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Nearly a third of key workers and self-employed have been rejected for a mortgage

Around 30 per cent of key workers had been turned down for a mortgage and 28 per cent of self-employed people had been rejected, according to a report.

According to a survey by LendInvest, which was carried out by Opinium with around 1,000 adults who were non-salaried, key workers or had missed a payment, this compares to 14 per cent of the general population.

Nearly a third, 32 per cent, said a barrier to applying for a mortgage was the fear of being rejected and around 29 per cent said they had felt discriminated against by a high street mortgage lender or bank due to their employment status or income streams.

This rises to 39 per cent of those with poor credit and 59 per cent of those who had been rejected for a mortgage.

Over a third said that mortgage products available discourage them from applying.

The most important factors when looking at a lender was offering low interest rates at 59 per cent, followed by good customer service and support at 48 per cent and variety of products at 42 per cent.

Around 41 per cent said that being turned down for a mortgage had left them feeling frustrated, 29 per cent said they were stressed and 28 per cent said they were embarrassed.

Approximately 20 per cent said that they felt hopelessness after being rejected for a mortgage.

However, 19 per cent said they were more determined and 14 per cent said they felt more positive.

Around 77 per cent said they had a negative feeling about the outcome and that rose to 80 per cent for those with poor credit.

Nearly half said they had been negatively impacted by the mortgage application process, with the biggest impact being on finances, followed by mental health and confidence.

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Nearly a quarter think they will never apply for mortgage

Over half said that they had gone to “great lengths” to up their chance of getting a mortgage.

This includes a fifth saying that they stayed in jobs they didn’t like, 14 per cent pushed back retirement plans, 13 per cent opted for a higher salary over their dream jobs and 11 per cent delayed or cancelled plans to become self-employed or freelance.

Nearly three quarters of those that had been turned down at least once had taken action, with over a quarter pushing back retirement plans and 20 per cent delaying plans to become self-employed or freelance.

Around 22 per cent believed that they will never be able to apply for a mortgage and 43 per cent said they thought they were less able to become a homeowner due to the cost of living crisis.

More than half of those with poor credit said the cost of living crisis had impacted on their ability to apply.

However, around 41 per cent of those who don’t own said that a fall in house prices would encourage them to buyer a property.

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New avenues needed for a new breed of borrower

LendInvest called for lenders to offer more flexible underwriting criteria, develop specialist mortgage products, use alternative credit assessments, enhance documentation guidelines, offer in-house expert support, give customers educational resources and guidance and offer a strong customer service.

Esther Morley, managing director, residential mortgages at LendInvest, said: “The research confirms our long-held belief that the traditional high street mortgage model is not fit for purpose for a large proportion of the UK population and is failing to keep pace with the increasingly complex needs of prospective homeowners.

“An increasing number of people across the UK have different income streams that do not conform with outdated legacy platforms and processes, leading all too often to dispiriting ‘Computer Says No’-style responses. Many are left navigating a needlessly complicated, intrusive and stressful process, resulting in hardworking people being denied the dream of owning their own home and suffering unnecessary mental anguish.”

Rod Lockhart, chief executive officer of LendInvest, added: “These results shed more light on the difficulties facing those with more complex cases applying for a mortgage and the general sentiment regarding the mortgage process during what is a difficult time for potential homeowners. It’s especially upsetting to see the emotional toll on a worryingly large number of people.

“Our residential mortgage products are designed to address the evolving needs of aspiring UK homeowners. With proprietary technology that streamlines applications and makes even the most complex cases simpler and faster, our aim is to improve the overall mortgage experience.”

By Anna Sagar

Source: Mortgage Solutions

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Why being self-employed isn’t a barrier to mortgages at 50 or 90

It is generally thought that if a person is self-employed, their mortgage options are limited. And if that person is also aged 50 to 90+, those options become even narrower. Of people we surveyed in their 50s (of all professions), only 4% had any idea they could get a mortgage. For those in their 80s, it dropped to 2%.These are shocking statistics because nobody is ever too old to get a mortgage they can afford, including the self-employed. All it takes is a lender with a can-do approach.

At LiveMore, for example, our mortgages are designed to help people aged 50-90+, including those who are self-employed. We have no maximum age for self-employed, but instead look at occupation and plausibility.

