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What the BoE’s 1.75% interest rate means for contractor homeowners

The Bank of England (BoE) last week increased its base rate to 1.75% from 1.25%. This was the sixth consecutive rise in interest rates, taking it to the highest level since the credit crunch in 2008.

But as many temporary professionals are asking us, writes John Yerou, chief executive of Freelancer Financials, what does this significant leap mean for borrowers who are contractors?

Up, up and away
Struggles facing the economy have led to a prediction of 13% inflation by the end of 2022. Economists reckon it could potentially reach 15% in 2023. These figures are far cries from the BoE’s target inflation rate of 2%.

These predictions, against a background of soaring energy bills and spiralling food prices, have forced the BoE’s hand.

Over the last three quarters, the bank’s Monetary Policy Committee has steadily nudged up interest rates from its historic low of 0.1%. This week’s 0.5% increase, however, represents a more forceful move as the BoE grapples to contain inflation.

Additional rate rises by the bank look certain, driven by:

  • the worst credit squeeze on consumer spending in years,
  • severe labour shortages, and
  • spiralling high food, energy, and fuel price hikes.

With the ever-growing economic challenges facing the economy, the question isn’t if increases are coming, rather — it’s when, and by how much.

Get in touch with UK Contractor Mortgages today to discuss your Buy to Let & Residential Mortgage requirements.

Will interest rate hikes curb inflation?
This latest interest rate rise to 1.75% is another blow to economic confidence. It places yet more financial strain on recovery as everyone continues to grapple with rising costs.

The reality is that it all makes the impending recession a self-fulfilling prophecy. How so?

Well, the governor of the Bank of England, Andrew Bailey, has been facing mounting pressure to keep up with the pace of global central banks. Both the European Central Bank and the US Federal Reserve have implemented rate increases of 0.5% and 0.75% respectively. This, in turn, has forced the Bank of England to act similarly to try and rein in rising inflation.

But we now question whether raising interest rates is the best way forward under the current conditions.

The textbook approach (isn’t going to cut it)
Any decent textbook on the topics of economics and finance will tell you that, yes, increased rates are the primary tool for reducing inflation. It reduces demand and helps to bring inflation under control.

And this is exactly what the BoE is doing; it’s textbook. By increasing the cost of borrowing, it’s trying to discourage spending. This theoretically leads to lower economic growth and lower inflation.

But will increased interest rates curb inflation in the traditional manner? In our humble opinion, unfortunately, no. That’s because the challenges we face are, to a great extent, unprecedented.

The catalyst for soaring food, energy, and fuels prices is the exceptional melting pot of global factors we face today:

  • successive covid lockdowns,
  • supply chains crippled (some fatally so)
  • the war in Ukraine, and,
  • worldwide labour / skills shortages.

This mix does not represent the usual backdrop for recession!

Get in touch with us today to speak with the UK’s Best Contractor Mortgage Broker.

Should contractors be panicking yet?
The 0.5% base rate rise and spiralling inflation headlines will leave many homeowners deeply anxious. And while it represents the largest individual hike in nearly 30 years, it wasn’t actually a surprise.

Those contractors old enough to remember the 80s and 90s may view today’s jump as no reason to panic (just yet).

But for the group of homeowners who’ve only ever known a sub-1% base rate since purchasing their home, it will certainly set off alarm bells.

It’s worth reiterating here that rates are low compared to historic levels. But the rise will affect monthly repayments and individuals’ abilities to borrow. So let’s look at the different scenarios.

What does this 27-year high in interest rates mean for UK borrowers and homeowners?
In the short term, the increase will undoubtedly spur another round of mortgage rate increases from ALL major high street lenders, including contractor-friendly lenders.

Interest rates are already 2% higher than they were at the start of the year, despite the base rate only moving up 1.25% over the same period.

Homeowners on tracker rate mortgages or their lender’s standard variable rate will see their repayments increase. Predictably, this group (some 21% of UK mortgagees), will be the first and hardest hit.

Mortgage borrowers on fixed rates will be protected from the immediate effects of the rate rise. But if you’re a contractor on fixed-term deal which expires in the next 12 months, you will need to be prepared. When you come to remortgage, you’ll see a sharp rise in the interest rates available.

What a mortgage broker can do for you in these uncertain times
Over the past few months, our mortgage brokers have played key roles in helping contractors and self-employed clients ‘lock-in’ competitive interest rates for the future. But the landscape on which they’re doing battle is changing.

We’re already seeing lenders tightening underwriting criteria for first-time borrowers, home-movers and further borrowing.

Applications are taking far longer to process because of increased ‘due diligence’ (whether that due diligence is necessary or not). And affordability calculators are changing every week, shrinking the window of opportunity even for borrowers who may have previously considered themselves well-heeled. These dynamics are making it tougher and more challenging to place mortgage applications.

