Flexible Resources Associates

In a survey of IT Directors, discovered that, of the two thirds whose workloads are expected to grow, fewer than half anticipated bigger budgets to undertake them. Almost half of IT Directors, in other words, have significant concerns about being able to complete their workloads to budget – a figure which compares to under a fifth for last year. data suggests that, since 2009, the gap between the actual cost of IT work and the resources available to deliver it has been growing.

noted that this is the second consecutive year in which budgets have contracted in relation to workload demands,  adding that, at a time when projects which were shelved during the recession are being revived, budgets as things stand simply won’t be able to cope with the workload demands.

One of the consequences, the research indicates, is that many outfits, from blue-chip FTSE 1000 companies right through to SMEs, are likely to have to shelve IT projects. Personnel are being asked to do ‘more with less’ – an uncannily similar requirement facing the IT contractor last year just before jobs were cut. The one ray of sunshine in the midst of this gloom is that cost-cutting measures related to the recession are coming to an end and companies are genuinely looking to invest, a trend which should percolate through to IT budgets eventually. Let’s hope that ‘eventually’ doesn’t mean ‘too late.’

It’s no secret that, for the average contractor, the previous government’s IR35 legislation proved to be far from popular. The last administration claimed that too many people were leaving their  ‘employment’ on a Friday, only to return to the same office in the same company the following Monday, undertaking the same work as the week before claiming to be a ‘contractor,’ rather than an employee – and paying substantially less NIC and tax as result.  contractors, by contrast, have seen the legislation as an unfair and indiscriminate barrier to business, ensnaring many Ltd companies and individual workers alike who were simply going honestly about their business, not exploiting tax loopholes.

In lieu of the new government’s proposed review of IR35, a recent tribunal ruling has highlighted the legislation’s ambiguity and potentially harmful effects. A Contractor who had provided services to the Avecia company since 1998 has just overturned a decision by HMRC. Avecia had provided all the IT equipment necessary for his duties and the contractor, Mr Brajkovic, became concerned about his status, requesting clarification about his contract from HMRC in 2000. The latter conducted an investigation, concluding that he was an employee and owed substantial payments in tax and national insurance as a consequence. But the tribunal, which was conducted at the end of last month, found otherwise. Judge Kempster dismissed the HMRC case that Brajkovic was a ‘disguised employee’ and asserted instead that the overall picture was ‘one of a contract of self-employment.’ The judgement is likely to bolster IR35’s numerous critics in the contracting world, who strongly believe that the legislation is too indiscriminate and too incapable of recognising real complexities to be either just or functional.

The new Work and Pensions Secretary, Iain Duncan Smith has said that the government, as well as reviewing the state retirement age and linking the basic state pension to earnings, is considering a phase out of the default retirement age.

The changes are a necessary response to the fact the people are living longer.

Mr Duncan Smith continued: “The idea of someone being fired just because they turned 65 is nonsense. People who are good at their job and want to work for longer should be able to do so. In my view, that’s only fair.”

The Minister also gave his backing to auto-enrolment workplace pension schemes for employees.

He said: “We want to encourage employers to provide high quality pensions for all their employees, and I look forward to working with employers, consumers and the industry to make automatic enrolment and increased pension saving a reality.”

But David Yeandle, head of employment policy at the manufacturers’ group, the EEF, argued that any changes to the default retirement age and state pension age should be introduced on a gradual basis in order to give employers time to adjust.

Nevertheless, Mr Yeandle welcomed the government’s support for auto-enrolment: “Whilst it is understandable that new ministers will want to review the commercial contracts for implementing the National Employment Savings Trust (NEST), we hope that a decision will be reached quickly so that the opportunity for as many people as possible to save for their retirement is not delayed.”

NEST is due to roll out from 2012 onwards, but Pensions Minister, Steve Webb has promised that there will be an assessment of the relationship between auto-enrolment workplace pensions and the state pension.

