Should you stay or go?

Should you stay or go?

Changes to the Flat Rate Scheme

There has been lots of coverage in the UK press about changes that are taking place to the Flat Rate Scheme (FRS) on 1st April.

The change has made many contractors (who operate via their own limited company) question if they should stay in the scheme, or if they will be better off leaving the scheme.

Our team has been working hard giving our clients advice on this. We thought we would share with you this straightforward flowchart that shows if you should consider staying in the Flat Rate Scheme, or if you may be better off leaving it.

This post also includes a brief background on why Flat Rate Scheme is changing.

Reason for the change

The Flat Rate Scheme was introduced to simplify the process that businesses with an expected turnover of less than £150,000 use to calculate the amount of VAT that they have to pay to HMRC. At present, users ignore VAT incurred on purchases when reporting VAT payable, with the exception of capital items costing £2,000 or more. Users only need to multiply the gross turnover (including VAT charged at the normal rates) by the FRS percentage set for the particular trade sector of their business.

HMRC became aware that some businesses were setting up composite companies to abuse the Flat Rate Scheme for monetary gains.

From 1st April 2017, a new 16.5% rate will be introduced for businesses with limited costs, such as businesses providing services. Businesses will now be required to determine if they are a ‘limited cost trader’ by completing a simple test. If their business, matches the criteria set out for a ‘limited cost trader’ they will have to use the 16.5%, instead of the percentage they previously used as outlined in HMRC’s trade sector list, commonly 12% or 14.5%.

What is a limited cost trader?

A limited cost trader is defined as one that spends less than 2% of its VAT inclusive turnover on relevant goods (and not services such as Accountancy fees) during a VAT period or £1,000 per annum (pro rata for the duration of the VAT period).

When working out the amount spent on goods, it cannot include purchases of:

  • capital expenditure (such as new equipment used in a business)
  • food and drink
  • vehicles or parts for vehicles including fuel and mileage
  • good that you intend to re-sell or hire out
  • gifts or promotional items

Examples of Relevant Goods include:

  • stationary and office supplies exclusively for the business
  • gas and electricity exclusively for the business
  • book, magazines – hard copies
  • software on a physical disc

Please note these are not exhaustive lists.

Flat Rate Scheme Flowchart

The flowchart is intended to give you an overview of your position in relation to the Flat Rate Scheme. It is imperative that you seek advice from an experienced team of contractor accountants to assist you in making your decision. Get in touch with us on 020 8952 2234 and speak to a highly qualified team member.

You can download a pdf version of the flowchart here.


FRS flow chart


























Is being happy at work important?

The reasons why we have asked this question is that today is International Day of Happiness.

International Day of Happiness was an idea put forward by the United Nations and is co-ordinated by the organisation Action for Happiness.

Action for Happiness believes that progress in life and business can be made through happiness and well-being and not solely through economic strategies.

Their campaigns look at how we can be a happier as a global community.  They have previously covered topics like relationships, (personal and professional) and how to improve social interactions (getting away from interacting online and connecting with people face to face).

With this in mind, we thought is being happy at work really important?

What is happiness?

Defining happiness is actually quite difficult and scientists have spent years trying to work out what happiness is (yes, really). They have come up with the following definition “happiness is when your life fulfils your needs”.

In other words, when you feel content with your life you are in a state of happiness.

Happiness isn’t…

Happiness is not earning lots of money, owning a large house, driving a sports car, owning an expensive bag, travelling first class, or, going on exotic holidays. All these things we listed give us ‘pleasure’. Pleasure is a fleeting feeling and over time fades. Once it’s gone, we then seek out new things that will bring this feeling back.

What creates happiness?

This is not easy to list as different things make people happy. There is not one universal thing that makes us all happy. For example in your personal life it could be owning a house in an area you always wanted to live, or, taking up a new hobby that you really like doing.

In your professional live it could be learning a new skill that will make doing the work you do easier, working on a project that you find rewarding or challenging, or, working alongside colleagues that you can learn from.

Is happiness at work important?