Our brokers are having to demonstrate incremental creativity and tenacity to pair and select the most suitable lenders. Even so, we retain our ethos of matching clients to lenders whose products and services meet their specific needs. This ensures the underwriting teams we deal with take a common-sense view of the bigger picture — as far as affordability checks go.

Get in touch with us today to speak with a specialist Contractor Mortgage Advisor.

The current backlog at lenders: sorry, lenders but you’re not helping yourselves!
Another problem mortgage brokers face when base rates increase is that lenders almost immediately start withdrawing their current products.

Moneyfacts has recently reported that the average shelf-life of any single mortgage product is 17 weeks. That represents the shortest shelf-life on record. This lack of notice creates mayhem for mortgage applications in the pipeline that haven’t been secured.

Many of our clients have seen this coming, however. In recent weeks and months, our brokers have been receiving calls from clients with over 12 months remaining on their fixed term. They’ve been demanding urgent reviews in order to lock in a competitive fix rate; so concerned are they that interest rates are spiralling out of control.

If you’ve not acted yet, it’s not too late. No matter how difficult market conditions become, there are always options available through the right channels. We can help people achieve their homeownership dreams, irrespective of how they are employed. Yet contractors please note, the earlier you engage a mortgage broker’s service, the greater the options and support you will receive.

Moving forward, flexibility from lenders is going to become increasingly important. In the current climate, using rigid tick-box practices for underwriting will fail to serve the needs of many self-employed property buyers. Our goal is to ensure that, even for those most complex of income structures, we find wiggle room — with at least one lender!

Housing market
Over the last couple of years, we have seen extraordinary demand for property purchases. Low interest rates that have made getting a mortgage a lot easier have supported this trend.

But last week’s 0.5% interest rate jump will slow house price growth. Potential homebuyers will become more hesitant over fears of rising interest rates and inflation. However, we don’t foresee a crush or drop in housing prices as we did after 2008, just a cooling-off period. This isn’t a bad thing!

We will see a power shift though. Up until recently, all the negotiating power has been with the sellers. This might start shifting to buyers in the coming months as dwindling interest forces property owners to sell at more reasonable prices.

Behind the headlines…
It was inevitable that mortgage interest rates would increase eventually. They were never going to remain abnormally low forever.

In the short-term lenders will tighten their affordability calculators and underwriting criteria until the dust settles.

And although most lenders have accommodated specialist income such as that of limited company or umbrella contractors in more recent times, independent professionals may find more barriers than their permie peers in the interim.

Nonetheless, our belief is that the fundamentals of the economy are fine. So ignore the scaremongering from some quarters.

Keep in mind, the circumstances affecting today’s surging inflation and cost of living have been brought on by Covid lockdowns creating temporary labour shortages and production issues. The current supply cannot meet the demand – it really is as simple as that. The invasion of Ukraine has also exerted a serious impact on inflation, affecting energy and fuel prices. While serious, none of these aren’t permanent fixtures.

We should also recognise that lenders increasing interest rates isn’t always a response to a change in the cost of funds alone. Sometimes, like now, it’s a response that will help them manage their service levels.

Time after time this has occurred in the past, notably when banks are struggling to cope with the volume of applications. They push up rates to make them less attractive to borrowers. They’ll then reduce rates once they can resume service levels!

Many banks are still understaffed and struggling to cope with application volumes. Swathes of their staff still work remotely, another factor making applications take nearly twice as long as before covid.

What contractor mortgage-holders should do next
One of the key ways to determine where lenders’ interest rates will go (next) is to look at SWAP rates.

SWAP rates are what lenders pay to financial institutions in order to acquire fixed funding for a specific duration. This could be anywhere between one to 10 years.

The cost of this SWAP rate will then be used to price up mortgage products for lenders to secure a profit margin. At the time of writing, current three, five and ten-year money funding is all lower than two-year funding rates, which implies that rates will peak — but start to come back down again.

As a contractor with a mortgage, what your next move is will depend on your current home loan small print and its associated fixed term. We’ve outlined different scenarios for remortgaging on our blog for you to consider. Alternatively, ask us about your current situation and our brokers will outline the avenues open to you. But do ask, and at the risk of repeating myself — act.

By John Yerou

Source: Contractor UK

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Mortgage affordability test scrapped by Bank of England

Mortgage borrowing rules have been eased after the Bank of England scrapped an affordability test.

The “stress test” forced lenders to calculate whether potential borrowers would be able to cope if interest rates climbed by up to 3%.

Removing the test may help some potential borrowers get loans, such as the self-employed or freelance workers.

But other rules such as strict loan-to-income limits will not make it easier for most people to get a mortgage.

