SJD v NW advice = confusion

[pastalista]

For starters I can think of:
1. If the client (company or agency) you are working through goes bust without paying you. As an employee if the company you are working for goes bust the government pays you the redundancy/wages you are owed. As a contractor you are on the list of creditors.

2. The fact that there is no mutuality of obligation i.e. lots of contracts have it that the client can get rid of you immediately for a number of reasons. As an employee the company who takes you on has to give you anything from one week to one months notice depending on the time you have worked for them and there is a statutory amount if nothing is put down in the employment contract.

3. The fact that you have to indemnify the work your company or you provide. If you work on live systems then this is a significant risk. Employees never have to do this. The most they can be done for is gross misconduct then sacked however they have legal redress so if the employer didn't provide adequate training then it's the employer who gets in trouble. With a contractor they will be either after you to fix it or contacting you to pay for the damage caused.

If you really cannot think of the difference between being a contractor and being an employee then maybe you should go back to being an employee as you are likely to get yourself in hot water.

I concur.

There are lots of risks associated with being a contractor on top of the risks that Sue Ellen identifies. Who pays us when we are sick (and what if you got really sick)? Who pays us to take holidays? Are we in any way protected by the clients for whom we provide our services (in the way that a permanent employee has to be)? We have no "career path" - any training we need to keep our skills current has be met from company profits - a permanent employee has a right to training. If we don't keep current, we don't get assignments.

Nobody but us ensures that we are complying with all of the different (and constantly shifting) legislation related to our fields of endeavour. If we fall foul of any, especially in the arena of taxation, we are liable. If we were employees, the employer would be liable.

I've been dumped out of contracts for trumped up reasons, often because the client has a "friend" that has suddenly become available and can do the role - I have no right of protection and no right of appeal, unless I am prepared to fund expensive and protracted legal action. This would not be the case if I were an employee - I'd be straight to the unfair dismissal tribunal (not at my expense)and get myself a nice fat payout.

The list of risks that we take as contractors is huge, and if you don't see that then I question whether you have really considered the potential consequences of what you do.

Contractor, despite the risks, until I die!!

Pastalista

[ratewhore]

That would be because you are the company director and it's your responsibility to keep the records straight and accurate. If they do it, they fall foul of the MSC regs and all your income becomes taxable as earned income

So who's the smartarse now?

Not about being a smartarse mal, it's about customer service. Funny how other accountants I have used over the years would contact me, tell me my mistake, tell me they have rectified it and send me the updated spreadsheet back.

That's the point I am making, as you well know...

[prudent consulting limited]

These big accountants treat every one the same. I believe an accountant is like medical doctor. As an accountant you should examine each client differently because the fact that an aspirin will work for one patient does not mean the same aspirin will work for another patient. As I have always said an accountant should have personal relationship with his client and advise each client based on their personal needs and not the all fit all approach. I have had clients who have moved from some of these big accountants and sometimes the sort of work they have done for them is so appalling.

[Peoplesoft bloke]

I know the salary vs HMRC "radar" argument's been done to death, but I only know one contractor who's been investigated by HMRC - and he had been paying themselves 25K+ Salary (plus divis) for 10+ years, so I don't think it makes any sense - if you talk to him now he wishes he'd paid himself the min salary.

[Moscow Mule]

Not about being a smartarse mal, it's about customer service. Funny how other accountants I have used over the years would contact me, tell me my mistake, tell me they have rectified it and send me the updated spreadsheet back.

That's the point I am making, as you well know...

If it was years ago, then the MSC legislation wouldn't have been in effect.

[malvolio]

If it was years ago, then the MSC legislation wouldn't have been in effect.

Whatever. Some accountants take the view they should "adjust" their clients' mistakes and tell them what they've done, some don't but tell them it's wrong and leave them to correct it. I don't think either is wrong, but I actually prefer the latter approach. It's when they don't tell you it's wrong you get problems...

[rightfluff]

Whatever. Some accountants take the view they should "adjust" their clients' mistakes and tell them what they've done, some don't but tell them it's wrong and leave them to correct it. I don't think either is wrong, but I actually prefer the latter approach. It's when they don't tell you it's wrong you get problems...

My issues with SJD was that I sent the spreadsheet with no errors but asked them if I had entered an expense in the correct field. They returned the spreadsheet with alterations which caused the spreadsheet to have error messages. For the personal tax return they left an entry from the year before and for the recent VAT return they used the old rate.

