We understand the world of contracting changes often, and when you’re busy taking charge of your company, it’s not always easy to stay up to date.
Fortunately, we’re here for you. We’ve found all of the latest news from the world of contracting and condensed it into our monthly news roundup so you’re in the know.
HMRC warns about the dangers of tax avoidance schemes
HMRC recently published a report, Spotlight 45, outlining the dangers of umbrella companies offering their employees a higher take-home pay and reduced tax liabilities. These companies are usually tax avoidance schemes masquerading as an umbrella company and can be detrimental for employees caught by such schemes.
If you are found to be using a tax avoidance scheme, you could be liable for additional income tax, interest and National Insurance contributions. In extreme cases, you may also be liable to pay penalties.
The report outlines some of the ways to spot such schemes, including checking whether the company are promising a take-home pay of up to 90% or paying only a small portion of your salary through PAYE. If you’re suspicious, you are urged to discuss this with a professional accountant.
Luckily, there are a number of compliant umbrella companies such as our sister company; Parasol about.
IPSE develops new training proposal for freelancers
According to IPSE, the self-employed are being left vulnerable when it comes to their training and development prospects. To counter this issue, IPSE has developed what it considers to be the best course of action for tax rules on training self-employed professionals. The training programme, known as Eight Ways to Upskill the Self Employed, consists of eight recommendations which they believe the government should adhere to:
- Fix the design faults in the New Enterprise Allowance (NEA) Scheme.
- Introduce Adult Education Vouchers to incentivise lifelong learning among low-income groups.
- Make the Apprenticeship Levy funding available for employment agencies to subsidise training for the self-employed people they represent.
- Make training for new skills tax deductible for the self-employed.
- Establish a self-employment hub to improve signposting to trusted online training providers.
- Ensure the self-employed benefit from the new Flexible Learning Fund.
- Introduce enterprise modules in higher and further education courses which produce a higher proportion of self-employed graduates.
- Urgently reform the Construction Industry Training Board (CIBT) levy.
Training for the self-employed is a major concern as many highly value developing their skills but don’t believe they have access. But this is also a problem for the economy as a whole and allowing easier access to training and development could be key to overcoming the UK’s productivity problem.
The self-employed facing pension crisis
According to research by Prudential, there is a pension crisis amongst the self-employed, who are not saving for later in life. Their research has revealed that 43% of self-employed workers don’t have a pension, with almost one third relying on the state to fund their retirement.
Though contractors and freelancers are likely to save more, the research revealed that they are more focused on day-to-day costs than on the long-term.
The solution, as posed by Prudential may lie in rolling out a ‘sidecar pension scheme’. This would allow the self-employed to make savings into a regular pension pot whilst simultaneously putting money into a rainy day fund.
You can find more information about your pension options as a contractor in our guide.
One month left until the offshore tax legislation
HMRC have declared that taxpayers with foreign assets could face penalties if they fail to declare their income before 30th September.
New legislation known as ‘Requirement to Correct’ now requires UK taxpayers to notify HMRC of any changes to their income tax, capital gains and inheritance tax. According to the report, the most common reasons for claiming offshore tax are due to foreign property investment, investment income and moving money from an account in the UK to abroad.
After this deadline, failure to update HMRC of any changes in tax could result in a series of penalties or fines up to 200% of the liabilities owed. In serious cases where liability exceeds more than £25,000 in the financial year, an additional penalty of 10% could also be enforceable.
You can read the full report here.