The withdrawal of the affordability test was announced in June but has come into effect on Monday.

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“Scrapping the affordability test is not as reckless as it may sound,” said Mark Harris, chief executive of mortgage broker SPF Private Clients.

“The loan-to-income framework remains so there will still be some restrictions in place; it is not turning into a free-for-all on the lending front.

“Lenders will also still use some form of testing but to their own choosing according to their risk appetite.”

In other words there will not be an immediate impact for borrowers as lenders will not need to change the way they assess loans.

However, some may well change their own rules in the future.

Mark Yallop, chairman of the Financial Markets Standards Board, said although the change would make it “slightly easier” for some borrowers to get a mortgage, he did not think with would have a significant impact.

“The biggest constraint on new mortgages is the ability of borrowers to afford a deposit,” he added.

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What was the scrapped test?
The mortgage affordability test was introduced in 2014 as part of a widescale tightening up of the mortgage market to ensure there were no repeats of the mis-selling scandal that partially contributed to the 2008 financial crisis.

The rule was put in place to ensure that borrowers did not become a threat to the financial stability of lenders by taking on debt they subsequently might not be able to repay.

Lenders had to not only work out if borrowers could afford a mortgage at the rate they were being offered, but also work out how they would be affected if interest rates soared by 3%.

Borrowers who could not prove they could cope with such an eventuality might have been turned down for a loan on that basis, even if they could easily afford a mortgage at the existing rate.

For that reason the test was seen by some as a barrier for some borrowers.

“The rule change could have a positive effect on borrowers who have been disadvantaged when it comes to getting on the property ladder,” said Mr Harris.

For example, some potential first-time buyers who have been comfortably affording rents far higher than potential mortgage payments have failed affordability assessments.

Get in touch with us today to speak with a specialist Contractor Mortgage Advisor.

What checks remain for borrowers?
There are some key protections in place to help ensure that borrowers don’t take on loans they may not be able to afford.

The main one is a loan-to-income “flow limit” which limits the number of mortgages that lenders can grant to borrowers at ratios at or greater than 4.5 the borrowers’ salary.

In short, it is very rare that a lender will consider a higher loan-to-income ratio because of the restriction.

After a review of the rules in 2021 the Bank of England’s Financial Policy Committee judged that “the LTI flow limit is likely to play a stronger role than the affordability test in guarding against an increase in aggregate household indebtedness and the number of highly indebted households in a scenario of rapidly rising house prices”.

“The change in the affordability rules may not be as significant as it sounds as the loan-to-income ‘flow limit’ will not be withdrawn, which has much greater impact on people’s ability to borrow,” said Gemma Harle, managing director at Quilter Financial Planning.

The FCA’s Mortgage Conduct of Business responsible lending rules also require a wide assessment of affordability.

By Simon Read

Source: BBC

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The ‘gig economy’ is not the home buying hurdle you may think – Whitear

One of the most common misconceptions among the self-employed is that securing a mortgage to buy a home is fraught with obstacles, therefore making it extremely difficult or practically impossible to get onto the property ladder.

Despite this sometimes being the case in the past, the market has evolved significantly to make it easier for those with a self-employed status or irregular income to obtain a mortgage.

In fact, catering for the borrowing needs of the self-employed has become vitally important as this demographic represents a strong proportion of UK population. This was highlighted in April 2022 figures from Statista which showed that there were approximately 4.21 million self-employed people in the UK.

Get in touch with UK Contractor Mortgages today to discuss your Buy to Let & Residential Mortgage requirements.

Multiple incomes
Traditionally, a self-employed status has been commonly used to refer to freelancers, contractors and sole traders, yet it can also extend to company directors, individual partners and anyone not in a salaried employee position. In addition, the emergence of the gig economy – where people earn an income per project or task – means that those earning multiple incomes can also fall under the self-employed umbrella.

And this is an area which is enjoying an impressive growth spurt.

According to ‘Fuelling the Global Gig Economy’, a report produced by Mastercard, an estimated 7.25 million are predicted to be working in the UK gig economy by the end of 2022. Which means that understanding and catering for this growing demographic is more important than ever.

Get in touch with us today to speak with the UK’s Best Contractor Mortgage Broker.

Tailored underwriting
For intermediaries looking to secure a mortgage for a self-employed client, one of the most important elements to consider is whether a lender can assess each application on its own merits rather than adopting a one-size fits all approach. This is because the fluctuating nature of self-employed income levels means no two applicants are the same, so tailored individual underwriting rather than the use of a blanket automated underwriting system can prove crucial.

In many cases, the mortgage products on offer to self-employed clients are to the same as those for employed borrowers: it’s how the loans are assessed that varies.

Get in touch with us today to speak with a specialist Contractor Mortgage Advisor.