Malcolm Small, senior adviser on pensions policy at the Institute of Directors, backed the review.

He said: “We welcome the announcement that the interaction between pension saving and means tested retirement benefits is to be investigated. This is not just an issue for the National Employment Savings Trust (NEST), but for all pension saving – and we believe that modest earning pension savers may in many cases be saving to no effect.

“Small pensions will, in certain circumstances, directly replace the means tested retirement income benefits that the saver would have been entitled to if they had done nothing at all. This cannot be right, and acts as a direct disincentive to save. Until this issue is resolved, and until clear incentives to save are established, all other pension reforms are peripheral.

“We have always supported the NEST project, but we have also argued that we need a decent, universal, basic state pension as of right, which acts as a bedrock for further saving. We think this can be afforded today, without Exchequer cost, and look forward to working with Ministers and officials to show them how to do it.”

The UK’s economic recovery, although in progress, is fragile and could be put at risk by the eurozone debt crisis and turmoil in the financial markets, the British Chambers of Commerce (BCC) has warned.

In its latest economic forecast, the BCC said that it has raised its prediction of UK growth to 1.3 per cent for 2010 but has revised down its expectations for next year because of medium-term problems.

The BCC urged the Bank of England to keep interest rates low for a prolonged period in order to encourage business investment.

The business group’s advice is in sharp contrast to the OECD, the west’s leading think-thank, which recently called for an increase in borrowing costs this year to tackle the threat of rising inflation.

The BCC report downgraded its growth forecast for 2011 from 2.1 per cent to 2 per cent.

It predicted that unemployment will continue to climb over the next 12 months but at a much slower pace.

The new forecast envisaged that unemployment will rise from 2.51 million to a peak of 2.65 million (8.4 per cent of the workforce) in the first quarter of 2011.

According to BCC estimates, CPI inflation probably peaked in April this year, but the new report suggested that it will remain above 3 per cent until the first quarter of next year. RPI inflation is forecast to average 4.8 per cent in both 2010 and 2011.

The BCC said that it hoped the Bank of England would hold interest rates at 0.5 per cent until November 2010, rising moderately after that to 1 per cent before the end of 2010 and to 2.5 per cent by the end of 2011.

The report also assumed that VAT will be raised to 20 per cent within the next 18 months, possibly in two stages, with an increase to 18.5 per cent in April 2011 and a further increase to 20 per cent in the autumn of 2011.

David Frost, director general of the BCC, said: “The UK economy is now recovering. But, the improvement is fragile, businesses large and small are still facing considerable pressures, and there are significant risks posed by the current crisis in the eurozone.

“To ensure this recovery lasts, the government must demonstrate an unwavering determination to support the vital role of wealth-creating businesses. Rebalancing the economy towards the private sector must be at the very heart of June’s emergency budget – with businesses encouraged to invest, grow and create jobs.”

Mr Frost went on to say that the new coalition government must avoid new business taxes and measures that might damage enterprise and entrepreneurship.

He warned that very careful consideration must be given to plans for changes to capital gains tax and to the possible abolition of certain corporation tax allowances.

Mr Frost expected VAT to rise but added that it should only be increased in conjunction with a full reversal of the 2011 employer National Insurance hike.

The BCC’s chief economist, David Kern commented: “After two consecutive quarters of positive UK economic growth, the risk of an immediate relapse is less severe. However, the recovery is still weak, and it would be unwise to disregard the threat of a double-dip recession. The crisis in the eurozone and turmoil in the global financial markets threaten to dampen the UK’s growth prospects.

“The government’s decision to adopt forceful measures to deal with the budget deficit will help to restore market confidence and underpin Britain’s AAA credit rating. A credible deficit-cutting plan and a freeze in the total public sector wage bill should be announced immediately.”

But Mr Kern counselled that significant additional fiscal tightening, beyond the £6 billion already announced, should only be implemented when the recovery is more secure.

