666 and Other Door Numbers

Most Accountants are numbers people. Like probably many others, Maths was the only school subject I was any good at. Even though there are many jobs these days that are non-numbers focused (and I have done a number of such roles myself, i.e. Change Management Consultant, Business Process Re-engineering Specialist, Systems Accountant, Tax Planning Strategist) it is fair to say that numbers are the bedrock of our world. Let me focus on one set of natural numbers (remember those from GCSE?) that we all come across – door numbers. Whether we’re talking about 10 Rillington Place, 221B Baker Street or 10086 Sunset Boulevard, these are numbers we all come into contact with on a daily basis.

This is a piece that is relevant to every Accountant… more specifically every Accountant who ever attends interviews or meetings in different locations… like people searching for opportunities on their favourite finance careers website GAAPweb.

I’ve actually had this piece in mind for the past several months, but each time I have been invited to write something there has been something else topical which took priority.

I’ve never ceased to be amazed at how difficult it can be to find company’s offices. A large cause of this is companies who don’t display a door number outside their property – this should be a law! About the worst example was when I went to visit a media company on Tottenham Court Road in London. The numbers were genuinely staggered in a fashion like 2, 6, 4, 8, 10.... and this becomes even more complicated when there are shops on the ground floor with offices above – complicated numbering patterns abound.

It is also not helped by differing forms of street numbering. Most streets in my home town of Leeds have odds one side, evens on the other. As a child living at number 11, I was continually puzzled that our neighbours were 15 – but that is something that seems to depend on the superstitions of the builder. A number of streets in London (for example Regent Street) have consecutive numbers, going along one side, then crossing over at the end and coming back up the other side.

LAC Solicitors in Birmingham is at 666 Washwood Heath Road. Their office has had one lady die at her desk, staff have gone bankrupt, and the office has its own ghost. They are on the web at http://www.lacsolicitors.co.uk.

So, GAAPwebbers, numbers do matter. In fact, I'm currently sat at home watching the tribute to Carol Vorderman, and her final episode of “Countdown”. As someone who was able to get an A* in GCSE Maths thanks to her videos, and as someone who was privileged to meet her when I went to see the programme live, she really is our Queen of Numbers. Hopefully the final episode and tribute programme will be available on the web at Channel 4 Catch Up.

James Fairchild's full collection of articles and blogs can be found at http://www.financecpd.co.uk/jamesfairchild – recruiters and clients can contact me by leaving a comment there.

The Crash of 1929 and the Crash of 2008

I think most of us have some sense of concern over the state of the economy at present. Over the past few months, the problem has shifted from merely being an issue affecting banks to an issue affecting us all, whether this is because of dropping house prices, soaring interest rates, or the unavailability of mortgages.

Perhaps you have swopped Waitrose for Lidl, or maybe like me you will have found that Sainsbury’s Value bran flakes are actually pretty good. Maybe you’ll have been thinking for a while that Pret a Manger don’t put enough pickle on their cheese sandwich, and you enjoy not only putting on as much pickle as you like, but also varying between Branston pickle and mustard pickle? History tells us, however, that we are not experiencing a new phenomena (du du, di du du)*.

In 1929, a very similar thing happened in the USA. Almost 79 years ago, in October 1929, the New York Stock Exchange collapsed. This occurred after a period of prosperity, “the Roaring Twenties”, not unlike the way things were in London in 2006/2007.

The human effect of the Wall Street crash is well documented, and from reading about the Great Depression I really hope it doesn’t come to this for us – but let's not lose sight of the fact that over the past few years in the UK alone repossession rates have risen – for example a recent 2008 forecast is that repossessions will be 23% more than in 2007. This means around a hundred families a day.

To find out more about what happened back in 1929, there is a documentary on The Business Channel this week. Tune in to Sky channel 547 at 20:00 on Thursday 9th October 2008 (repeated again at 23:00 the same day, and at 10:00, 14:00 and 17:00 on Friday 10th October). For more information on the channel and to see the other business related content that is on offer, visit http://thebusinesschannel.com

Meanwhile, time will tell how Gordon Brown compares to Herbert Hoover, as well as what effect (if any) forthcoming elections in the US and maybe here too will have.

* I see these strange creatures every time I say the word “phenomena” – Kermit the Frog and Sandra Bullock – see here – we’ve got to have something to smile about in these hard times.

Dragonfly – Where Now For Contracting?

Fawlty Towers series 2 episode 1 “Communication Problems” includes the moment when Sybil found out that Basil had bet some money on a horse called Dragonfly. At one point, Polly and Basil convince Sybil that the money is Polly’s, but then Polly can’t remember the name of the horse. Basil does actions behind Sybil’s back for Polly (pointing at Sybil, pointing at his trouser zip, flapping his arms like wings), and Polly first guesses Birdbrain, then Fishwife, Flying Tart, and then correctly guesses Dragonfly and Basil runs off.