Strategies vary
Different companies have varying strategies on managing balance sheets, cash flow and the distribution of profits and dividends, which is why individual assessment by the lender is necessary. A manual underwriting process can provide lenders with the ability to look beyond a more ‘basic’ overview of incomes and creditworthiness for such borrowers.

Affordability is all about what the future will look like based on past performance and this is an area where specialist lenders and such an approach can make a real difference.

Traditionally, two to three years’ worth of audited accounts were required on application, with net profits and director’s remuneration plus dividends considered as income for those running a limited company.

However, different lenders have differing approaches. For example, at Foundation Home Loans, we consider a minimum of one year’s accounts, and where a company director owns 20 per cent or more of the company shares, they will be classed as self-employed.

Self-employed lending
Mortgages for the self-employed are a particularly important area for brokers to market because of the lingering misconceptions around them. In our own borrower survey, 62 per cent said they believed it was significantly more difficult to secure a mortgage as a self-employed person, although only 14 per cent had been turned down because of it.

A range of competitive and responsible lending options remain available to this essential component within the UK work force. It will be mortgage intermediaries who open those doors for those clients the specialist lending marketplace who will continue to lead the way in delivering the types of solutions which can make a real difference for the self-employed population.

By Mark Whitear

Source: Mortgage Solutions

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“Mortgage accessibility for self-employed only becoming harder”

External factors worsening affordability for the group.

Self-employed borrowers have always had to jump over extra hurdles in order to get a mortgage product, however this has only become more difficult given the current state of the financial market.

The cost-of-living and energy bills crisis have both impacted affordability, combined with the pandemic, rising inflation, base rate increases and the war in Ukraine – with the latter having affected fuel prices.

As such, people are paying more for the same, with wages not having increased in line with rising inflation, this has resulted in affordability for the self-employed having declined significantly.

“Self-employed borrowers have always found it disproportionately hard to get a mortgage compared to their counterparts with more traditional income streams,” according to Matt Harrison (pictured), sales director at finova.

Get in touch with UK Contractor Mortgages today to discuss your Buy to Let & Residential Mortgage requirements.

For example, he explained that in most cases, a self-employed applicant needs to show two or more years of company trading accounts as evidence of income, while an employed applicant may need just three months of payslips.

“This has only gotten harder following the COVID-19 pandemic. The way the pandemic impacted the economy has made it especially hard for people who are self-employed to borrow money,” Harrison said.

Early on during the pandemic, many mortgage lenders began to withdraw from the specialist market, or made significant changes to their self-employed criteria. This made it increasingly difficult for self-employed borrowers to access products and left them stranded, unable to buy unless they accepted much higher rates.

Harrison explained that government support for self-employed workers was not as clear cut as the furlough scheme, and many who accessed the Self-Employment Income Support Scheme (SEISS) grant are now finding that this has impacted the amount they can borrow, or which lenders they can use. The last date for making a claim was also September 30, 2021 – meaning the after-effects of the pandemic are still being felt by the self-employed, without a scheme currently in place to help support them.

Get in touch with us today to speak with the UK’s Best Contractor Mortgage Broker.

According to the Office for National Statistics, there are 4.8 million self-employed people in the UK, which makes up 15.1% of the workforce, a stark increase from 3.3 million in 2001.

With the number of self-employed on the rise, finding solutions for their house buying needs is only becoming more and more important, Harrison outlined.

“As well as more complex income requirements, a lack of education on situations specific to the self-employed can make it harder for these borrowers to secure a mortgage. Take incorporation relief, for example,” Harrison said.

He explained that to be eligible for incorporation relief an individual must be a sole trader or in a business partnership and transfer the business and all its assets, except cash, in return for shares in the company. In order to work out the amount one must pay Capital Gains Tax on, you must deduct the gain made when selling a business from the market value of the shares received.

Get in touch with us today to speak with a specialist Contractor Mortgage Advisor.

“There are many ways self-employed people release income in tax efficient ways, which means that communicating the company outgoings to the underwriter can be increasingly complex, especially when there may be spousal company shareholdings, umbrella companies or director loans,” Harrison said.

According to Harrison, these complex requirements are then compounded by the other typical peculiarities that come up in a mortgage application.

“To deliver the best service, brokers need to put in additional time and care researching, packaging and presenting a self-employed borrower’s mortgage application to make sure the lender does not need further information, therefore increasing timescales in what can already be a lengthy process,” Harrison concluded.

Source: Carpenter Surveyors

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Ensure your contract keeps you out of IR35

What can contractors and freelancers learn from HRMC’s win against Sky Sports presenter Alan Parry? Here are tips to make sure you stay out of IR35.

