Welcome to the OrangeGenie Professional Contractor Services Blog

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OrangeGenie provide professional contractor services for freelance people in the workplace.  This blog aims to provide guidance and information to help you make an informed decision on whether our limited company services or our umbrella service is more suited to your needs. Both options have their own advantages and disadvantages depending on your personal circumstances and long terms goals. OrangeGenie are a leading UK limited company and umbrella company services organisation who will guide you every step of the way to manage your business, the way you want it.

We actively encourage visitors to our blog to subscribe to the regular news and topics we post about, so whether you are looking to run your own limited company or would like to sign up to our umbrella company services, this blog is a great place to start!

Julian Ward
Marketing Director

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Directors Remuneration Strategy

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As we approach the start of a new tax year, directors of Limited Companies should re-consider their remuneration strategy to ensure it still meets their needs and ambitions for 2013/14.

One of the main reasons for trading through a Limited company is the ability to take advantage of paying a mixture of salary and dividends. Deciding on the split can be confusing so it is worth bearing in mind a few basic principles:-

Salary

A salary is a payment made to a director of a company, through a PAYE scheme. It is a tax deductible expense and reduces the company’s Corporation Tax liability. PAYE on your salary is paid at source.

Dividends

Dividends are a return on a shareholders investment and are paid out of retained profits. All dividends paid generate a “notional” tax credit which covers the basic rate tax liability on dividends.

Dividends in excess of the higher rate tax bracket will attract additional personal tax – 25% of the net dividend and 35% of the net for income over £150,000.

Deciding a Strategy

An effective remuneration strategy will combine salary and dividends – but in what ratio?

When determining your strategy the decision has to be bespoke to your circumstances. Your choices will be based on your attitude to the following:-

  • Risk – a low risk strategy would see      the majority of funds being drawn as salary with infrequent dividends      being received. Conversely a high risk strategy would set a salary around      the Lower Earnings Limit for NIC and would pay frequent dividends. Theoretically,      HMRC could seek to define your dividends as “disguised remuneration” and      therefore charge NIC on the payments – statistically this is highly      unlikely.
  • National Minimum Wage rules – where no contract of      employment exists between you and your company, the National Minimum Wage      rules do not apply. Some commentators would argue that by paying the      National Minimum wage regardless, you afford yourself a little protection      from HMRC’s scrutiny as NIC is being paid.
  • State Pension Entitlement – if you are a UK National      entitled to a state pension you are required to have 30 qualifying years’      credits for National Insurance purposes. Taking a salary of at least the      lower earrings limit for NIC will ensure you receive credit for that      particular year.
  • Total income from all sources, employment, rental      properties etc. will need to be taken into account in your overall      strategy to ensure efficiency for both NIC and tax purposes.

Certain state benefits such as Statutory Maternity Pay (SMP), Statutory Sick Pay (SSP) and Statutory Paternity Pay(SSP) rely on the payment of a salary.

Still confused or not sure what to do , then Genie Accountancy can help. One of our qualified, specialist accountants would be pleased to talk you through the decision making process, highlighting the advantages and disadvantages of the options. Contact us on  01296 468185 or info@genieaccountancy.com

www.genieaccountancy.com

Feeling let down by your current accountant?

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- Has your accountant failed to file your Self-Assessment return on time?
- Were you given little or no notice of the amount of tax you owed on 31 January?
- Do you feel your tax bill was too high and that your accountant should have given better tax planning advice?

Even if you missed Friday’s filing deadline for your Self-Assessment return, it’s not too late to limit the damage. Any late return will now automatically attract a late filing penalty of £100, irrespective of the tax due but there is no reason for your penalties to increase.

Anyone who has still not filed a return and paid all the tax due faces further fines of £10 a day after the end of April. After another three months there is a further penalty of 5pc of the tax due, with a minimum of £300 – a penalty that is repeated after a further nine months.

In 2013 the HMRC sent out letters to 850,000 taxpayers to tell them that their returns were not received on time and that they must pay fines of £100. The penalty applied even if there was no tax to pay or if any tax due has been paid!

Please click HERE to see the ‘top ten oddest excuses’ for late tax returns as revealed by the HRMC.

So, if you are one of the ‘late filers’ find a good accountant without delay and they will be able to help you avoid further charges.

You never know, they may even be able to help you reduce your tax liability!

Orange Genie Group comments on ‘Onshore employment intermediaries.’

What is false self-employment?

Many skilled British workers choose the flexibility and freedom of being self-employed, where they take responsibility and control for their own working affairs, including ensuring that the correct tax is paid on their earnings.

