***PLEASE IGNORE THIS REMINDER IF YOU HAVE ALREADY SENT US YOUR QUESTIONNAIRE***

If you would like Cogent to prepare and file your 2022/23 tax return and you have not yet sent us your completed Self-Assessment Tax Return Questionnaire, you will need to do so by 30 September 2023 to benefit fully from our discounted fee.

If you have a second shareholder, they may also need to file a tax return, even if they haven’t previously. For further advice, please contact our Tax Department.

The standard charge including VAT for a basic tax return is £240. Questionnaires received by 30 September 2023 will receive the full discount on a basic tax return, charged at £85.

If your questionnaire is received between 1 October and 31 December 2023, the fee will be discounted to £120; any returns received after 31 December 2023 will be charged at the full rate of £240.

Please note, that more complicated tax returns where additional work or supplements are required, will be subject to additional charges.

Our deadlines have been set so that we can complete your return in time to meet the HM Revenue & Customs’ (HMRC) online filing deadline of 31 January 2024.

Penalties for late filing of tax returns can be as much as £1,600, even when there is no tax due, so please ensure your tax return is filed on time, whether you ask us to prepare it for you, or you have made other arrangements.

You can request a questionnaire for 2022/23 by emailing tax@cogentaccountants.co.uk

Please return your completed questionnaire together with any attachments by email only to our Tax Department – tax@cogentaccountants.co.uk

You are required to file a tax return if:

• You have been asked to file one by HMRC
• You have a tax liability for the year (e.g. additional and higher rate tax, student loan in repayments, high-income child benefit charge or if you have any income which has not been taxed at source)
• You have a new source of income that needs to be declared.

***PLEASE IGNORE THIS REMINDER IF YOU HAVE ALREADY SENT US YOUR QUESTIONNAIRE**

Being a freelancer or contractor comes with its fair share of challenges and rewards.

Among the most empowering aspects of this work model is the autonomy to choose which contracts to accept.

This represents one of the core tenets of the freelancing lifestyle: freedom.

Yet, it can also be a source of uncertainty and stress for professionals just starting out or even for seasoned experts.

To help you feel empowered, we have explored the strategies you can take to help make informed decisions on which contracts to take.

Understand your worth

The initial step in navigating the contract selection process is understanding your professional worth.

This includes an accurate evaluation of your skills, experiences, and the quality of work you can deliver.

This understanding should translate directly into the rates you charge and the projects you opt for.

Some freelancers and contractors make the mistake of undervaluing their services to secure more contracts.

Although this may result in short-term gains, it often leads to long-term frustrations, burnout, and an unsustainable work model.

Knowing your worth and standing firm with it is crucial for long-term success and satisfaction.

Identify your ideal client

Not all clients are created equal, and not all of them will be a perfect match for your services.

Identifying your ideal client profile allows you to sift through potential contracts more efficiently and effectively.

This profile should include aspects like the client’s industry, size, values, communication style, and budget.

Knowing your ideal client allows you to focus your energy and efforts on securing contracts that align with your professional goals.

More importantly, working with clients that match your ideal profile often leads to more rewarding, less stressful projects.

Project scope and impact

Every project comes with its own unique set of parameters. Before accepting any contract, it’s vital to gauge the project’s scope and the potential impact on your workload.

A project that offers high monetary rewards but demands an unrealistic workload is not necessarily a good choice. Such projects can drain you, leaving little energy for other opportunities and damaging your work-life balance.

On the other hand, a project with a manageable scope and potential for high impact (either monetarily or in terms of portfolio-building) can be an excellent choice.

These projects can boost your reputation, provide learning experiences, and propel your freelancing or contracting career forward.

Contract terms

Before signing any contract, make sure you fully understand the terms and conditions. This includes payment details, deadlines, work expectations, and intellectual property rights.

If there’s something you’re not comfortable with or that could potentially harm your business, negotiate the terms, or consider rejecting the contract altogether.

Transparency and mutual respect should be the foundation of any contract. If a potential client is unwilling to negotiate or discuss contract terms openly, it could be a red flag indicating future issues.

Cultivate strong networks

Finally, maintaining strong professional networks can dramatically improve your contract selection process.

Networking with other freelancers and contractors can offer insights into potential clients, projects, and industries.

These connections can also provide valuable advice on how to handle challenging situations and difficult contract decisions.

In addition, strong networks can lead to referrals. Referred clients usually match your ideal client profile closely and can offer contracts that align well with your professional goals and values.

Don’t buckle under the pressure

Most contractors feel that they need to take each contract that comes their way, as there is never any guarantee of where the next project will come from.

However, this doesn’t mean that you should settle for less and leave yourself exposed to work that is unfulfilling or not financially rewarding enough.

The freedom to choose which contracts to accept is a powerful aspect of the freelancing and contracting lifestyle.