Earlier this month Sky Sports pundit Alan Parry lost his IR35 appeal against HM Revenue & Customs over a £356,000 tax bill. The football commentator, 74, contested an HMRC claim that the contract held between his own company, Alan Parry Productions Ltd, and BskyB over the five years to April 2019, amounted to an employee relationship, rather than self-employment.

Under IR35 rules, a set of tax laws which govern off-payroll freelancers, if a contractor is deemed to be a “disguised employee” for tax purposes, and not genuinely self-employed, they must pay PAYE and national insurance contributions.

HMRC’s IR35 win came down to how tightly worded Parry’s contract was, giving BskyB more control than it needed, according to Parry’s lawyer Chris Leslie.

Commenting on the case, Dave Chaplin, chief executive of tax compliance firm IR35 Shield, told the Financial Times that contractors and employers should be aware that “the contract is king”.

Get in touch with UK Contractor Mortgages today to discuss your Buy to Let & Residential Mortgage requirements.

What the Alan Parry case means for freelancers
HMRC’s win against Alan Parry will no doubt be uncomfortable reading for freelancers. Once again it brings into sharp focus, HMRC’s intent on tax equality and its use of the off-payroll rules. While a fair tax system is a good thing, the legalities are difficult to navigate.

If there is one thing to learn, it’s that you must also take responsibility for managing a status determination of inside or outside IR35 yourself and avoid any reason for doubt in the contract. Quoting Chris Leslie, the lawyer who represented Parry, Parry’s contract contained ambiguity which gave Sky “more control than was needed or wanted”.

This word “control” should be the biggest learning from this. You must ensure you are the controlling party, not the hirer, so take responsibility for generating a contract to reflect it. As the Parry case shows, standard company contracts won’t work when it comes to IR35.

Instead, they must reflect the work you will undertake, how you will do it – e.g. with your own equipment in your own working hours, and that you have the right to substitute yourself for another professional.

Substitution clauses are a helpful way to show you are operating as a business and not as a quasi-employee, as Lorraine Kelly successfully argued when she proved she was instrumental in determining who covered for her when she was on holiday.

Here are some other things you can do to ensure you stay the right side of the law:

Get in touch with us today to speak with the UK’s Best Contractor Mortgage Broker.

Recognise that off-payroll represents a risk to a client
They want and need to get it right, because they don’t want a tax bill for getting it wrong. It’s true that when off-payroll first came into the private sector, there were some companies that were so concerned about getting determinations wrong that they banned contractors altogether. The world has moved on, as the impact of not having access to flexible contingent skill hit home.

Despite seeing some blanket use of inside IR35 contracts to manage the risk, it’s starting to become the anomaly.

Overall, the decision to engage contractors and freelancers has been good news not just because it opens options for work, but because it’s highly likely that a company will be ready to discuss the arrangement and create a contract which clearly falls outside IR35. But you need to be informed to do this and understand the nuances of the legislation.

There are three specifics to prioritise:

Mutuality of obligation
People who get a contract right are using statement of works to set out exactly what they will do by when. This also meets another HMRC test called “mutuality of obligation” (MoO) whereby you show that you are not like an employee and paid simply for being at your client’s disposal, instead you are paid to deliver a specific piece of work.

Overall, being savvy about how MoO helps determine a status will help you get into a position where you can confidently negotiate – there’s evidence that the more informed you are, the more likely you will secure an outside status determination which will hold with HMRC.

Many self-employed professionals find it helpful to undertake their own assessment of all the rules first, so they can adjust their approach to working with a client and create a watertight seal.

Understand being in business on your own account
In the high-profile Kaye Adams case, Kaye demonstrated that she was in business on her own account, and this was pivotal to being deemed outside IR35. Things that will help you show this are to have multiple concurrent clients, a dedicated office, and even employees.

Show you are not part and parcel of the organisation
Working practices are critical to compliance. If you behave like an employee, then you will be treated like one, giving HMRC more justification.

Get in touch with us today to speak with a specialist Contractor Mortgage Advisor.

Quick wins to stay out of IR35

Quick wins to avoid scrutiny are:

  • Develop a brand, and have a dedicated website and social media presence
  • Trademark your company name
  • Invest in your own phone, computing equipment, printer etc
  • Invest in yourself through training and memberships to professional bodies
  • Ensure you have things like professional indemnity and liability insurance.

Things to avoid to stay out of IR35

For all the do’s there are also a lot of do nots. Here are just a few of the things that can get you into hot water:

  • Going to company training and social events
  • Getting involved in appraisals or any HR matters
  • Accepting performance bonuses open to employees, or take advantage of things like gym memberships
  • Being misrepresented as an employee – make sure it’s clear you are a contractor or associate on your ID badge, email address and org charts
  • Taking on new work before you have adjusted the terms of the existing contract
  • Taking days off with permission – you should inform your client you’re not available
  • Working the same working pattern as staff

These things combined with knowledge and understanding, and following good practices and behaviours, will stand you in good stead when it comes to running an IR35 status assessment with a client. The way you conduct business and engage with them should be clear and correlate to an outside determination.