However, whilst Dragonfly the horse was lucky for Basil (almost), Dragonfly Consulting Ltd was not lucky for Mr Jon Bessell. Yesterday, the Court of Appeal handed down their decision in his appeal (against the Special Commissioners of HMRC) stating that the work he did for the AA over the period 2000-2003 falls within the scope of IR35. The implication of this is that Dragonfly Consulting will have to pay £99,000 (plus penalties) to HMRC in unpaid taxes and National Insurance contributions.

Essentially, many self-employed people (not just in IT – a sizeable number of people in Finance too) work through their own limited company. The issue is that the IR35 legislation essentially performs a lookthrough test, and decides whether, if the intermediary (which might be the worker's own limited company and/or a recruitment agency) were not there, the relationship between the worker and the end user client would be one of employment.

Since the legislation came in, many companies have made a lot of money by offering supposed solutions to workers in this position – contracts that claim to avoid IR35, off the shelf limited companies for the worker, with the selling point of maximising the worker’s take home pay.  More recently, the industry (for it is an industry – the big players have even recently set themselves up with an industry trade body) has moved towards offshore solutions. However, the crux of the matter is that HMRC do not like this, and if someone does work where the reality of the situation is that they appear as an employee, then HMRC will seek to tax them as such.

The primary advantage (to the worker) of the limited company set-up is that they can take a small salary (often as low as £5,000) and receive the rest of their earnings as dividends (which are taxed differently) – specifically this allows them to avoid the 40% income tax bracket – which is precisely what HMRC does not want.

The tests used to identify the status of a relationship are control, integration, economic reality and mutuality of obligation. This particular case focused in particular on Control and Mutuality (and related to both, Substitution). The fact that in reality Dragonfly Consulting could not substitute an equivalent professional at no notice was held to be crucial. The Intention of the Parties was summed up by The Honourable Mr Justice Henderson as: “statements by the parties disavowing any intention to create a relationship of employment cannot prevail over the true legal effect of the agreement between them” – i.e. that despite the fact that neither the AA nor Mr. Bessell wanted their relationship to be seen as an employment one, that is immaterial when the Economic Reality of the issue is considered.

ADVICE FOR WORKERS

Without delay, talk to your accountant and solicitor, and see what the implications of this decision are for you. If you spend a few months working for one client, then the next few months with one different client, then it is likely that this issue could apply to you.

Specifically, your risk is a demand for payment of (deemed) tax and NIC due within the relevant time period, remembering that the company will also have to pay the employers NICs.

ADVICE FOR COMPANIES EMPLOYING CONTRACTORS

Be aware that different legislation gives HMRC the power (in certain circumstances) to go to the recruitment agency and/or the end user client for certain unpaid tax debts of the limited company.

If you want people who aren’t employees, then treat them as contractors.  If you want someone you can integrate into your structure, then get an employee.

SUMMARY

Be aware of the risks, and make sure that the reality of your working environment reflects the role you are trying to play. Just as Sybil Fawlty always found out what Basil was up to, Her Majesty’s Revenue and Customs will always pursue any money they believe to be theirs – and whether you believe it is irrelevant, rightly or wrongly.

USEFUL LINKS

Professional Contractors Group – http://www.pcg.org.uk
HMRC IR35 Pages – http://www.hmrc.gov.uk/ir35
Google 'offshore contractor scheme' to find out about this (but this comes with a note of caution).

Who owns your online networking contacts‏?

In an initial judgment released this week, Mr Justice Richards of the Chancery Division of the High Court held that, under certain circumstances, the LinkedIn contacts of a former employee could be the company’s confidential data.

Hays v Ions was an application by Hays to force its former employee to disclose contacts on his LinkedIn account (as well as other things pertaining to his new business, Exclusive Human Resources Ltd). Hays successfully obtained an order to disclose “emails sent to or received by [Mr Ions'] LinkedIn account from the [Hays] computer network” as well as timesheets, invoices and other documents showing business made from these contacts, but failed in its request to see EHR’s complete candidate and client database. Hays will presumably use this information to consider whether there is a potential claim against Mark Ions in due course.

For many of us, the idea that our employer could ‘own’ our contacts on LinkedIn or Facebook is unthinkable. It's our profile, right? Our education, and current and previous employers? And a mix of our personal friends, previous colleagues, and other professionals we have dealt with in some way?  The issue in this case is the contacts themselves, and the process of uploading them to the site (done automatically by a tool on LinkedIn and Facebook).

Whilst I do have some sympathy with both parties, the proposition that an employee must delete all contacts added as a result of that employment seems strange to say the least. The idea with networking sites is that each person has a profile that builds up their whole life, not just one company. The obvious implication I can see is that the former employer, applying the same logic, could insist that a more personal relationship must cease when an employee resigns, on the grounds that the two people met during a business capacity only.

However, the internet has given every person a platform to share their opinions and thoughts to a wide audience, and even photos taken inside an office and uploaded to Facebook could be seen to constitute a breach of the employer's confidentiality requirements. It could also be said that many users have an overriding objective to increase their number of friends, or ‘connections’, on these websites, and so they add or accept people whom they wouldn’t dream of inviting round to a family barbecue. But that’s 21st century life all round. It's all about the numbers – quantity, statistics, sizes and money – and I’m not talking accounting.