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Solutions needed for a huge part of society

It’s surprising that mortgage applications are so challenging for such a significant sector of society in terms of sheer numbers. There are around 4.3 million self-employed people in the UK, and the largest proportion of them – 1.8million – are aged 45-54. Almost 1 million are aged 55-64, and nearly half a million are 65+ *. If they can afford a mortgage, why do lenders make it so tough for them to get one?

Lenders willing to show a can-do attitude can not only reach a large base of great customers, but also make a huge difference in many lives.

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

Helping the self-employed aged 50 to 90+

Flexible criteria is essential to helping the self-employed, including the newly self-employed who face a tough time in the mortgage market at any age. That’s why at LiveMore, we can consider applicants with one year of self-employed figures.

This can be a lifeline for anybody who went self-employed during the pandemic. It’s also helpful for people who used the Government’s Self-Employment Income Support Scheme (SEISS), which can go against them in some lenders’ eyes, but a lender that manually underwrites each case should be able to find a way forward.

At the same time, the Covid pandemic affected many self-employed people who were unable to work during the lockdowns, meaning their income might have been lower than in a typical year.

For example, one of our customers, aged 58, wanted to remortgage to buy out his ex-partner and move on after their divorce. But his self-employed income had reduced dramatically because of COVID.

Every high street lender turned him down. However, we considered what his income was likely to be post-covid, based on his previous track record, as well as accepting other income he had in the form of health and grant payments from the Government.

When our can-do approach helped him, he said: “LiveMore saved my life.”

Like this customer, who has various income sources, many self-employed people find income is an issue when they approach lenders who deem the case to be too complex.

However, if a lender considers all forms of income, mortgages often become affordable for many self-employed who may have thought they were running out of options. For example, we’re open to contractor’s income, and we’ll consider day rates or the previous year’s earnings.

The self-employed sometimes have foreign income, which many lenders will not accept but this is where it’s important for an intermediary to know their lender, as lenders like LiveMore will still accept overseas income, as long as it’s not the main source of money coming in. We can also consider net profits or retained earnings in limited companies as well as dividends, even when the borrower is no longer working.

So, whatever the profession of your self-employed clients, they may be more eligible for a mortgage than you think. We welcome most income and property types, and we always look for ways to say yes – even in ‘not your average’ cases.

By Phil Quinn

Source: Best Advice

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Accountants ‘worth the money’ for self-employed brokers ‒ analysis

Brokers have emphasised the importance of getting a tax return completed as early as possible, and argued that quality accountants are worth the expense.

With the end of the 2022-23 tax year last week, self-employed workers across the UK can now start to think about completing their tax return.

And brokers told Mortgage Solutions that it is important for self-employed advisers to do this as soon as possible, with one completing their return as soon as the new tax year had begun.

Getting off to a positive start

Samuel Gee, director at Manning Gee Investments, explained that he used to be complacent about his tax return, leaving it until the last minute and feeling stressed about the process.

“But this year I decided to take a different approach and tackled it before 7am on the first day of the new tax year. By being proactive and getting the task done early, I was able to avoid the stress and worry that often come with tax season,” he continued.

Gee added that he has always done his return himself “as it’s fairly simple”, though he has help on hand from those with greater tax insights if needed.

Jamie Alexander, mortgage director of Alexander Southwell Mortgage Services, said he has always submitted his tax return as soon as possible, admitting he has “never understood the mentality of submitting them the following January”.

He added: “I would prefer to know my exact bill as early as possible to prepare for it. I use an accountant who points me in the right direction and provides me with the estimated bill from May.”

Scott Taylor-Barr, financial adviser at Carl Summers Financial Services, explained that his business is run through a limited company, so his personal tax returns are not completed until the year-end of the limited company.

He added: “I do push my accountant to get them done as soon after that as possible; when I was a sole trader I would always get my tax return done as soon as I could after the end of the tax year too, so I can get as much prior notice as to the amount I need to pay by 31st January the following year. No one likes a surprise tax bill bigger than they expected, or have saved for.”

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Leaving it late

But not all brokers are so determined to get their returns sorted swiftly.

Jane King, mortgage adviser at Ash-Ridge Private Finance, admitted she was terrible with her tax return, constantly putting it off to the point that it is often submitted on the 30th January.