James Poyser is CEO of inniAccounts and founder of OffPayroll.org.uk

By James Poyser

Source: Small Business

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Contractors at risk of being taken in by bogus badges from ‘sham’ accreditation outfits

Contractors must start double-checking the badges that umbrella companies display on their website, experts are appealing to readers of ContractorUK.

The advice to check that the provider’s badge is a stamp of approval from a genuine, verifiable accreditation body featured in a new umbrella company checklist for contractors.

But an avoidance scheme blacklisted by HMRC – Peak PAYE Ltd — has since been observed using a badge emblazoned with ‘The Institute of Freelancing & Contracting Professionals.’

The institute describes itself as: “The UK’s most prominent professional membership association; promoting compliance, maintaining standards, and certifying the UK’s leading umbrella companies, contractor accountants, and payroll providers for freelancing contractor professionals.”

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‘Accreditation from unverified parties’
But established in 1999 and visible lobbyist against IR35 ever since, the Association of Independent Professionals and the Self-Employed has never heard of the institute.

“IPSE has not been previously aware of ‘IFCP’ and is not therefore in position to verify its legitimacy, or otherwise,” says a cautious Andy Chamberlain, IPSE’s policy director.

He further told ContractorUK: “We…advise contractors to take great care when choosing a provider. We would also add that contractors should be wary of any claims of accreditation from unverified parties.”

‘Unconvincing attempt to provide a veil of legitimacy’
Attempts to verify the institute’s legitimacy are complicated by the institute itself however, as it also calls itself, ‘The Society for Professional Freelance Contractors and their Associates.’

Its website has a third name, ‘Independent of Freelancing and Contracting Professionals,’ and a fourth (minus the “of ” blooper), ‘Independent Freelancing and Contracting Professionals.’

A long-standing adviser to the self-employed has heard enough.

“This is fairly obviously a very unconvincing attempt to provide a veil of legitimacy to at least one non-compliant operator,” said the adviser.

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‘Sham organisation’
Declining to be named the adviser added: “I [have been advising the self-employed for 12 years] and don’t know of anyone who works [at the IFCP].

“And as far as I can [see]…no evidence of them [exists] on Companies House, and even their ‘links’ to their Twitter and LinkedIn profiles don’t actually take you anywhere. It’s a sham organisation – so contractors beware.”

Also having tried to run some checks on the IFCP is WTT Consulting – an HMRC dispute advisory recommended in last week’s umbrella company checklist as a bonafide assessor.

‘Paper-thin entity’
The advisory’s tax director Graham Webber described the ‘organisation’ to ContractorUK last night as a “paper-thin entity” appearing to have “little or no substance.”

Lucy Smith, managing director of Clarity Umbrella agrees.

“When a contractor looks at a website and there is very little information available on the site, it [should] lead [them] to question why.”

Get in touch with us today to speak with a specialist Contractor Mortgage Advisor.

‘Question what they have to hide’
Referring to Peak PAYE Ltd but applying equally to the IFCP, Ms Smith continued: “The website is very bare, says very little and would lead me to question what they have to hide.

“If a….[provider] has nothing to hide then they should have no issues in explaining it all via the website.”

But equally, an abundance of explanations or claims, particularly those like the ones made on the institute’s website, can verge on the comical — or they would do if the risks to contractors of being hoodwinked were not quite as grave as they are.

‘Etc, etc’
Recruitment lawyer Adrian Marlowe of Lawspeed explained: “Peak PAYE [being outed] by HMRC is highly topical as tax avoidance [is] very much back on the agenda [at HMRC].

“But Peak PAYE’s website shows it is accredited by an outfit called the Institute of Freelance Contractor Professionals which claims to be [lots of good-sounding things] like ‘independently audited’, and ‘fully disclosed to HMRC.’ Etc. Etc. Someone clearly has a sense of humour.”

Neither Peak PAYE Ltd nor the Institute of Freelancing and Contracting Professionals responded to questions or written requests for comment.

By Simon Moore

Source: Contractor UK

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Barclays makes major lending push with £2.3bn deal for Kensington Mortgage Company

In a major push to broaden its lending offering, banking giant Barclays said this morning it has agreed a deal worth around £2.3bn to buy specialist lender Kensington Mortgage Company.

Barclays said the acquisition will allow it to offer more mortgage options to the self-employed and people who have multiple or variable incomes.

