PCG TAKING ON THE TAXMAN FOR HUSBAND AND WIFE BUSINESS

Section 660A of the Income and Corporation taxes Act 1988, also known as the "settlements legislation,” is a little-known tax rule under which the Inland Revenue has recently argued that dividend income received by a non fee earning spouse or other connected person should be taxed as the main fee earner’s income, typically at the higher rate of 40%.

PCG WELCOMES DTI STUDY INTO OFF-SHORING OF UK CALL CENTRE JOBS

During a visit to a Royal Bank of Scotland call centre in Bristol on Friday 5 December, Trade and Industry Secretary Patricia Hewitt announced a new study into the UK call centre industry. She invited business, unions and interested parties to contribute to the wider debate about off-shoring, and said that she would be chairing a round-table seminar on off-shoring in the New Year.

Denying that the UK’s call centre sector was in terminal decline, Ms Hewitt nevertheless acknowledged that the “decisions of a number of firms to move their back office and call centre operations off-shore has been painful.”

The Confederation of British Industry (CBI) has published the results of a MORI survey that it commissioned in association with iSoft. Its report is entitled “Economic Outlook Survey 2003 – Is the UK a Good Place to do Business?” The poll of 251 senior executives from CBI member companies indicated that 70 per cent of respondents thought that the UK had become a less attractive place in which to invest over the past five years, and that 60 per cent believed it would get worse over the next five years.

The Professional Contractors Group (PCG) will be exhibiting at the annual CBI National Conference in Birmingham from Sunday 16 November to Tuesday 18 November 2003. This high profile event will be attended by industry gurus, CEOs of FTSE 100 companies, leading politicians and business people. Gordon Brown, Chancellor of the Exchequer, will be the keynote speaker at the event.

PCG will be exhibiting at stand 86 throughout the conference, showcasing the benefits of utilising freelance talent to complement the permanent workforce in almost every commercial and industrial sector.

The Professional Contractors Group (PCG) is pleased to announce that PCG member Roger Tilbury from Bedford has won his case at the Special Commissioners.

Issues of substitution and control were apparently key factors in the case of Tilbury Consulting Limited v Margaret Gittins (Her Majesty's Inspector of Taxes), in which Inland Revenue sought to show that Tilbury was a disguised employee of his end client, Ford Motor Company. His contract was actually with Compuware, to which Ford had outsourced its application management centre.

The Professional Contractors Group (PCG) has announced that Professor Richard Scase will be the keynote speaker at its annual conference, being held on Saturday 4 October. He will address delegates about his views on the future of freelancing.

Professor Scase, an author, academic and entrepreneur, whose book "Britain in 2010: A New Business Landscape" offers valuable insights into the future of freelancing, is one of the UK's leading business strategists. He has a regular column in The Observer newspaper, and was voted by Personnel Today as one of the top ten most influential people in Britain on personnel and human resource management.

The Professional Contractors Group (PCG) will be exhibiting at Offshore Europe 2003, a major oil and gas exhibition and conference taking place in Aberdeen from Tuesday 2 September to Friday 5 September 2003. Offshore Europe is among the premier oil and gas exploration and production events worldwide, and in 2001 attracted well over 24,500 visitors.

Around 6% of PCG's members are active in the oil and gas industry, and a recent survey of members showed that respondents from this sector had been in business on their own account for an average of 10 years, that only 6% of them were currently out of contract, and that 93% had not had contracts deemed by the Inland Revenue to fall within its IR35 rules. This compared with a figure of 83% for all respondents.

LAWSPEED WINS IR35 CASE FOR CONTRACTOR ON SAME TERMS AS SYNAPTEK

Following a PAYE compliance investigation launched by the Revenue against a contractor in 2002, Lawspeed was instructed under its prevention and representation scheme to represent the contractor in relation to the
revenue's claim that IR35 applied to the contract arrangements.

The case involved virtually identical facts to those applying to Gordon Stutchbury of Synaptek Ltd (the contractor that failed in his IR35 High Court Appeal). The contractor worked through the same agency, under the same contract terms, and supplied services at a similar Government Department.

Over 1,800 of its members participated in a survey conducted by the Professional Contractors Group (PCG) during the first two weeks of July.
 
Of the respondents, nearly a quarter were currently out of work, and 54% reported earnings down over the past 12 months compared with the previous 12 month period. A similar percentage forecast that business prospects for 2003 would be worse, with decreases anticipated in net profit after tax.

