ContractorCalculator: Contracting news in brief - 16/Sep/2011

IR35 Test

Contractors steer clear of HMRC’s IR35 helpline

Contractors are choosing not to use HMRC’s IR35 helpline as telephone records reveal only around 1,000 people use the helpline to discuss IR35 each year. HMRC only started creating the call records, released to ContractorCalculator after a freedom of information request, in August 2009. “With an estimated 300,000 limited company contractors active in the UK, that’s only 0.33% who choose to ask HMRC for IR35 advice,” says Chaplin. “We have more contractors taking our free IR35 Online Test in a month than call HMRC’s helpline in a year!” More…

Contractors suffer from “inefficient” and “distortionary” taxation, says Mirlees Review

Contractors and other taxpayers are suffering from a tax system that is “inefficient” and “distortionary”, and through which the Government takes £4 for every £10 earned. This is the conclusion of the Mirlees Review of the UK’s tax system published by the Institute of Fiscal Studies (IFS). According to the IFS, the review is the “deepest and most far reaching analysis of the UK tax system in more than 30 years”. Overhauling VAT, income tax and National Insurance Contributions (NICs), taxation of housing and the benefit system are just some of its recommendations. More…

Potential contract bonanza for IT contractors following banking reform proposals

IT contractors could be set for a long-term contract bonanza as banks are expected to undergo huge changes to improve financial stability. The Independent Commission on Banking’s (ICB) Final Report proposes reforms that include ring-fencing retail banking from investment banking and a requirement for banks to hold a higher proportion of ‘loss-absorbing’ assets. The restructuring, which the ICB recommends is completed by 2019, is likely to demand a significant number of IT contractors to implement. More…

Collapse in bank hiring may threaten short-term IT contractor prospects

The contract scene for IT contractors in the shorter-term may not be quite so rosy. According to the Manpower Employment Outlook Survey for the 4th Quarter of 2011, a collapse in bank hiring is threatening the UK’s jobs growth. This may be bad news for IT contractors, because the UK’s financial sector is one of the largest consumers of IT contractors’ services. The survey reports that jobs growth in retail banking has been sustained, but in other areas “there has been a real pull back”. More…

Further banking job losses will impact negatively on IT contractors

In another blow to short term IT contractor prospects, more banking jobs are set to go because investment bankers are ‘stuck’ on much higher salaries as a result of the UK’s bonus regulations. Ambereen Choudhury and Liam Vaughan report on Bloomberg that 70,000 European banking jobs have already been lost across Europe, and more are set to go because, contractually, the banks can’t cut costs in deteriorating markets by asking bankers to take pay cuts. Further financial sector job losses are likely to hit IT contract growth in the UK’s financial sector. More….

Flat growth and declines in online demand for core contracting disciplines

Online demand for IT contractors has increased by 0.8% between July and August, although demand for engineers over the same period has declined by 1.3%. This is according to August’s Monster Employment Index (MEI), which fell by 1.4%, the second consecutive month the headline index has fallen. Despite the monthly fluctuations, Monster UK & Ireland spokesperson Michael Gentle is upbeat about prospects for the contracting sector: “IT and Marketing, Media and PR are recovering strongly,” while the industrial sectors such as engineering and transport and logistics continue to forge ahead, as a result of investment in industrial sectors.” More…

Labour market conditions worsen, yet self-employment falls

A growth in the contracting sector does not seem to be following the further contraction of the labour market, in which conditions worsened from May to July 2011. Unemployment increased to 2.51m, up 80,000, but workers in self-employment fell by 10,000. The public sector shed 110,000 jobs between May and July. According to the Office of National Statistics, 3.973m workers were classified as self-employed and 1.561 workers were classed as temporary employees during the period, a fall of 34,000 temps compared to the first quarter of 2011. More…

Falling business confidence is a double-edged sword for contractors

Contractors could either do well or badly as a result of the falling business confidence reported by the BDO Monthly Business Trend Indices. With BDO reporting that business confidence is at a 26-month low and hiring intentions are “stagnant”, that can mean firms are more likely to hire contractors to meet short-term needs, rather than taking on the risk of permanent employees. Conversely, if business volumes are shrinking, then the number of contracts is likely to fall. Reassuringly, BDO believes that the weak data in the indices “does not necessarily predict a return to recession. More…

Small business survey bucks downwards trends: should contractors target more SMEs?

Contractors may wish to consider targeting small to medium sized enterprises (SMEs) as a potential source of contracts, as a survey reveals 74% of small firms anticipate increasing headcount in the next 12 months. The ECI Growth Survey asked over 250 CEOs of SMEs with sales between £10m and £200m about their growth intentions. The response was overwhelmingly positive, in direct contrast to other business surveys. These CEOs should be listened to, because according to ECI: “68% of respondents last year expected to grow employment over the 12 months when many commentators were predicting a drop in employment. Private sector employment has indeed grown in the past year by more than 500,000.” More…

Contractor VAT update: bank interest not part of flat-rate scheme turnover

Limited company contractors who use the flat-rate scheme (FRS) for VAT accounting can exclude bank interest from their turnover when performing VAT calculations. Two recent tribunal rulings, Thexton Training and Fanfield, offered different decisions over how bank interest should be treated for FRS purposes. But HMRC has now confirmed that “for simplification purposes, all FRS users can exclude interest from their flat rate turnover.” More…

Published: Thursday, September 15, 2011

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