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Shout99 - Freelancers, FO35, Section 660
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Issue 1; 26 March 1999
by Andy White at 10:50 15/03/00 ( Shout99 Newsletter)
Likely Inland Revenue Guidelines | Forum 2000

Since this site was first posted on Saturday 13th March comments having been coming in fast. To all of you who made them, most of them well thought out and cogently argued, many thanks.

I started out with good intentions to answer each and every one, but simply have not been able to keep up. To those who only got the Auto responder message, my apologies. I have tried to post a representative selection of them on the site, each one has numerous others supporting, not posted, with similar sentiments. To give you some idea of the activity; On Wednesday 17th the site got 1500 hits, a week later on Wednesday 24th it got over 40,000 and I received over 1000 emails. No press, word of mouth!

Two new major developments to report

1.0 - Likely Inland Revenue Guidelines

The proposed guidelines from the Inland Revenue would appear to be along the lines of the conversation that Tim Warr had with the person responsible for drafting them. They have now been up for some time and one would assume that if the Inland Revenue did not agree they would have been taken off.(See link on the site for original). This clipped from the site:-


"The new rules will not attempt to distinguish between contractors supplied by agencies and those who provide their services directly to clients. Instead, they will look at whether the work carried out by a contractor more closely resembles employment or self-employment. Therefore for example, a contractor who is brought in by a client, whether directly or through an agent, as a pure consultant to advise on a suitable system for the client to implement is unlikely to be caught by the new rules. On the other hand, a contractor who works as part of a team, under supervision direction and control of the client, alongside other contractors and employees will almost certainly be caught by the new rules.

APPLICATION OF THE NEW RULES

Where the new rules apply it is likely that clients and agencies making payments directly to a contractors company will be required to calculate and pay over tax and National Insurance as if that payment was a payment of salary. A limited company receiving such a payment will not suffer corporation tax on that payment and will be able to pay it on to the contractor as salary without any tax or National Insurance becoming due from the contractor. Such a company will of course, still incur expenses such as accountancy fees. No tax relief will be available on such expenses unless the company has other income which is not caught by the new rules.

Of course a company may have more than one business contract. Where one or more of those contracts is caught by the new rules payment for those contracts will be received net of tax and National Insurance. The company will be able to deal with any payment for contract not caught by the new rules in the same way as it has always done.

TIMESCALE

The new legislation is expected to be introduced on 6th April 2000. The chances of any delay were according to Mark Nellthorp close to nil."

2.0 - Forum 2000

After a conspicuous silence on this issue the Recruitment Industry have now picked up the ball on this problem and, fronted by Giant, have established a group called Forum 2000 to take responsibility for fighting these proposals. I clipped this from their web site on 26th March:-

"At Giant we believe that there needs to be a strong and consistent voice within the contracting industry. The best way of doing this is to form a pressure group representing end users, agencies, advisors and contractors to make representations to government and to influence their decisions.

Giant has established forum 2000 and are inviting key industry figures to action. Our first meeting will be arranged shortly.

The aim of this first meeting is to:

plan how to develop the industry response to the Revenue's proposals, and

develop a strategy for influencing public and political opinion to ensure support for the legitimate ambitions of contractors.

As well as senior figures from the top 25 agencies and the contracting media the chairman of FRES will be attending together with representatives from the CBI's taxation committee and leading accountants and lawyers with interests in the debate."

The last thing we need is a fragmented approach to the issue and with Forum 2000 taking responsibility for campaigning on this issue I wish them the best of luck.
The web site will now concentrate on the following:-

* Act as a focal point for information and opinion on this key issue with regard to Contractors in the IT and Engineering Sectors.

* Provide informed and independent analysis of the situation as it develops

If you revisit the site you will note that I have cut down the content and focused on the Contractor with some educated guesses on what it will mean for you.

All the best

Andy White | andy@engineerjob.com

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