary registrations completed. You may also need your contract and working practices reviewed for IR35 purposes, which is something which as accredited professional contractor group accountants we have received additional training in, as well as being Certified Chartered Accountants.

If you are thinking about contracting talk to us as we will be able to advise you on the most appropriate vehicle to undertake your contracting and set it up correctly, so you can make your contracting more enjoyable and financially rewarding.

Walking and other solutions to those common freelancer distractions

A good freelancer that uses an accountant in Richmond is also likely to keep up to date with all of the other aspects of their professional practice, training up their weaknesses and building on their strengths in such areas as making a proposal, negotiating a fee and marketing their services effectively. However, sometimes, there is a more elementary problem that the freelancer faces: the inability to concentrate and knuckle down to work.

This is a serious problem for any conscientious freelancer, given that every hour in which they are unable to motivate themselves means money lost. However attractive the low overheads of working from home can be, such an environment can also bring the greatest difficulties concentrating. There are many ways in which freelancers can recover their motivation and creativity and return to productive work once more, with one of them – taking a brisk walk – being the subject of a fascinating recent study in the Netherlands.

Anecdotes and literature have, for centuries, recommended going for a walk to those suffering ‘writer’s block’, and a Leiden University professor couldn’t pass up the opportunity to prove its effectiveness. In unveiling her findings, Prof Lorenza Colzato said that she had set volunteers convergent and divergent-thinking tasks to find conclusive evidence that creative powers could indeed be boosted by physical exercise. The test of each volunteer’s creative thinking was whether they could come up with ways of using a pen that didn’t involve writing, and sure enough, volunteers exercising four times a week outperformed those with more sedentary lifestyles.

The professor ensured the diversity of the test by also asking volunteers that exercised regularly and those that didn’t to find a common link between three words. Once more, it was those participants that spent more time regularly exercising that fared better on the test. The conclusion of the study was that a person’s brain was trained to “become more flexible in finding creative solutions” by physical exercise – although it didn’t seem to be a long-lasting edge, and also wasn’t as pronounced in people that were very physically fit. Nonetheless, the findings will intrigue many a freelancer using an accountant in Richmond (not, by the way, the worst place to go for a wander in the Surrey area).

Walking is not, of course, the only recognised technique for a freelancer whose concentration is flagging. Other known methods include switching off email, mobile phones and other frequent distractions, breaking down larger jobs into smaller, more manageable tasks with mini-deadlines and setting the morning alarm clock earlier. A freelance client of an accountant Richmond could also choose to perform certain tasks at a certain time of the day, only open an application when it is absolutely necessary for the task in hand and/or start with the easier work first, among the vast range of trusted concentration-boosting methods that probably haven’t been subject to a university study!

Ministers slammed for overlooking creative industry potential

There is likely to be many a creative freelancer among those using an accountant in Canary Wharf, with many of those certainly likely to take an interest in the latest warning from the Institute for Public Policy Research (IPPR) that the government could be “missing a trick” in its failure to include the creative industry in its 11-sector economic blueprint. The think-tank described the omission as a snub to the considerable growth and job creation potential of this section of the economy.

The IPPR said that the government didn’t appear to be taking the creative sector seriously, despite 2012 seeing it surpass average industry growth 25-fold. The think-tank’s analysis also showed the creative industry’s growth to be almost three times the average since the bottom of the crash in 2009. While GVA growth for the economy as a whole was 1.1 per cent and 0.3 per cent in 2011 and 2012 respectively, the equivalent figures for the creative sector were 7.9 per cent and 7.7 per cent. In addition, GVA growth since the crash’s 2009 trough was 3.1 for the whole economy, but 8.7 per cent for the creative industries.

None of these figures will be greatly surprising to many of those at the sharp end of the creative sector making use of an accountant in Canary Wharf. Nor will they be shocked by the 8.7 per cent rise in turnover since the bottom of the crash in 2009, or the 18 per cent increase in the number of enterprises between 2008 and 2012 – from 185,000 to 217,000. The film and TV, advertising and marketing and design industries have been responsible for the greatest rises. However, noting the patchiness of growth across the country, the IPPR also suggested measures to support growth outside London’s boundaries.

IPPR Associate Director, Will Straw said that although the government was showing a commitment to a “march of the makers”, what he described as “the impressive efforts of one of the fastest growing industries in the UK” were not being noted sufficiently. He said that despite the likes of Arts Council funding, spectrum policy, broadband roll-out and the BBC license review already lending the government “major impact” on the sector, a coherent industrial strategy had not been provided across government departments. This, he stated, raised the possibility of some of the sector’s potential being squandered.