By understanding your worth, identifying your ideal client, evaluating contract terms, and cultivating strong networks, you can navigate the contract landscape confidently and successfully.

The Perks of Being a Contractor: Optimising Your Time Off

As a contractor or freelancer, your relationship with work is fundamentally different from that of a traditional employee. As your own boss, you call the shots.

When it comes to holidays or time off, some significant benefits often go unnoticed. We will look in detail at these advantages and provide tips on how to make the most of your flexible schedule.

Total flexibility in scheduling

The fundamental advantage of being a contractor or freelancer is the freedom to set your own work schedule.

Unlike traditional employees, you’re not restricted by the fixed holiday calendar of an organisation.

If you prefer the serenity of off-peak travel, want to avoid the summer crowds, or have a desire to take an extended holiday during non-traditional periods, as a contractor, you can. This flexibility allows you to enjoy your time off to its fullest and often at a lower cost.

No need to “accrue” leave

As a contractor, you’re free from the constraints of “accrued” leave. Regular employees must earn their time off, usually calculated by the number of hours or days they’ve worked in a year.

As a freelancer, you can simply decide when to take your holiday, for how long, and how often. As long as you can afford to take the leave and your contract with the organisation you are working for allows it, your schedule belongs to you.

Control over income and expenses

While you do give up the security of paid holiday leave, you gain more control over your income. As a contractor, you can plan ahead and work additional hours or take on extra projects to fund your time off.

If you intend to take a holiday it is important to consider the impact this will have on your finances and you may even build a safety net into your fees to allow you to take the time off you desire.

Work-Life Balance

Taking time off as a freelancer or contractor can be a balancing act. However, with the power to manage your own time, you can create a work-life balance that suits your needs.

You might choose to take a longer holiday but still maintain a limited amount of work during this period.

Technology allows us to stay connected, so if your job permits, you can work from anywhere in the world. The key is setting boundaries that allow you to enjoy your holiday while still keeping your business running.

Maximising the Benefits

To make the most of these benefits, planning is crucial. Plan your year ahead, noting when you’ll likely be busiest and when you can afford to take time off.

Consider creating a ‘holiday fund’ as part of your financial planning. As you won’t be earning while on holiday, setting aside a portion of your income throughout the year can ease the financial burden when you decide to take a break.

Always communicate your availability with clients well in advance. This helps manage their expectations and keeps your professional relationships strong.

Being a contractor or freelancer offers a unique way to balance work and life, and the freedom to take time off as you see fit is a major part of that.

Make the most of this flexibility, and you’ll find your work more satisfying and your holidays more rewarding.

Former Lord Chancellor Robert Buckland has urged the Government to abandon the controversial IR35 reforms in an attempt to win back public support ahead of the upcoming general election.

Buckland, along with several other influential Conservative party members, has expressed concerns over the tax legislation’s detrimental effects on the contracting industry and the wider economy.

In an article published on the Conservative Home platform, Buckland described IR35 as a “Frankenstein’s monster”.

He said it was a rule which, despite its noble intention to curb tax avoidance, has become burdensome.

He believes that it threatens dynamism, entrepreneurship, jobs, and growth and should, therefore, be repealed or reformed further.

IR35 controversy

Buckland argues that IR35 discourages independent professionals from taking on projects and curtails their ability to negotiate terms and work arrangements freely.

The legislation also places a substantial administrative and financial burden on businesses engaging contractors.

The ambiguity of IR35 makes it difficult for companies to make accurate employment status determinations.

The rise of IR35 avoidance schemes

The introduction of the off-payroll rules has also led to a proliferation of non-compliant tax avoidance schemes.

Experts say that the Government must act swiftly to halt these operations, which result in massive tax avoidance and go against the initial objectives of IR35.

The ongoing debate around IR35 highlights the need for balance in tax legislation — a balance that protects the rights of contractors enables businesses to thrive and ensures tax fairness.

As we are well aware, one of the key issues surrounding IR35 is the ambiguity inherent in it’s tests for determining a contractor’s employment status.

The legislation uses phrases like ‘mutuality of obligation’, ‘control’, and ‘substitution’ to decide whether a contract falls inside or outside of IR35. These terms, however, are subject to interpretation and can often result in inconsistent outcomes. This creates an environment of uncertainty and confusion for contractors.

Additionally, contractors caught inside IR35 face the worst of both worlds. They pay taxes equivalent to those of a full-time employee but without the same employment rights. They do not have access to benefits such as paid annual leave, sick pay, maternity/paternity leave, pension contributions, etc. This leaves them with the worst of both worlds as they have neither the flexibility of contracting nor the benefits of full-time employment.