Yes, it is. If we are unhappy at work this can impact your personal life. No matter how hard you try it is difficult to leave work at the office and not bring it home with you. It is not fun to be around someone who vents their frustrations to family and friends.

Feeling happy can make us better at our jobs. When we feel happy the brain releases certain chemicals, these include Serotonin, Dopamine and Norepinephrine.

Serotonin gets the body ready for sleep. If you lack Seratonin you will not be able to rest properly. Low levels of Serotonin is also linked to depression and anxiety.

Dopamine controls the body’s energy and alertness levels. If you are producing Dopamine you are likely to more alert and enthusiastic.

When the body is producing Norepinephrine your attention and motivation levels are greater.

So, as you can see being happy at work can make you better at your job!

Spruce up your freelance business for Spring

The gloom and doom of winter are supposedly behind us and we can look forward to warmer days and lighter nights. It’s a time that you may start planning your summer holiday or decide to get out in the garden and start on the jobs that you can’t do in winter.

Spring time gives you a new lease of life. Why not inject some of this feeling and enthusiasm into your freelance business.

In this article we give you our top 5 tips for sprucing up your freelance business for spring:

Sort out your invoices

One freelancer described invoicing as a ‘necessary evil’. They know they need to do it in order to get paid but they can find any excuse not to get it done.

Invoicing isn’t difficult but the way you are doing it maybe. If you are keeping track of invoices and finances using an excel spreadsheet, maybe its time to consider upgrading to a more seamless system. Cloud accountancy software now has the option for you to send out invoices automatically. Here at Cogent, we use FreeAgent, and we have had great feedback from freelancers who find using the system seamless.

Touch base with your accountant

The dreaded self-assessment is over for now. But, this doesn’t mean you should slink off your accountant’s radar.

Someone once said that your accountant should be your business’s best friend. Yet, many freelancers’ put off reaching out to their accountant. Why? They are not scary! Well, we aren’t!

Accountants are not just there to sort out your tax return’s they are also a source of important and helpful information. Importantly, for freelancer’s they can offer advice on how to run your business more tax efficiently.

Reconnect with contacts

If your business was booming in 2016, and it looks like it will be in 2017 as well. It’s still important for freelancers to keep their pipeline of your work flowing.

Who knows what might happen. For instance, your main client may have to cut back on budgets and this means cutting back on the number of hours they engage your services. If this happened, what impact would it have on your business and revenue?

Use spring as a time to send out a ‘what have you been up to?’ email to past clients and colleagues. And, speak to other freelancers to see they are up to. Or, spend some prospecting for new clients on social media.

Strive to keep your pipeline flowing to stop a revenue drought.

Update your portfolio

When you first started freelancing you would have been told by other freelancers that having a portfolio is essential. You would have probably gone off searching for examples of your work that you could showcase to potential clients.

As you become more established in your work, and you find clients through word of mouth recommendations, your portfolio can take a back seat and you might have become slack with keeping it up to date.

How long has it been since you looked at your portfolio? Do the examples you have on there reflect the type and quality of work you produce now?

If not, take a couple of hours to go through it and add new examples of your work.

Get some training

Spring is the time when new life is developed, put some new life into your freelance business by brushing up on your skills.

Even if your business is booming and you feel at the top of our game. There is always something you can be doing better or you could learn a new skill that you can offer as an extra service to your clients.

Maybe, you need some tips on how to stay motivated, or how to switch off and relax. These are things that freelancers are not very good at. Being a freelancer can consume your life, but thinking about work 24/7 is not good for the mind and body. Learning techniques that allow you to disconnect from your business could actually help it.

Is your freelance business looking for a new accountant? Speak to Cogent 020 952 2234 and find out how we can help you. 

Spring Budget 2017 Round-Up

Various rumours were swirling around Westminster in the days before Philip Hammond rose to deliver his first Budget – confirmed as the last time a major fiscal statement will be made in the spring.

The Chancellor, still scarcely nine months in the job, has a reputation as a cautious man and in advance many expected that much of today’s speech would be laying the ground for the Prime Minister to begin formal negotiations for the UK to leave the EU.

