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Picked up a new contract last week, which was nice. Close to home, decent rate, interesting work so clearly got something wrong somewhere then. So I have been just a little busy learning the new company and how it works, reading all the material I need to understand and getting to grips with yet another agency’s version of time recording and invoicing. Haven’t quite cracked that bit yet either…

Meanwhile out in the real world, HMG seem to have had a serious case of the vapours. I’ve already had a moan about Danyygate and its misdirected assault on senior Civil Servants. But now they’ve gone from misdirected to utterly barking.

The latest wizard wheeze from those coves in the Remove (aka our government) is to say that if you get more than £220 a day for six months or more, clearly you are an employee and must agree to pay PAYE and NICs on all such income. And we’ll put it in the contract to make sure you do.

Say what? Talk about holey…

for a start, they (the client) are effectively telling you (the Company) how to run your affairs and how to apportion your corporate income. Now I’m no legal eagle, but doesn’t that make the client a shadow director? Let me quote form the excellent (OK, I’m joking) HMRC website:

A shadow director is someone who is not a named director but who directs or controls the company.
It should be remembered that acting as a shadow director is not an offence in itself (unless the person is an undischarged bankrupt or disqualified from being a director). But the existence of a shadow director is a risk indicator. It raises the suspicion that the shadow director is attempting to conceal something by managing the company but not being listed as one of its directors.

Do they really want to go there? But it gets sillier, if that were possible.

Firstly you want to treat me as an employee for tax purposes. OK, so you can pay the Employers’ NICs then. And I want pension cover, sick pay, holiday pay and a few other things. What? I’m a contractor so don’t qualify? OK, so if I’m a freelance contractor, why do I have to pay personal tax on all mycomapny’s income?

And if you sign the contract, ignore that particular provision as being unreasonable and get shopped to HMRC, what then? The rules for IR35 still apply, as does the usual defences, as do the usual win/loss ratios. Curiouser and curiouser, says I, somewhat ungrammatically.

Finally, how did they get to £220 a day as the cutoff, a laughably low figure for a good contractor in any market: even ITCs charge more than that and we know how cheap they are. It couldn’t possibly be that some Lib Dem researcher in Danny’s enclave has worked out there are 260 working days a year and divided that into the bottom of the pay scale for the senior Civil Servant grades, which is £58,400, and ignored emplyers’ NICs, and all the other overheads associated with having a senior employee that usually double the salary to get the cost of employment. They couldn’t be that stupid. Could they?

 

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Information needed…

Further to my previous blog posting about UK public sector clients asking their freelances to be contractually required to divulge their taxation arrangements, it is becoming clear that nobody is really sure what is in scope here, and how widespread it is. PCG are trying to collect and collate as much evidence as they can on this subject to strengthen their case with HMG. So if your client is a public sector body of some kind and you are being asked to accept contract terms regarding your personal finances, can you email the details in to the PCG at the address publicsectorreview@pcg.org.uk. Everything will be kept strictly confidential of course, but the more ammunition the shorter the battle.

HMG recently launched an investigation into how some senior Civil Servants were being remunerated. They had discovered cases where key members of a Departmental management team were not actually on the payroll, but were working through their own private companies and charging day rates somewhat above the pay scale for the role. Clearly – in their view at least –  this is wrong and needs to be addressed. So they did something.

And that’s where it all goes a bit pear-shaped.

Firstly they have defined the cut-off point for this as being anyone in a controlling position charging more than £220 a day through a Limited Company. This seems a ludicrously low day rate for a senior contractor, even if they were all short-term ICT’s shipped in from the sub-continent, not the highly experienced professionals that they are. So, you have to ask, why such a low rate?

Well that’s easy. A Senior Civil Servant is defined as one on a certain pay scale structure that starts at £58,200. There are 260 available working days in a year: roughly 365 days less Saturdays and Sundays. Divide one by the other and you get a shade over £220. So there you go. Simples, as a certain Muscovite Meerkat might say.