I spotted all of these errors and asked if they could correct them. If I hadn't spotted these I could of got a fine or even worse from HMRC.

School boy errors. If they can't get these right then how can I trust them anymore.

[simondolan]

These two topics are constantly being debated in the tax and accountancy press as well on here and in many other small business forums, and it seems that there is no prospect at the moment of any form of certainty either way. What we need is unambiguous and clear law, but until we have that, we are simply left with opinion.

So, ours is that we advise that directors take the NMW on the basis that this could prevent any future attacks by the Govt. Let’s not forget that “Income Shifting” was based on law dating back decades and it was perfectly accepted wisdom at the time to split shareholdings and therefore dividends – even the Govt advised it!

In terms of our approach to Income Shifting, we advise that clients only split shareholdings unless the spouse does actually produce income within the company. This is partly to pre-empt any future attacks by the Revenue, but mostly because the income (and half the Company) absolutely belongs to the spouse – in divorce situations this can prove extremely costly, and we have had many clients caught out in this way.

Again, this is only our advice. Some may view it as unnecessarily conservative and of course our clients are free to ignore the advice and make their own judgement. All we can do is to advise what we see fit and to point out the pros and cons.

Finally, for many years on this forum I was accused of being too conservative by some for suggesting that EBT’s and all sorts of “exotic” tax planning schemes were fraught with potential problems – only with hindsight can we now see that I, along with many, many other professionals were right – this may or may not be true with the advice on NMW and Income shifting in the future, but I’d much rather have our clients aware of the risks as we see them, than to lead them into a false sense of security.

[simondolan]

HI,

Can you let me know who you deal with here and I'll look into this and come back to you. Obvioulsy someone has dropped the ball here. My email address is simonatsjdaccountancy.com

My issues with SJD was that I sent the spreadsheet with no errors but asked them if I had entered an expense in the correct field. They returned the spreadsheet with alterations which caused the spreadsheet to have error messages. For the personal tax return they left an entry from the year before and for the recent VAT return they used the old rate.

I spotted all of these errors and asked if they could correct them. If I hadn't spotted these I could of got a fine or even worse from HMRC.

School boy errors. If they can't get these right then how can I trust them anymore.

[rightfluff]

These two topics are constantly being debated in the tax and accountancy press as well on here and in many other small business forums, and it seems that there is no prospect at the moment of any form of certainty either way. What we need is unambiguous and clear law, but until we have that, we are simply left with opinion.

So, ours is that we advise that directors take the NMW on the basis that this could prevent any future attacks by the Govt. Let’s not forget that “Income Shifting” was based on law dating back decades and it was perfectly accepted wisdom at the time to split shareholdings and therefore dividends – even the Govt advised it!

In terms of our approach to Income Shifting, we advise that clients only split shareholdings unless the spouse does actually produce income within the company. This is partly to pre-empt any future attacks by the Revenue, but mostly because the income (and half the Company) absolutely belongs to the spouse – in divorce situations this can prove extremely costly, and we have had many clients caught out in this way.

Again, this is only our advice. Some may view it as unnecessarily conservative and of course our clients are free to ignore the advice and make their own judgement. All we can do is to advise what we see fit and to point out the pros and cons.

Finally, for many years on this forum I was accused of being too conservative by some for suggesting that EBT’s and all sorts of “exotic” tax planning schemes were fraught with potential problems – only with hindsight can we now see that I, along with many, many other professionals were right – this may or may not be true with the advice on NMW and Income shifting in the future, but I’d much rather have our clients aware of the risks as we see them, than to lead them into a false sense of security.

'So, ours is that we advise that directors take the NMW on the basis that this could prevent any future attacks by the Govt.' - so why have I been advised by SJD to pay myself £12K pa? NMW is alot lower.


'Finally, for many years on this forum I was accused of being too conservative by some for suggesting that EBT’s and all sorts of “exotic” tax planning schemes were fraught with potential problems – only with hindsight can we now see that I, along with many, many other professionals were right – this may or may not be true with the advice on NMW and Income shifting in the future, but I’d much rather have our clients aware of the risks as we see them, than to lead them into a false sense of security.'

If it's legal to do these now then why not go ahead with them in the mean time? When they are made illegal simply change from EBT to LTD or stop incoming shifting.