Mr Straw concluded, in words that will find little disagreement among creative freelancers using an accountant in Canary Wharf: “Given the rapid growth of this sector, which has been rapidly outstripping the rest of the economy since the financial crisis, there is a strong case for the creative industries to be prioritised by government. Eleven other sectors have been chosen but there seems to be little rationale for their inclusion while omitting one of Britain’s most thriving and exciting industries.”

 

Entrepreneur advocates investment for superfast broadband, not HS2

Many freelance clients of Richmond accounting firms are likely to have amassed, through considerable experience, much knowledge of what practices can financially help and hinder their work. Hence, they are likely to be opinionated about the recent claims of Scott Fletcher, an entrepreneur and the founder of award-winning cloud expert ANS Group, that the government should invest in high-speed broadband rather than the intended high-speed railway commonly known as HS2.

Mr Fletcher suggested in an article recently published on the website of Freelance UK that the move would bring greater financial benefit to the country than spending in excess of £46billion on the High Speed 2 railway. HeeHeHe proposed that UK businesses should be equipped with two forms of broadband, fibre-to-the-premises or FTTP and fibre-to-the-home or FTTH.

The entrepreneur argued that FTTP would be more useful to businesses in the short term, while FTTH would be similarly helpful to businesses over a longer period of time, given the increase that it would bring in the rate of development of new technology. This was because, he elaborated, common business practices in the UK are rapidly changing and will continue to rapidly change, leaving as the only certain prediction that fast data speeds will be crucial as the UK corporate world becomes increasingly digital.

The ANS Group founder’s suggestions are likely to provoke intriguing responses from freelance clients of Richmond accounting firms, and we reckon that the suggestions do have some merit. It is worth pointing out, for example, that though the government has claimed that HS2 would result in £12.6billion of economic benefits simply due to the reduced time spent on business travel, the National Audit Office has taken issue with this figure. The NAO claims that the figure has been reached due to “a simplifying assumption that that time spent travelling is unproductive.” This therefore suggests that corporate productivity could be boosted more cost-effectively through the provision of speedier broadband and a greater number of carriages on existing inter-city trains.

The Internet has done much to revolutionise corporate practices and, it seems, will continue to do so for a long time to come. For example, digital conferencing and mobile computing devices are likely to be used more and more often by businesses in future. This means that over time, face-to-face business meetings will likely become less necessary and therefore, so will very fast trains. We reckon that many UK businesses, including Richmond accounting firms and the freelance businesses that rely on them, will agree with such sentiments.

Seven year high in IR35 investigations

The period since 2011-12 has seen a quadrupling in the number of new IR35 investigations into consultants and freelancers using limited companies, the many freelance clients of Canary Wharf accountants may be interested to read. It brings the number of enquiries in a 12 month period to the highest level for seven years, according to official data.

No doubt that many Canary Wharf accountants and their clients will have taken note of the new figures recently released by HM Revenue & Customs (HMRC), showing that in the 12 months from April last year, 256 IR35 enquiries were launched. This compares to a mere 59 in the previous tax year, 2011-12.

It equates to a greater number of freelancers and contractors facing an IR35 investigation in 2012-13 than in all of the previous five tax years put together, which saw a total of 223 enquiries being made under the legislation. The latest data vindicates HMRC’s earlier pledge to MPs that the target of 230 IR35 probes a year would be exceeded.

However, this figure is a long way shy of the 2,000 enquiries a year that the website of the freelancers’ trade body, the PCG, had claimed to have been made under the rule in the five months since May 2012. Indeed, according to HMRC data, even the 1,000 barrier of total IR35 investigations has only been broken twice, in 2003-04 and 2002-03, when there were 1,166 investigations and 1,016 investigations respectively.

However, the 2012-13 figure is still the highest that it has been for some time, freelancers making use of Canary Wharf accountants may be intrigued to know. Indeed, one has to look back to 2005-06 to find a higher figure, with 656 investigations having been launched that year.

As for the current 2013/14 tax year, the first six months have seen 112 IR35 investigations carried out, a Lords committee investigating personal service companies was told. This is well short of the 193 IR35 investigations that had already been launched at the same point in 2012-13. However, the 112 figure still constitutes almost one investigation per day being opened by HMRC since the commencement of the current tax year.

As HMRC’s employment status team leader, Robin Wythes, stated to the Personal Service Companies Committee, the 112 cases launched thus far were “all cases that we consider to represent a high risk of IR35… i.e. those companies where, generally, we believe all their contracts of the year would be within IR35.”

In other news of relevance to contractors making use of Canary Wharf accountants, HMRC officials also revealed a fall in the average duration of an IR35 enquiry, from 110 weeks and 140 weeks in previous years, to 28 weeks in the current tax year. Mr Wythes said that “Possibly, in truth for the first time, [HMRC is] trying to see IR35 from the view of the worker,” also asserting the need for Business Entity Tests – part of last year’s released IR35 guidance – to be made “fit for purpose.”