It is this inconsistency and unfairness which has caused the Association of Professional Staffing Companies (APSCo) to call on the Government to reform IR35 legislation in order to give a boost to the contractor workforce which in turn will help revitalise the economy.

Let us hope the government finally listens to reason.

One of the biggest news stories in the country right now is the ongoing cost-of-living crisis. This crisis has caused inflation to rise relentlessly, and the Bank of England’s measures to curb this inflation have seen the base interest rate rise to 4.5 per cent, with another expected rise to be announced on Thursday.

The interest rate increase has had an immediate impact on the mortgage market, as lenders have started to raise their rates.

According to data from the Office for National Statistics (ONS), the monthly cost of a new mortgage for the average semi-detached house in the UK rose by 61 pfer cent in the year to December 2022. Bank of England figures for April 2023 have shown that the number of net mortgage approvals for house purchases has fallen to 48,700 from 51,500 in March 2023.

For contractors looking to purchase a house or remortgage in the near future, the current trends can be worrying.

We understand that many of our clients will need advice about contractor mortgages and finding a better deal, especially under the current financial climate.

We can recommend you to a quality firm providing professional mortgage advice that you can trust and who will work hard to find the best solution for you, whatever your requirements.

We have developed a close relationship with Windfall Finance so that you can draw on their experience and expertise to meet all of your mortgage needs.

Please contact Jeremy – jeremy@cogentaccountants.co.uk – for further details. You may receive preferential rates from Windfall Finance if you are a client of Cogent.

The complexities around IR35 rules are well known to most contractors and this is highlighted with the final conclusion of the six year case against Gary Lineker after being wrongly accused by HMRC for underpaying £4.9m in tax.

The first-tier tax tribunal hearing for Gary Lineker’s case was heard by Tribunal Judge John Brooks and the appeal was upheld, meaning HMRC were wrong to pursue him.

The HMRC investigation against Gary Lineker was launched in 2017 and only now in 2023 has he finally won his case.

Hopefully, this result will give contractors increased hope of winning any IR35 case brought against them by HMRC.

As a contractor, one of the most important decisions you will make is how you structure your business.

Opting for a Personal Service Company (PSC) can provide you with numerous benefits, such as reduced tax liability, increased control, and a more professional image.

Setting up a limited company can be a complex process, however here at Cogent Accountants, we take the burden away from you, leaving you free to concentrate on what you do best. Below, we take a look at the necessary steps required to successfully establish your own PSC.

Choose a Company Name

If timing is important we can arrange an ‘off-the-shelf’ company for you. However, if timing is not an issue, you may want to choose a unique company name. If you decide to choose your company name, make sure to consider it’s relevance to your line of work. Once you have chosen the name, it will be necessary for us to check that it is not in use and significantly different to any other name that already exists.

Register with Companies House

Next, we will need to register your PSC with Companies House. As part of this process, we will be required to supply them with the following information:

• Company name
• Registered office address
• Director’s details (name, date of birth, nationality, occupation, and address)
• Additional director / shareholder’s details (if applicable)
• Details of the company’s shares and share capital

Create a Memorandum and Articles of Association

A Memorandum and Articles of Association are required to establish the rules and regulations for running your PSC.

The Memorandum is a brief document stating that the initial shareholders agree to form a company, while the Articles of Association outline how the company will be governed.

You can rely on us to ensure the Memorandum and Articles of Association are appropriate for your new company.

Set Up a Business Bank Account

It is essential to separate your personal and business finances by setting up a dedicated business bank account. This will help you manage your finances more efficiently and ensure you retain sufficient funds for your tax liabilities. We have tie-ins with a couple of bank institutions you may wish to choose from in order to fast-track the application process.

Register for Corporation Tax

As a PSC, you will be liable for Corporation Tax on your company’s profits. We will register your company for Corporation Tax as part of our set-up process.

Register for VAT

If your PSC’s annual turnover exceeds the current VAT threshold (£85,000), you must register for VAT. This involves charging VAT on your services and claiming it back on your business expenses.  We will register your company for VAT and file your quarterly returns.

Establish Payroll and National Insurance

As a director of your PSC, you will be both an employee and an employer. This means you must use a payroll system to process your salary and National Insurance contributions. We will register your company with HMRC and submit the monthly RTI on your behalf.

 Obtain Business Insurances

Having the right insurances in place is crucial to protect your PSC against potential risks. At a minimum, you should have professional indemnity insurance, public liability insurance, employer’s liability insurance and legal expenses insurance.  We can help arrange this for you.

Maintain Accurate Records

To ensure your PSC remains compliant with HMRC regulations, it is vital to maintain accurate financial records. This includes keeping track of income, expenses, invoices, and receipts. This is our strength and you can relax in the knowledge that everything is being taken care of.