That said, the day before Mr Hammond stood up to address the Commons, the Organisation for Economic Co-operation and Development (OECD) upgraded Britain’s growth forecast, which inevitably raised questions about whether there was yet room for manoeuvre.

Would the Government prove willing to make money available to shore up struggling services or answer the growing criticism over business rates reforms? Would it be tax rises or surprise giveaways bothering the headline writers?

Economic overview

In his opening statement, the Chancellor said that the resilience of the UK economy had continued to defy expectations and the country had enjoyed robust growth. Indeed, he noted that last year Britain’s growth was behind only Germany’s among the world’s biggest economies.

Mr Hammond confirmed that the Office for Budget Responsibility (OBR) had raised its growth forecasts for the year, with the economy now projected to grow by two per cent in 2017, compared with the previous estimate of 1.4 per cent. The independent body suggests growth next year will be 1.6 per cent and in 2019, 1.7 per cent.

But he made clear that there was no place for complacency in the current climate, acknowledging that levels of debt were still too high (peaking at 88.8 per cent next year), productivity needs to be improved and many families up and down the country continued to feel the pinch almost a decade on from the financial crash.

OBR figures also suggest that inflation will peak at 2.4 per cent this year, with expectations that it will drop off as we approach the end of the decade.

Trying to strike a balance between prudence and positivity, the Chancellor told MPs that the Budget presented an opportunity to put money into public services while ensuring that the nation continued to live within its means. Crucially, he said, the tax and spending plans would form the bedrock of the EU negotiations ahead.

Business and enterprise

Following several weeks of sustained criticism over the burden that business rates changes would place on many enterprises, Mr Hammond announced a three-point plan which he said would amount to an additional £435million support.

Any firm losing existing rate relief will be guaranteed that their bill will not rise by more than £50 a month next year. In addition, there will be a £1,000 discount for pubs with a rateable value of less than £100,000 and the creation of a £300million fund which will enable local authorities to offer discretional relief.

The Chancellor made clear that a fair tax system was one of the best ways to make Britain a top destination for businesses. He reiterated the commitment made by his predecessor, George Osborne, to bring the Corporation Tax rate down to 17 per cent by 2020. A reduction to 19 per cent will take effect from next month.

Following concerns about the current timetable, he confirmed that quarterly reporting would be delayed for small businesses for a year (at a cost of £280million).

Transport and infrastructure

Acknowledging that congestion was an issue in large parts of the country, Mr Hammond said that some £690million would be made available to tackle traffic problems in urban areas and get local networks moving more freely.

The Chancellor also announced a £270million investment to keep Britain at the forefront of research into biotechnology, robotic systems and driverless cars.

An additional £200million will be ploughed into projects to help secure private sector investment in full-fibre broadband networks and £16million put aside for a 5G mobile technology hub.

Personal tax

Controversially, it was revealed that National Insurance contributions will rise for the self-employed.

Under proposals, Class 4 NICs will increase from nine per cent to 10 per cent next April and to 11 per cent in 2019.

Trying to defend what will undoubtedly be a contentious move, the Chancellor said that the “unfair discrepancy” in contributions between different groups of workers could no longer be justified. Critics have suggested the move has broken with a commitment in the 2015 manifesto.

In more positive news, the personal allowance will rise to £11,500 – the seventh consecutive increase.

The Chancellor reiterated the Government’s previous commitment to increase the allowance to £12,500 and the higher rate threshold to £50,000 by the end of the Parliament in 2020.

There was a boost for road users with confirmation that vehicle excise duty for hauliers and the HGV road user levy will both be frozen.

The Chancellor also announced there would be no change to the previous planned duties on alcohol and tobacco. There will, however, be a new minimum excise duty on cigarettes based on a £7.35 packet price.

Pensions and savings

In what is likely to be an unpopular move, Mr Hammond confirmed that the tax-free dividend allowance for shareholders would be cut from £5,000 to £2,000 as of April 2018.

The Treasury said that the change would “ensure that support for investors is more effectively targeted”, but critics fear it will could further hurt entrepreneurs.

Public spending

Mr Hammond had faced some pressure from his own MPs to plough more revenue into public services.