This way of working also suits the needs of many organisations which rely on the flexible workforce as and when they need them, without having to make a financial commitment to employ workers on a full time basis.
However, the government believe that a significant number of workers are currently being treated as self-employed when their working practices suggest that they should be treated as employees. The supply chain using the services of the self-employed worker is able to avoid not only the 13.8% in employer national insurance contributions, but also other costs associated with engaging employees and affording them full employment rights.

Changes in legislation

It was widely understood that self-employment can be determined by using employment tests that had been formulated by case law over the years. However, HM Revenue and Customs (HMRC) have had trouble proving false self-employment in cases where the right to substitution was present.

An example of this is the case of HMRC v Talentcore (2011) where even when the workers were determined to be supervised, directed and controlled by the organisation, no employment taxes were due because the level of control was low enough for a substitute to be used.

In order to take action against this type of arrangement HMRC have consulted on their proposed changes and are currently preparing the final version for the upcoming Finance Bill which will come into effect on 6th April 2014.

How it affects recruitment agencies

Whilst it remains to be seen what the final legislation will look like, the proposed changes could have a major impact on recruitment agencies who currently engage with self-employed workers either directly or through an intermediary.

Importantly, the recruitment agency will be liable for the Tax and NI of the workers unless they can show the worker is genuinely self-employed.

In addition, all recruitment agencies involved in supplying workers through intermediaries (e.g. an Employment Umbrella Company), as they will be responsible for additional record keeping and reporting requirements via HMRC’s Real Time Information (RTI) processes.

How it affects workers

There is a strong likelihood that many workers who are engaged via a self-employed arrangement, do not understand the benefits of being an employee. Although they may enjoy additional income for a short while, this is at the detriment of other employment protections such as statutory sick pay and redundancy pay which could prove much more useful in the long term.

How it affects Personal Service Companies (PSC’s)

During the consultation process, many commentators felt that the proposed new legislation would deter Agencies from engaging with contractors operating through PSC’s, since the Agencies would be asked to deliver what were considered onerous reporting requirements whilst exposing themselves to risk.

Agency Legislation has always applied to PSC’s and the revised rules are no different. However, HMRC have issued guidance assuring PSC’s users and Agencies alike that the Legislation is not intended to affect those genuinely working through their own businesses. In the majority of cases the PSC’s fall outside of the rules since not all of the worker’s remuneration is received as a consequence of providing services – as dividends are paid as a consequence of their shareholding in the PSC.

How it affects Orange Genie Group

It will be business as usual – the new regulations will NOT affect our services to our agency partners or end clients. As members of both the Freelancer and Contractor Services Association (FCSA) and Professional Passport, Orange Genie Group already meets the high standards of compliance set by these organisations. Our operations follow HMRC employment tax rules which mean our solutions are risk-free for both recruitment agencies and contractors.

All Genie Umbrella and Genie Education workers are employed on an overarching employment contract and all employment income is subject to the correct deductions of PAYE and NI. Employer’s NI is reported in RTI and paid in full to HMRC by Genie Umbrella and Genie Education.

For a more detailed explanation please contact Orange Genie on 0845 603 8088. We have a knowledgeable team who can provide clear advice, and support.

Genie Accountancy advises on reviewing your protection plans to ensure it is suitable for your contractor status.

Most people are aware of the need to consider insurance for life’s unexpected and unwanted eventualities. As an employee, many will have been used to benefiting from protection provided by their employers : life cover and sickness pay, whilst others will have taken the personal step to arrange their own policies. Not all policies are equal and it is important to regularly review the protection in place to ensure it continues to offer you and your family the best chance of not experiencing financial difficulty should the worst ever happen.

Changes in lifestyle = change level of Protection

There are a number of lifestyle factors that can impact on the level of protection you require. Starting contracting, having children, buying a home or milestone birthdays should all act as prompts for you to review your cover so that you can rest assured your finances won’t suffer if the worst should happen.
When it comes to reviewing your existing policies, the experienced advisers at Contractor Financials are on hand to help you decide on the level of cover you require and can advise you on the different types of protection that you could benefit from. The award winning Advisers aim to future proof your policies and making sure you get it right first time could save you time and hassle in the future. For example, inflation proofing can protect a lump sum pay-out and ensure that you have the same amount of spending power in twenty years’ time or whenever you come to claim as without this, inflation can erode the value of your policy over time.