Cameron salutes UK freelancers ahead of National Freelancers Day

Freelancers making use of accountants Richmond have received timely encouragement from the very top ahead of a 24 hour celebration of freelancers across the UK on Thursday 21st November, with Prime Minister David Cameron describing the country’s freelancers as “the engine of our economy” and deserving of his “very best wishes on National Freelancers Day.”

The PM’s warm words follow a month of support for NFD from various quarters, including from other MPs like shadow business secretary Chuka Umunna, as well as business leaders and celebrities.

Mr Cameron said that the country owed “a huge debt of gratitude to the thousands of men and women who have decided to make their living as freelancers”, telling the freelance clients of accountants Richmond that “You have not only taken your own future into your own hands, but you are the engine of our economy and economic revival. Indeed, SMEs are the very lifeblood of our country.”

The country’s freelancers also drew the praise of the mayor of London Boris Johnson, who described them as “brave and ambitious” and providing the UK with “vital talent”. NFD’s London launch will take place later on Thursday, keynoted by BBC The Apprentice star and vice-chair of West Ham United, Karren Brady.

Ms Brady will take part in a Question Time-style debate alongside a panel of experts, to discuss the economic impact of flexible working. The event, at which BBC small business expert Liz Barclay, journalist and broadcaster Nick Ferrari, Salisbury’s Conservative MP John Glen and Sunday Times political editor Isabel Oakeshott will also appear, will be hosted by one of the UK’s best known freelancers, broadcaster Sue Lawley.

Ms Brady signalled that a dedicated celebration of the country’s 1.72 million freelancers was well-deserved, stating: “As a businesswoman, I have first-hand experience of working with freelancers and know that they provide an invaluable flexible resource to clients, helping them grow.”

Other influential figures to have previously hailed the event and the work of freelance clients of accountants Richmond include Countdown co-presenter Rachel Riley and shadow economic secretary Catherine McKinnell MP, who said that freelancers “played an increasingly prominent part in creating economic growth and prosperity.”

The chair of PCG, Julie Stewart, commented: “We are honoured that David Cameron has shown his support for freelancers. Backing from the prime minister shows that our unique way of working is being recognised at the highest level.”

She added that the purpose of National Freelancers Day was to promote and celebrate freelancing’s positive effect not just on the UK economy, but also the work-life balance of workers, concluding that it was “brilliant” that so many prominent individuals were choosing to join in with the celebrations.

Tax concerns prompt 'control' test for BBC freelancers

The BBC is set to run a much-anticipated employment test on its freelance professionals, both high-profile and obscure, as it seeks to clamp down on personal service companies (PSCs). Clients of Richmond accountants may remember the corporation promising to carry out the test a year ago, following negative national press coverage of its use of PSCs and a critical report from the Public Accounts Committee.

Back then, the BBC had said that it would undertake the test on more than 800 ‘on-air’ workers who were paid not as individuals, but through their own limited companies. The report had said that the government and the BBC had too many staff making their own arrangements for the payment of tax and national insurance, potentially equating to a lesser contribution to the exchequer.

The new test will scrutinise the amount of editorial ‘control’ that the broadcaster has over the activities of each of the freelance workers, which are expected to be predominantly on-air. Should the assessment find a “significant” amount of BBC control of certain presenters and newsreaders, they will be asked to join the payroll, enabling them to be taxed at source rather than allowed to continue with their PSC.

The BBC stated in a news item outlining the assessment that it could not accurately gauge the number of ‘to camera’ freelancers set to be affected, given the “case-by-case basis” on which the test will be run, although top BBC talent, such as Jeremy Paxman and Fiona Bruce, could be within scope. Users of Richmond accountants may be interested to read that so-called ‘off air’ BBC freelancers are already being assessed for the appropriateness of their use of PSCs.

It is estimated by the corporation that around one fifth of its 16,000 production freelancers presently operating through their own limited companies could be requested to join the payroll as employees of the BBC.

The trade group PCG, which represents many freelancers using Richmond accountants, expressed its disappointment at the corporation’s measures against its freelance talent, pointing out that a distinction between employed and self-employed was already made by existing tax rules like IR35. It said: “If there are concerns about tax, it is the tax system that should be reformed, not the way these experts are working.”

The group continued: “Rather than taking the retrograde step of pushing back against these vibrant, successful and rewarding working practices, the government should instead be embracing it.”

The BBC has described the employment test as its response to the criticism of the Public Accounts Committee, despite “no evidence” being found last November that PSCs were used by the corporation to assist tax avoidance. That the test is going ahead will doubtless concern many present and prospective freelance clients of Richmond accountants.