Like many sole practitioners, I started out as a wage slave and only became self-employed about midway through my career. It was something of a happy accident really. It certainly wasn't planned that way!
I spent most of my early career in financial services and worked for various banks, finance houses and insurance companies throughout the 80s and 90s, studying part-time for the ACCA exams and finally qualifying in 1988. I had a CV as long as your arm, but all that background actually did me a lot of good, as it gave me a breadth of experience few people in the industry had.
It didn't teach me very much about being an accountant though, not a real one anyway. That only really happened when I started contracting in the late 90s and running my own company. Maybe it was the buzz of being (more or less) my own boss or maybe it was just the tax savings, but I never wanted a "permanent" job after that. In just a couple of years, I learnt more about tax returns, and more importantly tax planning, than in the whole of my career up to that point. In fact, the other contractors started asking me to do their accounts too, so I got my practising certificate in 2000 and re-branded the business as Acumen Accounting.
Back then it was just a spare time practice, as I had a full-time job running the finance function for a group of captive insurance companies. This came in handy when IR35 first reared its ugly head in 2000, as I had a separate contract with each company and, crucially, was able to draft the basic terms and conditions. This kept me on the right side of the taxman, but IR35 also encouraged me to take on more private clients and market my burgeoning practice as a real business, mainly through the website. This worked quite well, as few accountants had their own website in those early internet days, and I was able to steal a march, so much so that when I came to a cross-roads in my career a couple of years later, the way forward was obvious.
The group had decided to outsource their insurance operations, and only a small team of us remained to manage the handover. I had a choice between finding a new position or staying on 2 days a week for a while and using that interim period to dip my toe in the water and see if I wanted to go into public practice full-time. It was a no-brainer. I went for it, and I've never regretted it for a single moment ever since.
For one thing, I actually feel as though I'm doing something useful these days. My clients are really appreciative of the work I do for them and rely on my advice. So different from the old days, when I felt more like a cog in a machine, and I certainly never really felt appreciated. Back then, I seemed to spend more time sorting out staff issues or sitting in weekly meetings than doing any useful work, and I was getting bored with the repetitive cycle of head office reporting and regulatory returns.
I came to another career cross-roads in 2008 when the "old job" finally came to an end and simultaneously my largest client created his own accounts department, precipitating a big drop in turnover. I decided to focus more on the tax side of things, so set up a new brand called Acumen Tax Solutions and marketed it with a series of fact sheets, which ranked highly on the internet and drove business towards the main website.
I've always enjoyed tax more than accounts and by that time I'd added considerably to my knowledge and experience. Anyway, there's not much money in number-crunching any more. Those days are over. You have to be more of an all-rounder now and advise on all sorts of things, from IT to HR to tax, and I find the tax work a lot more fulfilling. I've even found the time to write a couple of Tax Cafe books which have helped to put me "on the map" so to speak.
It was also around that time I started posting on Accountingweb. I've always found this site to be both a brilliant resource and a great way of communicating with fellow professionals. I also get a lot of satisfaction from helping others, which is one of the things that makes me stay in public practice. It's been a lot of fun too, even when I'm crossing swords with some of the more contrary posters (of whom I am undoubtedly one). Accountingweb certainly boasts more than its fair share of us. Well, that's my story, for anyone who's interested. It would be fascinating to read other members life stories and see where they come from.
Sometimes all you have is an item on a bank or credit card statement. This is where the alternative evidence we are forced to rely on can get stretched to breaking point.
This often happens with online orders where the client fails to print the receipt, or where they buy goods on a card in-store rather than using their account and then lose the receipt.
If it's a regular supplier with a known VAT number and the goods purchased couldn't have been for anything other than the business, then I would be inclined to claim the input tax, although I'm sure HMRC would argue the evidence was insufficient if they ever found out.
It's a real pain in the neck though as it holds up the bank recs and often means asking suppliers for receipts based on little more than the date and amount. Not easy when they do literally hundreds of sales every day. Even when you have an account with them it can be difficult.
Love the socks Tim, but couldn't you get a matching pair?
I have one question concerning the answer to the travel expenses query. If the director only goes to London once a week for meetings, does the office he goes to really count as a permanent workplace? As he works from home too, is that not his real permanent workplace?
I know that you can have more than one permanent workplace (or maybe none at all) but it strikes me that the meetings count as self-contained tasks rather than part and parcel of his duties there, so should be treated the same as an engineer visiting a place regularly to do safety checks.
I believe there is an example in Booklet 490 that bears this out. At the end of the day, I guess it depends on the length and purpose of the visits. If they take all day every week, or if he has go in every week regardless of whether there is anything to talk about or not, then I suppose it would indeed be a permanent workplace. Otherwise, I don't see why that shouldn't be a temporary workplace too in line with the 40% rule. In that case, both the meetings and the client visits (assuming they aren't permanent workplaces in their own right) would be tax deductible.
The only reason these contractors are jumping overboard from public sector work (since IR35 inclusion was mandatory for the public secor) is precisely because they have a private sector to fall back on. Once that option is removed, they are stuck. They will roll over. They will have to choice but to 'do or die.'