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The bank will also take ownership of a portfolio of mortgages offered by Kensington Mortgage Company, worth £1.2bn, in efforts to lend to a greater variety of customers.

The deal comes after the pandemic has led to an increase in the number of self-employed borrowers and those with complex incomes due to the impact of the Government’s furlough scheme and the wider effect on job volatility.

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The Maidenhead-based specialist lender has around 600 staff and offers buy-to-let residential mortgage options as well as owner-occupied lending.

The transaction is expected to complete towards the end of 2022 or early 2023.

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Matt Hammerstein, chief executive of Barclays, said: “The transaction reinforces our commitment to the UK residential mortgage market and presents an exciting opportunity to broaden our product range and capabilities.

“KMC is a best-in-class specialist mortgage lender with an established track record in the UK market, strong broker and customer relationships and data analytics capabilities.

“KMC complements our existing UK mortgage business and broker relationships through the addition of a specialist prime mortgage originator and the utilisation of our strong UK funding base,” Hammerstein concluded.

By Michiel Willems

Source: City A.M.

Marketing No Comments

Just Mortgages launches marketing service for brokers

Just Mortgages has launched a white-labelled digital marketing package for self-employed brokers.

The service is aimed at brokers who want to promote their own trading style and brand.

Carl Parker, national director of the self-employed division of Just Mortgages, described the offering as a full-service marketing solution, with the group aiming to match the level of service provided by a dedicated marketing agency.

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Self-employed brokers will have access to in-house marketing professionals, who are also experts on the subject of mortgages, and will be offered branding and logo development, content creation and social media support.

An initial consultation between the broker and the marketing team is followed by a brand set up with logo and brand guidelines to establish the look and feel of the business, as well as website and social media content in line with financial promotion regulations.

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On-going support is then provided to the broker to help raise their business profile and attract new clients, according to Parker.

“Our aim is to provide the best possible showcase for the brokers’ business while they get on with the important job of helping clients with their mortgage and insurance needs,” he said.

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Figures from IBISworld show there are 5,580 mortgage broker businesses in the UK in 2022, an increase of 2.6 per cent from 2021.

Last week, Just Mortgages also announced a new training initiative for those wanting to become mortgage and protection advisers.

By Jane Matthews

Source: FT Adviser

Marketing No Comments

High inflation boosted IT contractor jobs market in May 2022

High inflation appears to have boosted the less quickly growing IT contractor jobs market, as the slowdown in growth in temporary technology billings paused in May.

In Report on Jobs, the REC suggests that rising costs made employers scrutinising the bottom line turn to temps rather than add members of staff to the payroll on a full-time basis.

REC chief executive Neil Carberry gave this assessment in the report on Friday, potentially part explaining how demand for IT contractors shot up in May to 66.1 from 63.7 in April.

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‘Inflation-induced caution’
Mr Carberry said: “The market for temporary work is stabilising faster than for permanent staff, which could suggest a little caution creeping into employers’ thinking in the face of high inflation.”

Kate Shoesmith, the Recruitment & Employment Confederation’s deputy CEO returned last week from a hiring expo in Brussels, only to similarly acknowledge inflation’s tight grip.

“We have been through tough times [chiefly due the coronavirus pandemic], followed by record-breaking successes. But the economic headwinds are [still] there,” she said.

‘Rethinking growth plans’
As to inflation’s effects, Claire Warnes of KPMG spoke of employers “starting to rethink their growth plan” as — like candidates — they face ‘the greatest costs in recent years.’

“And these are expected to increase, at least in the short term,” said Ms Warnes, KPMG’s head of education, skills and productivity.

As well as “rising business costs” for both candidates and end-users alike, she sounded more sympathetic to the latter, by pointing out organisations also face “supply chain disruption.”

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‘IT Operations and Helpdesk keeping pace with inflation’
But only last week, Indeed said that as “the economy starts to weaken,” the phenomenon of “soaring inflation” was eroding the pay gains of “most” workers.

The jobsite found exceptions though – seven occupations in total, including IT Operations and Helpdesk where pay has climbed by a healthy 7.1% in the 12 months to April 2022.

“A handful of occupational categories are seeing wage growth keep pace with inflation, largely the ones facing the most acute hiring challenges”, said Indeed’s Jack Kennedy.

The jobsite’s economist, he added: “Employers in these sectors are having to raise pay to deal with the combination of high vacancies and falling relative jobseeker interest.”

‘Hot market for the sector-qualified’
Compounding the situation, candidate availability is falling too, the REC found in May, and one consequence is “it remains a hot market for those well-qualified in their sectors.”

But another consequence of lower candidate availability is frustrated recruiters.

“Jobs that are paying well for super companies = no applicants. No amount of hunting is getting responses. Very, very few if any candidates,” posted recruiter Roseanne Stockton.