However, she noted that as her accounts “are very simple and straightforward” it only takes half a day to put them together.

The benefits of an accountant

Anil Mistry, director of RNR Mortgage Solutions, said that as a limited company, he needs to obtain two sets of accounts: one for the business, and another for personal use.

As a result his accountant has historically deferred completing them both until the final month of the year.

He continued: “In my role as a broker, I find it helpful to have a comprehensive breakdown of my company’s expenditures, categorised by area. This allows me to identify areas where costs can be reduced or budgeted for in the future. I have even asked my accountant to establish new criteria on Dext, such as marketing, advertising, and coaching, to streamline this process, and know what is being spent where.”

Andy Wilson, founder of Andy Wilson Financial Services, said that his return is prepared by the firm’s accountants as part of a bundle of services provided.

He explained: “The returns are submitted on our behalf, after checking and our approval, at the same time as the business accounts are prepared and signed off. This will usually be around July each year. This is because our network requires the finalised accounts as soon as possible. I never allow this to be last minute as it would stress me out.”

Wilson also emphasised that while accountants are not cheap, they do provide brokers with peace of mind. “In 12 years, I have never had a single query from HMRC as a result of their diligence,” he added

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Accountants save more money than they cost

James Miles, director of The Mortgage Quarter, said that as a broker he can see first hand how important it is to get your accounts in order ASAP and be ahead of the curve so that you can submit your tax return.

He continued: “Despite being surrounded with numbers constantly I’d be naive to think I’m the best person to be submitting my own returns. With tax laws changing every year and allowances bouncing around as much as the stock market, use a professional accountant. It’s a must and I have no doubt they’d save you more money than their cost.”

And Taylor-Barr highlighted the value provided by quality accountants, noting that not only can they ensure that the return is done correctly, they can also highlight potential savings or allowances you were not aware of.

By John Fitzsimons

Source: Mortgage Solutions

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Mortgages – how is the current economy impacting dentists?

As the cost of living and interest rates rise, how does this impact self-employed dentists and their mortgages? asks Vinay Rathod of VR Financial Solutions.

Self employed dentists and those operating under a LTD Company have often faced difficulties when applying for a mortgage.

Recent increases in the cost of living and the Bank of England Base Rate (BBR) have had considerable impacts to how lenders view applicants, especially those who are not employed with PAYE income.

For many years, self employed dentists have faced scrutiny of their accounts, often requiring two to three years of accounts before being able to maximise borrowing potential and get the most competitive rates.

If you have changed from being self employed to trading under a LTD Company you may have found it difficult until you have two full years of accounts under the new company.

Even then, many will have found borrowing limited by their relatively low salary and dividend drawings. I should highlight that there are options to overcome all of the aforementioned obstacles.

This has become even more difficult as a result of the pandemic, and even worse still following Kwarteng and Truss’s mini budget on 23 September 2022.

Huge uncertainty

Following the budget, the financial sector was aghast with announcements that were contrary to anything expected by even the outliers.

Huge uncertainty was quickly followed by huge volatility as financial institutions desperately tried to protect themselves from what might happen – and for once, nobody had any idea what that might be.

The announcements were so contrary to anything expected, and to anything experts all agreed was in desperate need.

When uncertainty exists, people and businesses seek to protect themselves – we enter a state of defensiveness because, human nature is to seek consistency, certainty and avoid the unknown. Financial markets are no different – they crave stability and predictability.

When this is not present, banks and lending institutions favour over cautiousness to growth and profits.

It wasn’t until Rishi Sunak was confirmed to replace Liz Truss that there was any relief felt in the financial sector.

I will try to remain politically impartial in this article, however Sunak’s background working for investment bank Goldman Sachs and various hedge funds, as well as his education in economics, offered some hope of recovery of our fragile economy.

Sunak had even been recorded predicting what we witnessed, months before when debating Truss.

If anybody touted as our future PM could give us back some stability, the financial sector believed Sunak was our man.

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How do banks price mortgage products?

Firstly, we must understand where the money actually comes from. Banks do not lend their own money They lend a combination of their customers money, and money borrowed from wholesale financial markets in the form of various complicated financial products.

It was not until the financial crisis of 2007/8 that there were any real rules governing how much capital a bank must possess versus the money they lend.