The Professional Contractors Group (PCG) has recently agreed a joint standard contract with The Association of Technology Staffing Companies (ATSCo), the body representing agencies that supply IT freelancers. This is available for use by PCG members working through ATSCo agencies, and has been described by legal experts as "a robust defence against IR35".

The first such contract was signed this week, by freelancer Neil A' Violet, working through The Wreay Group, a PCG Affiliate member whose managing director, Derek Wreay, also serves on the ATSCo executive.

The Professional Contractors Group (PCG) presented its case for freelancers at the public hearing held on 11 June 2003. Chaired by Mark Prisk MP, Treasurer of the All-Party Parliamentary Small Business Group (APPSBG), this was the culmination of a three week web based consultation into the issues, threats and opportunities facing freelancers.

PCG Chairman, Simon Griffiths, told the hearing that whilst the government acknowledged that the economic climate was difficult, it was making things significantly worse for freelancers by failing to include those without work in its unemployment statistics. "It's as though freelancers were invisible," he said, "and therefore simply not taken into consideration when assessing jobless figures or so-called skills shortages."

The Professional Contractors Group (PCG) is calling for more research into the slump in IT which has left many independent contractors out of work, but "missing" in official statistics. The move is as a direct result of reaction to the Prime Minister's comments last month when he told MP's that "…. There are increasing employment opportunities in IT…."

PCG Director Ian Durrant said, "Within hours, we were inundated with literally hundreds of personal testimonies from independent freelancers and IT specialists who are out of work or in jobs where their skills are not being used." The PCG has compiled a dossier of evidence which has been sent to the Prime Minister, circulated among MP's and other interested bodies.

Representatives of millions of independent freelancers are travelling to the International Labour Organisation (ILO) conference in Geneva this week to raise concerns over what they regard as "inappropriate meddling" in the working relationships between independent contractors and their clients.

UK based Professional Contractors Group (PCG), the Federation of Small Businesses (FSB) and the Independent Contractors of Australia (ICA) who between them represent around 3 million freelancers and small businesses believe there is worldwide misconception about independent professionals.

FREELANCERS QUESTION PM OVER WORK PERMITS

The Professional Contractors Group (PCG) is calling on the Prime Minister to explain why he believes there is full employment in the IT sector.

Newly elected PCG chair Simon Griffiths has today written to Tony Blair following an exchange during Prime Minister's Question Time in which the PM seemed to suggest that there are insufficient numbers of skilled IT freelancers available to fill vacancies in the UK; "It is the PCG's belief that tens of thousands of skilled IT freelancers are currently without work in the UK while many companies continue to bring in non EU workers to fill these vacancies," said Griffiths.

NEW FREELANCERS' LEADER WARNS OF TRAINING CRISIS

Simon Griffiths, the newly elected chair of the Professional Contractors Group has warned that the UK faces a mounting crisis in the technology sector due to lack of training, short termism and the growing trend for UK companies to use foreign workers who, he says "are ruthlessly exploited while home grown talent languishes on the sidelines."

Griffiths believes that the UK's concentration on "soft" management has left many technical staff excluded from management roles and that in turn has led to gross under investment in training in the hard technical skills that are vital to the continuing success of the UK's knowledge based sector. "Lack of training and the gradual erosion of freelancer status by punitive tax measures like IR35 and S660 are in danger of destroying a uniquely skilled, flexible work force that will have dire consequences for the UK." he warned.

The PCG has called on the Paymaster General, Dawn Primarolo not to backdate the tough new tax rules announced by the Inland Revenue in its April tax bulletin.

The Tax bulletin, which was issued last week, contains new guidance on how to apply the settlements legislation to small businesses.

The Revenue announced that it can use S660A to tax a husband and wife's dividends from a company which they both have shares in as if they were all received by one of the spouses.

The PCG has called on the Paymaster General, Dawn Primarolo not to backdate the tough new tax rules announced by the Inland Revenue in its April tax bulletin.

The Tax bulletin, which was issued last week, contains new guidance on how to apply the settlements legislation to small businesses.

The Revenue announced that it can use S660A to tax a husband and wife's dividends from a company which they both have shares in as if they were all received by one of the spouses.