Boss at Nu-Recruit, she added: “Candidates….are excellent. But in the main, up to that point [of meeting them], I cannot find many. [There are just] two candidates per job [opening] at the moment!”

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‘None of their clients would touch a career-breaker’
However some recruiters aren’t helping themselves by excluding professionals who have CV gaps due to taking a career break.

The disregard of individuals with lives beyond just work disappoints agents like Kieran Boyle, owner of CKB Recruitment, who took to LinkedIn.

“Spoke to a candidate this morning [with] bags of experience, [but] taken nine years out to have children.

“The [candidate] was told by a rather well-known insurance recruiter that they didn’t want to work with her, and none of their clients would touch someone whose had a career break”.

“What a load of poppycock,” Mr Boyle continued online, reflecting in his own post. “The industry faces an unprecedented skills shortage, so why would you not try and help someone back into this amazing industry, and help one of your clients fill a role at the same time?”

‘Flexibility trumps pay’
The shortage in the IT sector in May was severe for Developers, Software Engineers, and IT and Technology generalists, as these four were scarce on both a permanent and contract basis.

No other IT contractor skills were “in short supply” in May according to REC’s member agencies, which struggled to find full-time applicants for Analysis, CAD, Data, Digital, Software and Technical Sales positions.

But the confederation has repeated its advice to employers that cash is no longer king.

“Flexibility [now] trumps pay, “ said the REC’s Ms Shoesmith. “[And that’s] closely followed by [company] culture in [terms of] candidate job search [preferences] right now.”

By Simon Moore

Source: Contractor UK

Marketing No Comments

Contractor sector sceptical of potential tax cuts from an under pressure Boris Johnson

Contractors being potentially among the one in three adults who can afford basics but not always luxuries isn’t making the contractor sector into Boris Johnson’s whispered tax cuts.

Reportedly recommended to the prime minister as a way to heal rifts after he narrowly survived a confidence vote, any tax cuts would usually be embraced by contractors.

After all, contractors are “up against IR35 reform, dividend tax rises and [potentially] an incoming hike to corporation tax,” Qdos’s Nicole Slowey pointed out yesterday.

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‘Token gesture’
But another specialist in contractor taxation, Graham Webber of WTT Consulting, says he expects any tax cut from Mr Johnson to be only a “token gesture”.

The PM’s trying political circumstances, plus the government’s tendency to legislate against contractors rather than incentivise it via tax cuts, makes his expectation creditable.

But in a thread featuring both the tax specialists, a Test Analyst said that if any of the tax cuts resemble Spring Statement’s 5p cut in fuel duty, the government can “keep it.”

‘Forced bribe’
“At this stage [from Mr Johnson], it would be a forced bribe,” said the analyst, a self-employed contractor. “It would only be announced to make Boris look better, not to help us”.

The prospect of tax cuts has prompted Mr Johnson’s most supportive national newspaper, the Daily Telegraph, to identify a fuel duty reduction as the most important of five he may make.

The right-leaning broadsheet said a close second would be for the PM to abolish the 5% VAT charge on heating fuels — as Mr Johnson has previously promised to do.

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‘Attacks on contractors’
Yet a consultant posted yesterday that it’s not ever Number 10’s decision to cut taxes – it’s Number 11’s.

“[Chancellor] Rishi [Sunak] and the Treasury are in charge of taxes, not Boris,” the consultant said.

“[Following the many] broken promises and attacks on contractors over the last few years, it will take a lot [for either Mr Sunak or Mr Johnson] to win back support — and trust.”

‘Government handling taxation badly’
A YouGov reading of June 2nd shows 69% of adults believe the government to be handling of the issue of taxation “badly.”

Income tax is the levy which people would least like to be increased by the government, followed by council tax, and then National Insurance, the pollster found in May.

Speaking since the findings, Keith Gordon QC has pinpointed what he would most like to see in relation to the contractor sector’s most notorious tax rule.

In a phone-in with LBC about the off-payroll rules, the tax barrister said: “I hope someone will go back to the drawing board and decide IR35 is not fit for purpose.”

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‘Unwelcome letters from HMRC’
A revoking of the Intermediaries legislation is even more of an outside bet than tax cuts from the prime minister, so accountants say it’s ‘business as usual’ this tax return season.

“With tax returns on the mind of many pro-active taxpayers, something often forgotten on the tax returns of those submitting early, is benefits-in-kind,” advises Adam Dove, senior client accountant at Orange Genie.

“With P11Ds not due for submission until July 6th 2022, it is important to ensure your employer has submitted your P11D and you have the details before you complete your self-assessment tax return, to avoid any unwelcome letters from HMRC with amendments, interest and, or, penalties.”

By Simon Moore

Source: Contractor UK