It was a poor ratio of this very measure that contributed heavily to the 2007-2008 financial crisis. Even now, capital adequacy rules are far from requiring banks to have an equal amount of capital vs. their credit risk exposure.

So then how do banks decide what interest rate to charge to you? Many believe that the interest rates that we pay, are linked somehow to the Bank of England’s Base Rate (BBR).

Historically, you can even see that this has largely been an assumption that you will see to be true.

It is in fact however, the LIBOR (London Interbank Offered Rate) that has historically been the measure used to price many financial products, the most widely recognised being mortgages.

Even this has largely been phased out due to its contribution to the 2008 financial crisis and more recent manipulation of the LIBOR rate by some banks, and replaced by SONIA (Sterling Overnight Index Average).

Financial markets

Back to 23 September last year. The financial market’s concerns resulted in the worry of huge increases in the LIBOR/SONIA rate.

This prediction of future LIBOR/SONIA changes is measured by ‘swap rates’. The swap rate determines the markets estimates of future changes in this rate.

Following the mini budget you can see a step away from the normal and desired slight changes we normally see.

Banks did not know what it would cost them to lend money. They feared they could make losses on mortgages if they didn’t overcautiously raise rates quickly.

This was more than 6% for many, and smaller building societies and money lenders pulled from the market entirely, taking on no new applications.

Lenders ramped up their stress testing – worrying even more because of the rising cost of energy soon being fully exposed to the public when the domestic price cap ends (more doom and gloom I know).

They reduced income multiples and those banks willing to be flexible and negotiate bespoke terms for certain applicants (dentists) started saying no.

This meant more difficulty maximising your borrowing ability, smaller maximum loans, budgets for new homes forced to be reduced and remortgaging made more difficult.

Fast forward to 25 October 2022 and we welcome Rishi Sunak as Liz Truss steps down. Financial markets feel hopeful of recovery under the control of a fellow financial expert.

The man to make unpopular decisions was brought in to reverse almost all of Kwarteng’s measures. Never before was I relieved to know Hunt would be making difficult decisions – a person who clearly doesn’t care about being popular.

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Life after Trussonomics

Confidence brought us stability. Stability meant more certainty. Certainty gave us cheaper mortgages.

We now understand that, despite the Bank of England continuing to increase interest rates in the hope to grasp some control of the runaway train that is inflation, mortgage rates have been consistently coming down.

We have a long way to go. In fact, we are likely never to see the kind of interest rates offered to borrowers a year ago – rates fixed at well below 2%.

But thankfully we are far from the 6% and are back in the less worrying 4 and 5% range – and even for those with a hefty deposit / equity – sub 4%. I am optimistic that we will see more rates in the threes again in the not too distant future.

Rarely has a day passed since October where I don’t have at least one lender email us regarding an incoming rate reduction. Yes, they are slight, but a little does add up to a lot given time.

Those lenders who stopped lending have largely returned – maybe not quite back to business as usual, but they’re already planning for it!

This is something they couldn’t think about just three to four months ago.

Overcome troubles

The lenders who will allow negotiation are coming back to their seats at the table, and we are hearing that delightful word more – yes!

Maximum loans are still impacted due to the cost of living expected still to rise. Those remortgaging will almost certainly have to tighten their belts a little for a couple of years.

But within dentistry we remain fortunate, for the majority income exceeds committed outgoings with some to spare. Tightening belts is not something too uncomfortable for most.

For those whose businesses have boomed during the pandemic, you may now just have a little less to put away than you used to.

But we have long been spoilt with rock bottom interest rates to borrow money. We have long been too easily able to raise low cost finance resulting in being maybe slightly unrealistic of how much money costs to borrow.

I think we should get used to money being less easily available, and not quite so cheap to borrow. The days of mortgage rates in the one percent range are likely long behind us.

VR Financial solutions have a considerable amount of expertise in arranging mortgages for dentists, having consulted lenders and assisted in lending policy being established and improved for self-employed dentists.

We work closely with many lenders and have established close relationships to allow us to negotiate and overcome many of the troubles being self employed result in.

At an uncertain time like this, it’s more important than ever to take professional advice.

By Vinay Rathod

Source: Dentistry

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Conservative MP calls for Sunak to reverse IR35 reforms

Conservative backbencher Sir John Redwood has called for Prime Minister Rishi Sunak to reverse the “very bad deal” IR35 is bringing to self-employed workers.