Except clearly whoever came up with that formula  has about as much appreciation of basic economics as the aforementioned meerkat. As far as I know, the Civil Service still pays Employers NICs, it gives its staff holidays, sick pay, pensions, training (lots of training, most of it wasted) and all the other usual benefits.

Frankly I find it astonishing that anyone allowed such a stupid and utterly naive approach to go unchallenged.

And there’s more.

This is about senior Civil Servants or, perhaps a little more accurately, people holding posts that are controlling roles in the Civil Service. Such people are to be bound to reveal the extent to which they are paying taxes on their income, so the HMRC can be satisfied that all necessary taxes – which, needless to say, HMRC thinks is the maximum possible – are being paid. Which has a degree of logic, I suppose, if you ignore the provisions of IR35 which, as far as I can remember,  was meant for precisely the situation of an employee pretending to be a freelance to gain a tax advantage. Heigh ho…

Hang on, though, it’s even sillier.

I know of programmers – genuine, independent IT contractors – who are seeing clauses appear in their contract demanding access to their tax position. Say what? They aren’t senior civil servants, they aren’t in controlling positions. They certainly don’t work 260 days a year or get any paid benefits. Most of them aren’t even post holders but project-based resources. So why are they being faced with these intrusive and potentially damaging demands?

Could it be possibly that a significant number of Civil Servants have absolutely no idea what they are talking about, and are blindly applying a limited rule to anyone who looks like a willing victim? Now that is a really silly thought. Isn’t it?

There is one thing that has come out of the ongoing furore about the tax arrangements of various civil servants and other “freelance” workers that may do some good. The press have not been very rigorous in separating the good and bad cases and have simply labelled everyone with their own company as a tax avoider who should be flogged out of town with extreme prejudice.

The reality, as ever, is somewhat different.

I’m not talking about the various schemes (aka “tins of magic beans”) that some enlightened souls are using to pay minimal taxation. Those, while legal, carry a significant risk of you being presented with a six-figure tax bill, or seeing all your money disappear, or having your estate raided when you finally shuffle off this mortal coil, leaving your family destitute. If that’s your idea of a good idea, then you carry on.

I’m talking about people using limited companies purely as a tax avoidance vehicle. A company gets tax breaks, compared to an employee’s salary, mainly to encourage entrepreneurship  and reinvestment, and to compensate for the much higher levels of risk they carry. Employees have a pretty good chance of being paid at the end of the month, after all, something that no company can be sure will happen.

And personally I have no issue with that arrangement.

But what I do have an issue with is where someone uses the limited company structure to process monies that are actually earned on the back of their real day job. Like most freelances, all my income – such as it is – comes from the invoices raised by my company in return for supplying my services to a range of other companies. I pay all the taxes due, corporate and personal, and have no intention of avoiding any of them. But others use their companies to process money from speaking engagements or looking good in an advert for men’s underwear or for occupying a desk in an organisation where they’ve been working for many years.

But you can see the problem here: where is the dividing line between them?

That’s what is at the heart of this whole “disguised employment” nonsense that’s plagued us throughout this century. Nobody has come up with a set of rules that clearly separates one from the other. But might I suggest one group that is clearly out of scope of the confusion an who should be left alone to get on with it?

Those, like me, who only have that single source of income?

Well done PCG!

The team at PCG Towers have come away as winners of the Trade Association Forum awards for the Event of the Year against some serious opposition. This was awarded for National Freelancers Day 2011, which touched 6.5 million people and received messages of support from numerous political and business leaders including the Prime Minister. This is a well-deserved recognition of the work of the PCG and its efforts to promote freelancing to both the business and political communities. Well done all. Roll on NFD 2012.

Meanwhile, back on Planet Bench, it’s been a mixed week for my search for the next challenge. I’ve applied for a few roles that are within my reach. I’ve even managed to talk to a couple of agents about one or two. However, sadly, the net result is zero.