According to the Professional Contractors Group (PCG), yesterday's Budget offers little to bolster the fortunes of Britain's growing freelancer community. In his analysis, PCG adviser and tax expert, Simon Dolan of SJD Accountancy, says that those freelancers who are caught by IR35 will be a further 2% worse off from the national insurance increase. Those who are outside IR35 will be marginally worse off due to the fact that the personal allowance has been frozen.

There have been no changes to Corporation Tax, and only inflation linked changes to the Capital Gains Tax and Personal Tax bands. The 100% capital allowance for IT equipment has been extended for another year, which was a welcome piece of news for small businesses and freelancers.

THE BUDGET AND IR35 - IT AND ENGINEERING FREELANCERS ARE NO LONGER ALONE

The scope of IR35 or intermediaries legislation has been extended to include those domestic workers, such as nannies and butlers, who work through personal service companies. Any income for services performed after 9 April 2003 will be subject to additional tax and NI on the difference between the "deemed payment" and the salary paid through PAYE.

According to Professional Contractors Group (PCG) director, Keith Hogben, this extension to IR35 legislation clearly shows the government's determination to target freelancers, sector by sector.

For the last month the PCG has been advising members not to tick the IR35 box on their P35's until after the Synaptek verdict.

Judgement was finally handed down on Friday 28 March, and although it was not a personal victory for Gordon Stutchbury, there were positive aspects for the wider freelance community.

This case demonstrates the underlying importance of two key pieces of advice that the PCG has been highlighting strongly since the introduction of IR35.

Small businesses were dealt a bitter blow today after the High Court upheld a controversial ruling in favour of the Inland Revenue.

Gordon Stutchbury, an ex-police officer from Sunderland, backed by the Professional Contractors Group, had challenged a decision of the Tax Commissioners that, while he was acknowledged to be "in business on his own account", he must nevertheless pay tax as a "disguised employee" of his businesses clients.

Stutchbury founded his company, Synaptek - a software consultancy in 1990. After the ruling, he had to pay more than 50% of his company turnover in tax.

PCG TELLS FREELANCERS TO WAIT FOR SYNAPTEK RULING BEFORE SENDING P35 RETURNS

The PCG (Professional Contractors Group) is urging freelancers to await the outcome of the Synaptek case before sending in P35 returns. This high profile IR35 case, Synaptek Ltd vs Graeme Young (HM Inspector of Taxes), was heard in the High Court last week.

PCG’s advice to freelancers is that neither they nor their accountants should submit their P35s before the Synaptek judgement, expected in a fortnight. Simon Griffiths, PCG Deputy Chairman, says “You should do the provisional calculations. Document any factors affecting your likely IR35 status. Then join PCG for detailed information about IR35, tax investigation insurance, discounted contract reviews and the best expert advice and support. PCG is a truly virtual organisation with a powerful web presence; you can find all you need to know on this matter at www.pcg.org.uk.”

SMALL BUSINESSES HOLD THEIR BREATH FOR TAX RULING

Small businesses will have to wait a further two weeks to hear the result of a High Court appeal which could mean a change to the tax rules.

After a two day hearing in the High Court Mr Justice Hart said he would deliver his judgement in a fortnight. The appeal was brought by former police officer Gordon Stutchbury from Sunderland and backed by the Professional Contractors Group against the Inland Revenue.

LETTER TO DAWN PRIMAROLO

The Rt. Hon. Dawn Primarolo MP
Paymaster General
Treasury Chambers
Whitehall
London SW1P

11/02/03

Settlements legislation - Income and Corporation Taxes Act Section 660A and following sections

Dear Paymaster General,

I am writing to express our deep concern about the application by the Inland Revenue of the Settlements legislation to shareholdings in small family businesses.

In a number of recent cases the Revenue has sought to recharacterise a wife's dividend income from a small limited company as that of her husband, under Section 660A ICTA 1988.

TAX ATTACK ON SMALL BUSINESSES 14.02.03

Britain's small business community is facing a new onslaught from the taxman. The Professional Contractors Group (PCG), which represents thousands of independent freelancers, is calling on the government to step in.

The PCG is concerned about the Inland Revenue's interpretation of Section 660 - an existing piece of tax legislation which helps determine the principal beneficiary of a business - in other words, the shareholder who receives dividends from company profits at the end of the year. Many independent freelancers form a limited company allocating some shares to a spouse who carries out administrative work for the business. This then allows corporate dividends to be paid at the end of the year, helps the contractor reduce their own earnings and thus stay out of a higher tax bracket.