Appearing on Sky News over the weekend, Redwood said: “I think, first of all, the self-employed are getting a very bad deal.

“I think we should reverse the 2017 and 2021 changes to so-called IR35. We want to promote more self-employment – make it easier for people to get into self-employment.

“That is the quickest way to expand capacity.

“Then I think we need to look at business taxes. I don’t think the Corporation Tax delayed increase will raise the money The Treasury and the OBR think it will.

“All the evidence is, in the past, when Conservative governments have had the courage to cut the Corporation Tax rate – never a popular move – it raises more money.”

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The highly controversial changes to off-payroll working tax rules came into force in 2012, with a year’s delay due to Covid-19.

The legislation mans medium to large-scale businesses are responsible for determining the IR35 status of contractors they hire.

The reform was set to be repealed as part of the mini-Budget in September 2022, before the plans were abandoned by new Chancellor Jeremy Hunt.

IR35 insurer Qdos has welcomed calls from Sir John to reverse the off-payroll working rules,

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The he firm’s chief executive, Seb Maley, said: “Millions will welcome Sir John Redwood’s comments. Whichever way you look at it, IR35 reform has damaged flexible working in the UK,” Mr Maley said, “It’s made it harder to work self-employed and harder for businesses to engage these workers – at a time when the economy desperately needs the skills and flexibility of independent workers.

“Rishi Sunak himself saw through IR35 reform in the private sector when Chancellor. So he’s no stranger to this legislation, nor the challenges it has created. Reversing IR35 reform would be the fair and logical thing to do.

“However, when it comes to IR35, the government has anything but fair and logical. Its head has been buried in the sand for years.”

By Ryan Duff

Source: Energy Voice

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Mortgages difficult for self-employed say advisors

A new survey of mortgage advisors has found that the majority of them think that lenders are making it more difficult for self-employed people to get a mortgage, despite growing numbers opting for self-employment.

United Trust Bank carried out this survey and nine of every 10 advisors that responded to it said that the eligibility criteria for people who are self-employed has been made much stricter by mortgage lenders. In total, 91% of the advisors who took part in the survey told the bank that it is now harder than ever for the self-employed to secure a loan.

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This survey was part of a new report published by the bank that has been titled ‘Growing opportunities for brokers in the specialist mortgage market.’ The premise is that lenders outside of the big-name ones might offer a way for those with complicated financial and employment situations to get onto the property ladder.

According to Mortgage Strategy, this report goes on to argue that such people:

“Are a group which will continue to grow and that having lenders sufficiently skilled-up and with an appetite to cater for these customers is vital.”

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This is supported by the available evidence, which shows that self-employed numbers in the UK had reached 4.2 million by March of this year. These figures are provided by the Office for National Statistics.

Many mortgage advisors who have CeMAP training are already aware of the need to look to specialist lenders to meet the mortgage needs of self-employed clients and others with complex circumstances.

Source: Beacon Financial Training

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Union urges contractors to follow Kier lead on sick pay

Campaigning by Unite has secured sick pay of up to £100-a-day for Kier workers.

Union bosses are now calling on other contractors to follow suit and boost their terms beyond the statutory rate which can be as little as £16 per day.

Unite regional officer for the construction sector Malcolm Bonnett said: “Unite has been campaigning hard to end the discrimination on sick pay for construction workers so we’re delighted by this victory.

“Statutory sick pay in the UK is the lowest in Europe so it was vital we persuaded the employer, a wealthy business, that they had a duty to pay when workers are ill.

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

“From here, we build further. Unite is determined that other construction employers act to end sick pay discrimination, too.”

A Kier spokesperson said: “At Kier, we recognise that our people are our greatest asset and our teams have been working hard to provide industry-leading policies and measures to support our people.

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“In the last 12 months, we have launched improved family-friendly policies, our new and enhanced standard for sick pay for all and we have become signatories of the Real Living Wage.

“All of these actions reflect the plans we put in place as a result of our strategic review. They form part of our Performance Excellence culture and underline our focus and commitment on doing the right thing.”

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By Grant Prior

Source: Construction Enquirer

Self-employed mortgages
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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.

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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.

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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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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”.

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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:

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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.

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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.”

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‘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