And that’s not zero as in no interviews, it’s zero as in absolutely no feedback whatsoever. Which don’t half make it hard to know where you’re going wrong, or even if you are.You have to wonder when you see someone looking for  a Service Manager (that’s what I do) who has built service operations (I’ve done three from scratch), managed improvement programmes (five of them, all successful) and has led teams (Head of IT do you? Manager of 75 staff?). This for a role about 20 minutes from home. End result? That’s right – no interview, no feedback, no comment. The CV was submitted and that’s it.

Then you get an email offering me a permanent role (don’t do them) in Kent (handy for Bristol) in finance (won’t get in  there) for £35,000 a year. Well thanks for that. I think someone’s search engine needs an overhaul…

Heigh ho, back to it on Monday.I’m thinking of changing my company name to Micawber Enterprises: after all, something will turn up.

Has it ever occurred to you that the hardest part of being a freelance contractor is how much you should be charging your client? Or perhaps, attempting to charge your client, since the agency will have already set a working price band with the end client and will usually be seeking to maximise their income by reducing yours as much as they dare. Which means, in effect, that all the usual rules of commerce have gone out of the window.

Of course I do actually know what my rate is, in an ideal world. I know my monthly outgoings so I know how much I need to be in my personal bank account every month . It’s simple enough to convert that into a gross figure, and from there work out what needs to go into the company account each month. Allow for not earning  at all for a chunk of the year (if you work all year, that’s a bonus) and deriving a minimum day rate becomes straightforward.

To that you have to add the cost of actually doing the gig, of course and a sensible profit margin to ensure you can keep the yacht in the Mediterranean  and eventually you have a working day rate, which in my case isn’t all that excessive.

Then you go for a job and the first question is “What will you charge?” and you tell them and they say “Well the client only has fourpence, is that a problem?”. Well yes it is,actually, I’m in business to make money, not subsidise someone else.

The other factor that gets ignored is that a lot of time I don’t actually cost anything anyway. A recent contract resulted in me identifying close to £400,000 of real savings, which more than covered my fees to deliver them, and there have been other similar, if less easy to quantify results: how much is saving a failing programme, or winning the renewal of a £17m support contract for example?

It’s long been a truism that if you pay low you tend to get people who will work for that rate, not people who can do the job properly: ask RBS, whose recent problems are at least in part down to giving the work to the lowest bidder. Or a certain insurance company near to me who use a punitive rate card and wonder why so many of their projects are in trouble.

I’ll freely admit my standard rate isn’t cheap – but it certainly isn’t expensive…

 

Can’t talk. Busy…

I will admit to a certain degree of bias when talking about recruitment agencies, even though I do try to remain supportive. After all, the bulk of my work comes from them in one way or another. But on occasion, it does get hard…

The standard approach to finding work is to spot the opportunity, customise the CV to emphasise why you’re such a brilliant fit for the role, send it in, wait long enough for it to arrive and for them to see it, then give them a call to explain why you should get the gig.

Spot the problem? “Give them a call”. Ah…

Increasingly agencies aren’t putting contact numbers out there any more. No problem, I’ll look them them up on the interweb and get it from there. Except that doesn’t always work either. For one thing, they are never at their desk, ever. Secondly, messages never get passed on, or if they do they don’t do anything about them. Just yesterday, a new torture:  I found myself faced with three options on the agency switchboard – 1 to call the extension, 2 to spell the first three letters of their surname (it was Jones…)  and 3 for an operator. So I pressed 3. Click, burr, “You have three options. Please press….” Aaaargh!

Thing is you can understand it. Talking to an agent earlier today (yes, it can be done on occasion. Such people are to be treasured) he had 70 applications  for a fairly senior and quite specialised role within two hours of posting it on the boards. If even half of them then tried to call in, you can see the problem from their side.

But – and it’s a big but – it’s not exactly helpful. Exactly how can you sell a product – yourself, in this case – if you have a very brief description of the requirement, no idea of the location (hey, the South West is a big place you know) and the buyer is too busy to listen to you anyway. Write a killer CV, of course, which I have and on occasion they call you back.

What you never get is any idea about why you were not called back. Perhaps the killer CV isn’t so killer. Perhaps they don’t like Welshmen, or people over 25 or any number of other reasons. But it would be nice to know…