Setting up a Personal Service Company can be a valuable move for contractors looking to maximise their income and gain greater control over their business. With Cogent Accountants by your side, you can establish your PSC with confidence and enjoy the benefits it offers.

As the new 2023/24 tax year begins, there are several personal tax changes taking place.

Whilst most of the personal tax rates remain frozen until 2028, with the base rate and higher rate thresholds remaining at £12,570 and £50,271 respectively, there is a more significant change for higher earners.

As of 6 April 2023, the additional rate threshold has dropped from 150,000 to £125,140. As a result of this, more people pay the highest 45p rate of tax sooner.

This will have a significant effect on many higher earners as the income level at which an individual will not have any personal allowance remains unchanged.

This means that £1 of the personal allowance is withdrawn for every £2 of income above £100,000.

According to HMRC, this change in the threshold will result in an additional 232,000 taxpayers drawn into additional rate tax for the first time – with those who have income between £125,140 and £150,000 losing an additional £621 to tax.

At first, the pool of people affected by these changes seems small.

However, when you consider rapidly rising rates of salary as a result of inflation in recent years, then it is easy to not only see how more people will be drawn into the top rate of tax but also how the freeze will cause others to enter new marginal tax bands.

Given these changes, or lack of change in the case of freezes to the basic and higher rate of tax, it is more important than ever to seek tax planning advice from us.

As a contractor in the UK, finding the right work contract can be a challenging task, especially if you are new to contracting and have little previous experience.

A wide range of factors come into finding the perfect role, not least the potential cost and complexities that come with the IR35 tax regulations.

However, before we look at this, what are some of the other considerations that may come into selecting the right work contract for you?

Pay

A key consideration when choosing a contract is how much it pays. Some contracts naturally pay more, especially if certain skills are in high demand.

While it may be tempting to just go with the highest-paid contract available at any given time, it is important that you understand what is expected of you and that other factors don’t make the role difficult or untenable. Money isn’t everything.

Flexibility

There is a natural level of flexibility for contractors, but some businesses may have expectations about where you work and the days that you need to be working. It is best to clarify this so that it fits in with your requirements.

Length

Every contract will have varying lengths. Some will be clear and give a definite beginning and end date, others may be less certain.

If you have plans to take time out from contracting during particular parts of the year, which isn’t uncommon, you should make sure that these arrangements don’t clash with your plans.

People

It is worthwhile knowing what kind of people and business you will be working for. Before agreeing to a contract, it helps to speak with the people you will be supporting and understand how the business operates.

A little due diligence can prevent you from being stuck in a contract that is dull, difficult or involves working with challenging characters. It never hurts to speak with agencies or other contractors that have previously worked for the business to get a measure of the company.

IR35 – What to consider

IR35 is tax legislation designed to deal with a form of tax avoidance known as disguised remuneration.

This is where individuals attempt to avoid paying the full rate of Income Tax and National Insurance Contributions (NICS), by providing their services through an intermediary, such as a Personal Service Company (PSC).

Under the previous IR35 rules, the intermediary was required to determine the status of the person providing the service. However, this person was typically the sole director of the PSC, i.e. the intermediary itself.

Since 6 April 2021, the rules have changed and it is now the responsibility of the businesses engaging the services of these individuals, who are responsible for determining whether they are inside or outside of IR35.

These changes to IR35 legislation represent one of the most significant changes to contractors’ relationships with medium and large-sized businesses that are affected.

Some contracts you come across may be advertised as inside or outside of IR35. This is because in some cases the business engaging your services will have already determined whether the role available is within the rules.

Regardless of how a contract is advertised, a business must carry out a status determination exercise for each contract agreed with an agency or worker, even where you have worked with them previously.

The Status Determination Statement (SDS) should clearly outline the decision on whether the off-payroll working rules apply and the reasons for the decision, which must be provided to you.

When considering the status of an employee they must consider:

• What are the worker’s responsibilities?
• Who controls the individual (i.e. when, where and how do they work)?
• How they are paid?
• Are they directly in receipt of any benefit or expense?

Evidence suggests that some large employers in the public sector have taken a blanket approach to include all contractors under the rules to avoid a penalty or reputational damage.

However, employers should take a cautious approach when applying the rules and take time to identify each person’s status on an individual basis to prevent legal action from being taken against them.

Speak to your clients

Status determinations or advertised roles are rarely set in stone and so there may be some room to reassess a contract if you are interested in taking a position within a business.

As mentioned, many employers have been cautious and have taken the decision to apply blanket IR35 determinations.

If you can make a reasoned argument to them on why your contract is not within the rules, many employers may be willing to consider your position.

Seek professional advice

If you are still unsure about your IR35 status or if you need help finding the right work contract, it’s a good idea to seek professional advice.

We here at Cogent Accountants or a recommended specialist contractor advisor can help you navigate the IR35 rules and find the right work contract for you.