Too simplistic. You're thinking like a politician. The private sector is not one homogeneous mass. It is made up of independent competing firms with an eye for business. They will not all behave the same and they will not roll over if it threatens their bottom line.
The public sector managers didn't much care if their contract staff left or demanded higher fees as a) they still got their salaries at the end of the month and b) it was more than their jobs were worth to oppose the edicts coming down from above or to think of solutions. Private sector firms will take the opposite approach.
The most likely outcome is that work will be outsourced to consultancy firms rather than individual contractors, who will then have to work for those firms or, better still, show some real entrepreneurship and band together with other professionals to form their own boutique consultancy firms.
I can also see a lot more use being made of the online status tool, which for all its faults does put you outside IR35 if you can honestly say you control the work or appoint a substitute. OK, the latter is unlikely but not the former. If you can get the client on-board, the taxman will find it impossible to challenge your answers and have no choice but to stand by the results in line with their guarantee. I wonder how long that will remain!
The public sector shied away from using this tool as they thought they could get away with blanket policies. They are paying the consequences. I think the private sector will be a much tougher nut to crack.
There will be no "holding the line" as the NHS expected their trusts to do in standing up to locums. Any private sector firms who try to wash their hands of this as the likes of TFL tried to do will lose good staff to firms who don't.
I don't expect any of this to cut any ice with politicians and civil servants. The roll-out to the private sector will probably go ahead anyway. It's what always happens when ideology and PR get in the way of common sense.
If the sector is being "professionalised" it's probably because higher-paid contractors, such as NHS locums, are now being forced to work through umbrellas en-masse in the wake of the catastrophic public sector IR35 rules rather than through any choice of their own.
Has anyone got any statistics on how many contractors have left the public sector altogether, or on how much pay rates have had to go up to keep the rest on board? Both are quite high if my client base is representative.
I'd have thought the increase in "captive" clients more than makes up for the loss of income due to restrictions on expenses. Still, they should look on the bright side. At least now they don't have to spend ages checking if travel and subsistence claims should even be made!! In particular, the 24 month rule was widely ignored or at least misunderstood.
I don't agree that umbrellas are better for people caught by IR35. For one thing, the fees are often almost as high as engaging an accountant to look after a company. They also miss out on the 5% expense allowance, tax free expenses such as professional subscriptions and mobile phones, capital allowances for necessary equipment and pension contributions, all of which save 25.8% NI as well as tax.
Of course, public sector contractors don't have that choice now anyway unless they can a) pass the status test tool and b) persuade their clients to use it.
Can't he go above their heads or is his job not worth it?
Perhaps your client could write to the Chief Executive of the Trust himself, or someone else with the power to over-rule the box-tickers if he can get hold of a name.
Money is usually fairly persuasive, especially in these cost-cutting times. If he can make out a good financial case, I'm sure strings can be pulled.
It's because they got rid of their most knowledgeable staff to save money, automated everything in sight and lost all local knowledge by centralising their operations. The merger also probably had a lot to do with it.
Sounds like this is being dealt with by a box-ticker. If your client really does have such rare skills, he should escalate this in the Trust as high up as it will go. The managers with the real say probably aren't even aware of it as they delegate such matters to their minions.
To be honest, MOO is a bit of a red herring as for 99% of contractors it almost certainly does exist. Remember, it can exist within an individual assignment. MOO does not cease to exist simply because the client is under no obligation to extend the contract or to provide further work.
However, if they can send you home without any pay or notice due to computer downtime or other such reason, then there might indeed be no MOO. There was an IR35 case a few years ago (Spencer I think) where that was a factor.
The ESS was actually quite forgiving as you could avoid IR35 just by claiming control of the work. The problem of course was persuading the client to a) assess you individually, b) use the ESS, and c) agree with you.
I haven't run through the CEST yet so not sure if that is still the case, but assuming it is, contractors should be proactive and present their clients with their own CEST results rather than waiting for their client to inform all their contractor staff how they intend to play it.
Speakers at Accountex this year were fully expecting the new IR35 rules to be rolled out to the private sector in the very near future and this prospect was mooted in the Telegraph a couple of weeks ago. We can only wait and see what is in the Budget on 22 November.
I've got a case like this going on right now where we need to increase the interest claimed in line with the capital account, so a highly pertinent article.
It sounds to me more like untrained HMRC staff getting it wrong than any official change of policy. Happens all the time these days. They probably don't even understand the concept of a capital account.
Trouble is, once they adopt a position, they dig their heels in and refute all arguments to the contrary. You just have to be very persistent. Will be interesting to see if they let it go to Tribunal.
If you have clients in the construction industry who do conversion jobs, there might well be a few invoices with 5% VAT, so always factor that into your checks.
Also, many builders use separate systems for costing work and raising invoices and these do not always feed through to their accounting package straight away, so it's always worth checking paper copies.
If they use cash accounting (advisable where you tend to carry significant debtors) it is useful to add up receipts in the last quarter and check that against the VAT return. Not a problem if the bank recs are up to date of course.