He said: “Following the modest slowdown in Q1 2010, we expect relatively strong GDP growth in the next few quarters. But, the factors driving the early stages of the recovery are temporary. Longer-term growth prospects are weak. The need to slash the budget deficit, strengthen the enfeebled banks, and reduce personal debt will limit growth.’

Mr Kern foresaw that long-term growth may be below trend, averaging just under 2 per cent per year for the next four to five years and considerably less than the 2.7 per cent average growth recorded in the period 2003-07.

He concluded: “Unless our labour market remains flexible and adaptable during the recovery, there is a risk that low productivity will persist, damaging the UK’s medium-term growth prospects. To achieve a sustainable improvement in Britain’s productive potential, recent adverse trends in the labour market must be reversed. Inactivity needs to decline, full-time employment must grow, and private sector employment has to increase.”

Employers and employees are being reminded that there could be some errors with the new PAYE tax codes that have been issued by HM Revenue and Customs (HMRC).

As a result, employees should check their April and May payslips to see if they are paying the correct amount of tax.

This may be reflected in any unexpected change to the amount of money they receive in wages.

Worries emerged earlier in the year that a proportion of the 25 million tax coding notices that have been sent out may have been wrong.

The codes dictate how much employers and pension firms deduct in income tax for the coming 2010/11 financial year.

A number of people with one job have received two (or more) tax coding notices with different codes. This is because HMRC’s new system, which combines information on NICs and PAYE details for the first time, has been failing to distinguish between current and previous jobs in all cases.

Without complete information on those taxpayers who have moved from one job to another recently, the new database has been treating them as if they are in more than one job.

HMRC has said that it is in the process of reviewing individual cases to correct as many discrepancies as quickly as possible.

This means that in a number of cases where P2 forms have been issued to employees, HMRC won’t be sending P9 forms to their employers until the reviews have been completed. So some employees’ tax codes won’t have reached their employers in time for the new tax year.

If an employer does not receive a P9 in time, HMRC has said that they should continue to operate the existing 2009/10 code for the employee concerned even though the employee may already have been issued with a revised coding for 2010/11.

HMRC went on to add that, if an employee contacts an employer because they think their tax code may be wrong, then the employer should get them to call HMRC on the number printed on the coding notice or on 0845 3000

In most cases a correct new tax code will be sent to both employers and employees in due course.

Following on from the historic coalition between the Conservative and Liberal Democrat parties it is clear that pressure has been brought to bear on the Conservatives to adopt many of the LibDem policies in return for their support. In areas of fiscal policy rumours abound that Vince Cable has made a number of demands which have been accepted by the Tories.

Accountants and commentators alike have recognised for some time that the current main capital gains tax rate of 18% is unsustainable. The gap between income tax rates and capital gains tax rates is simply too large and gives rise to a multitude of avoidance opportunities. In addition, there is a massive fiscal deficit to be dealt with and the only surprise therefore is that capital gains tax rates have not risen sooner.

There now seems little doubt that the rate of CGT will be increased massively in the forthcoming emergency budget to be held within the next 50 days. Figures of 40% or even 50% have been mentioned.

So what can you do to avoid this penal rate?
If you have assets which are subject to CGT (such as quoted shares, second homes, investment properties etc) these are in the firing line. One way to avoid the problem would be to dispose of the asset prior to a change in the CGT rate.

If you wish to sell in any event, then the advice of course is to do this sooner rather than later. There are also techniques available if you wish to retain economic ownership of the asset in question. It is no longer possible to sell the asset and re-acquire it within 30 days (often referred to as “bed and breakfasting”) but it is still possible to “bed and ISA” or “bed and spouse” whereby you can sell the asset and crystallise the gain and in certain circumstances your ISA or spouse may choose to acquire the same or similar asset.

There are a number of issues to take into account. If you never have any intention of selling the asset then utilising one of these techniques will simply incur an unnecessary liability. You must also consider the timing of any tax payments.

If you think you will be caught by the likely change in the legislation,