Specialist Contractor Protection solutions

Income Protection acts as a sick pay arrangement and can be specially tailored to your Contractor status. It will pay out a monthly income if you are unable to work due to illness or injury to help cover your household expenses until you are able to return to work. If that day never comes then the policy will continue to pay until retirement age. ContractorFinancials have negotiated a new type of policy especially for Contractors that allows you to protect up to 50% of your gross contract income so you will benefit from a far higher income from the policy if you need to claim.

Life Insurance is essential to protect your loved ones if the worst were to happen to you. It would pay out a lump sum to your dependants, which could be used to pay off any debts such as a mortgage, or to cover rental payments or household expenses to take the pressure off your loved ones.
You can now fund your life insurance through your limited company as a legitimate business expense without benefit in kind considerations. This allows you to have the benefit of death in service, as well as tax efficient premiums which will not affect your pension allowances.

Critical Illness cover can protect against the financial risk of critical illnesses such as stroke and cancer. It will pay out a tax free lump sum on diagnosis of a covered illness and even if you fully recover, you never have to pay it back. You can choose the amount of benefit you wish to receive, along with the length of the term you are covered for, this will be helpful if you wish to cover your mortgage or to clear any other financial burdens.

To speak to a specialist advisor in this field, get in touch with Genie Accountancy on 0845 603 8088 or email info@genieaccountancy.com.

Genie Accountancy is here to provide contractors & freelancers a helping hand with Mortgages.

Over recent years Freelancers and Contractors have grown in numbers and now represent a substantial element of the labour market. Many contractors choose to enter the labour market through their own Personal Service company and as such they are able to structure their rewards in a way that is most suited to their circumstances. Traditionally many contractors choose to withdraw funds through a combination of salary and dividends – this is often a concept not understood by high street lenders and is sometimes cited as a barrier to choosing the contracting route.

A lifestyle decision to enter a contracting career and legitimate tax planning should not detract from a contractors ability to obtain a competitive mortgage. Genie Accountancy work closely with Contractor Financials who specialise in providing mortgage advice to contractors. Contractor Financials have negotiated specialist contract based underwriting with many of the well-known High Street Lenders that makes securing a competitive & affordable mortgage easy. Instead of looking at what the accounts of your limited company show, your mortgage will be based on a multiple of your annualised gross contract rate. This means that any tax saving methods you have in place will have no impact on your affordability calculation & you won’t need to present three years’ worth of accounts to prove your income. This often means you can borrow more than your permanent colleagues & at the same competitive rates.

Your first step on to the ladder….
Before you start the exciting hunt for your perfect home, you need to have an idea of how much you can afford to borrow. You should work out what your expenses are per month, so that your repayments will be affordable for you. Worryingly 33% of first time buyers have put an offer on a property without knowing whether or not they could afford it but you needn’t fall in to this trap.

When you are ready to start the process of organising your mortgage, an Adviser at ContractorFinancials can arrange an agreement in principle from whichever mortgage lender you have chosen.

Once you have had an offer accepted on a property, ContractorFinancials handle the whole mortgage process for you & they won’t charge you a fee for specialist advice, saving you over £500.

Remortgaging to a better rate
If you already have a mortgage then you will already have an idea of what you want your monthly repayments to be but you might be surprised by how much you could save by remortgaging to a new fixed rate product.

A remortgage expert can help you look at the whole of the market to find a more competitive rate which could save you hundreds of pounds a year in repayments. Your new mortgage will depend largely on the valuation of your property but the expense of this is often covered by the new Lender, as are any legal fees, so you needn’t be concerned about the costs of remortgaging. If your property has risen in value then you may be able to release some capital to put towards home improvements or whatever you had in mind, alternatively you may wish to leave this capital where it is so that you can secure an even lower LTV remortgage & therefore access better rates.

More than a million first time buyers have entered the market since the base rate was cut to a 300 year low at 0.5% in early 2009 according to Lender Nationwide. Many of these first time buyers have yet to experience a rise in interest rates & some may be shocked to see their repayments increase when that day comes.

The guidelines announced as part of the Bank of England’s (BOE) Forward Guidance scheme last year, explained that when unemployment hits 7%, the BOE may look to increase the base rate. This was not expected to happen until 2016, however the economy has grown at a meteoric rate since then & unemployment is now standing at 7.1%.

Getting a fixed rate mortgage
Contractors who are concerned about the potential increase in interest rates, should remortgage on to a fixed rate Contractor mortgage to avoid being affected when rates start to move. A fixed rate mortgage is great for Contractors who want to know exactly what their monthly repayments will be for a certain amount of time. When this period is up, you can always remortgage onto another fixed rate if you need to.

Get in touch with Genie Accountancy today!
info@genieaccountancy.com
www.genieaccountancy.com
0845 603 8088