In an attempt to address criticism that institutions were buckling beneath the strain, the Chancellor confirmed an extra £260million for improving school buildings and funding for an additional 110 free schools (on top of the 500 previously announced). There has been some controversy, however, that some of these are set to be selective.

In an attempt to address the mounting crisis in social care, Mr Hammond announced there would be an extra £2billion in funding over the course of the next three years. A Green Paper will be published later this year with a view to drawing up a long-term funding plan.

Tax evasion, avoidance and aggressive tax planning

The Chancellor said that a fair tax system required people to pay their dues and a series of measures to curb abuses of the system are expected to raise an additional £820million for the Treasury.

A raft of measures to tackle non-compliance were announced, including preventing businesses converting capital losses into trading losses, curbing abuse of foreign pension schemes, introducing UK VAT on roaming telecoms services and imposing new financial penalties for professionals who help facilitate a tax avoidance arrangement that is later defeated by HM Revenue & Customs.


In his closing remarks, Mr Hammond struck an optimistic tone. Whatever the uncertainties surrounding Brexit, he told MPs that the UK should be confident that our best days lie ahead of us.

It would be fair to say that the Budget was not strewn with giveaways, but the Chancellor did try and take the sting out of some of the main criticisms levelled at the Government in recent months – including its handling of business rates reform and the sluggish response to a mounting care crisis.

That said he is also likely to have stirred up fresh controversies and the decision to increase National Insurance for the self-employed is perhaps evidence that in the current climate tough choices will still have to be made.

International Women’s Day

8th March is a special day for many women across the globe, as it is International Women’s Day.

International Women’s Day celebrates the economic and cultural achievements of women from all backgrounds.

In celebration of this special day, our article looks at ‘Women in Contracting’.

Contracting – open to everyone

For a long time contracting was seen as a career path for men. Thankfully, this perception is changing and more women are choosing to go down the contracting route.

There are many reasons why women choose to become a contractor, they want to reap the economic benefit’s that can be achieved by contracting, they want more control over their career or they might be stepping their foot back into the working world after a period of leave and have decided to go down a different route other than the traditional ’employee’ one.

It’s fantastic news that more women are becoming contractors, but there is still a lot of work to be done until the number of women contractors equals that of men. For those women who are thinking of becoming a contractor, there has never been a better time to do it.

Many industries are experiencing a skills shortage and one of the ways to plug the skills shortage is to encourage women to enter these industries as contractors.

The construction and engineering sector is one such industry that is experiencing a massive skills shortage. The lack of skilled workers could have a catastrophic effect on the industry in as little as 5 years. The effects of this shortage are already been felt by housebuilders and engineering firms who are struggling to find enough skilled workers to fill open positions.

Trade bodies, construction and engineering firms and colleges are coming together to create a co-ordinated approach to encourage more women to work in the industry. This includes grass root projects in schools and colleges and also targeting women who are looking to return to work after taking a career break.

The demand for skilled contractors has also been helped by Brexit. A number of businesses have been put off taking on permanent members of staff due to the uncertain political environment we find ourselves in, and have turned to the flexible workforce to fill employment gaps.

Ready to take the leap?

If you are ready to enter into the contracting world, there are a couple of ways you can choose to go.

These are via an umbrella company or through your own limited company.

If you are unsure if contracting is the right option for you, maybe working through an umbrella company is the best option until you are sure that this is what you want to do long-term.

If you already know that you want to be a contractor for the foreseeable future then working via your own limited company could be the most tax efficient option.

There are a number of factors to consider with setting up your own limited company and it is best to gain expert advice from a firm of contractor accountants, such as ourselves.

You are not on your own

Everybody needs a helping hand now and again, and we are here to guide you through the process of becoming a contractor. Our News section contains numerous articles that detail what is involved in becoming a contractor, such as how to choose your limited company name, if you need to become VAT registered and much more.

If you want further information, our downloadable guides go into these things in greater depth. Or, if you simply want to talk an expert, give us a call on 020 8952 2234 and we will be delighted to discuss your requirements in further detail.