Recruitment Newsletter, Winter Edition

Read. Review. Recruit.

Recruitment Newsletter Winter 2015/16

Key Changes Recruitment Agencies need to Look out for in 2016

Gifting Company Shares to Employees

Has HMRC Gone Soft on Recruitment Companies?

2015 brought us a tremendous amount of changes, many of which are coming into affect this year.

Gifting company shares to an employee can be a great way to reward them in a tax efficient manner.

At the statement, the Chancellor made no reference to IR35 and it appears that no immediate action will be taken.

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Your Business Our Passion

Your Businesswww.raffingers.co.uk Our Passion 1

Contents

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Welcome and Partners

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Special Feature Key Changes Recruitment Agencies Need to Look out for in 2016

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Employee Spotlight

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Employment Levels Increase by 207,000

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Raffingers Service Reducing the Cost of Business Rates

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2015 Recruitment Benchmarking Report

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Gifting Company Shares to Employees

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Enterprise Management Incentives (EMIs)

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Xero Add-On Introducing Chaser

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Events 2016

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UK Employees Amongst the Least Loyal in Europe

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Why are Face-to-face Interviews Still the Best Recruiting Method?

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Partner Perspective Has HMRC Gone Soft on Recruitment Companies?

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Recruiters ‘Getting to Grips with Intermediaries Reporting’

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www.raffingers.co.uk

Welcome to our WINTER Newsletter After an excellent 2015, we are excited to announce that going forward we will be using our new rebranded name, Raffingers. To coincide with this and to help us provide further support to the recruitment sector we have also launched our new website - www.raffingers.co.uk - which is jam packed with videos and resources that we hope you will find useful.

Raffingers Partners

Gary Inglis Managing Partner gary@raffingers.co.uk

Andrew Coney Partner

Now, looking forward to 2016, we have used this edition to summarise the key changes set to affect the recruitment sector this year, such as those being made to Travel and Subsistence Expenses and, potentially, IR35. We also feature Lee Manning’s latest blog, which discusses the Autumn Statement and how it will impact upon the recruitment industry.

andrew@raffingers.co.uk

Furthermore, we remind you of our 2015 Recruitment Benchmarking Report, which captures the current trends in the industry, along with estimations of what we can expect to see in 2016.

Adam Moody Partner

If you would like to be featured in our next edition, or have any suggestions for topics that you would like to see discussed, please get in touch.

Lee Manning Partner lee@raffingers.co.uk

adam@raffingers.co.uk

Suda Ratnam Partner suda@raffingers.co.uk

We wish you a successful 2016!

The Partners at Raffingers

Barry Soraff Partner barry@raffingers.co.uk

Paul Dell Partner paul@raffingers.co.uk

Last Chance to Save Tax Before the 2016 Budget - Page 11 Your Business Our Passion

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SPECIAL FEATURE

Key Changes Recruitment Agencies Need to Look out for in 2016 2015 was a tough year for the recruitment industry after HMRC lived up to their promise of cracking down on tax avoidance in the sector. So, what is changing?

Umbrella Companies and Personal Service Companies (PSCs)

IR35 Update

Remuneration

In 2015, proposals were made to remove home to work travel and subsistence tax relief for workers that are supplying personal services and engaged through an employment intermediary.

Surprisingly, as of yet, no changes have been made to IR35. Although, Umbrella Companies and PSCs are not in the clear yet as changes are still likely.

As of 6 April 2016 dividends will be taxed using the following rates:

The Autumn Statement has confirmed that whilst these changes will apply to umbrella companies as of 6 April 2016, the restriction will only apply to those working through a PSC if they are caught within the current “IR35” legislation.

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The key change rumoured is the suggestion that those who engage a contractor through an employment intermediary should be responsible for ensuring the right amount of employment taxes are paid. It is expected that this change would mean the end of employment intermediaries as engagers would err on the side of caution, removing the associated tax advantages

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● First £5,000 will be tax free (0% band) ● Basic rate taxpayers will be taxed at 7.5% ● Higher rate taxpayers will be taxed at 32.5% ● Additional rate taxpayers will be taxed at 38.1%

Gary Inglis 020 8418 2770 gary@raffingers.co.uk

Pensions

Apprenticeships – Large Employers

Company Car Tax – Diesel

From April 2016 the basic state pension will rise to £119.30, an increase of £3.35 per week.

This will be the biggest real term increase for state pensions for 15 years.

The government is trying to encourage more businesses to take on more apprentices.

Where a company provides a car that is diesel fuelled there is currently a 3% supplement, which applies to both company car tax and fuel tax rates. As per the Autumn Statement, this supplement charge will remain until April 2021. The government will then need to ensure that diesel cars meet the air quality standards set by the EU.

Also, from April 2016 the pension system is changing and for those that reach the state pensionable age the new flat rate will be £155.65.

From April 2017, large employers will have to pay a 0.5% levy on their payroll and employers will receive an allowance of £15,000, which can be offset against their levy payment of 0.5%. However, the levy will only be payable by companies with payrolls exceeding £3million.

Consultation will be taking place surrounding the levy shortly.

Your Business Our Passion

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Employee Spotlight

Employment Levels Increase by 207,000 Office for National Statistics, Labour Market Statistics, December 2015

In this slot we introduce you to a valued member of our team, allowing you to put a face to a name. This quarter we speak to our Cloud Accounting Manager, Amy Townsend.

Name: Amy Townsend DOB: 16 December 1983 Email: amy@raffingers.co.uk Career history: Raffingers is the third accountancy practice that I have worked for. The first practice being a small two partner firm in Goff’s Oak where I worked for eight and a half years and achieved my AAT qualification. Whilst working there I also developed my skills in management accounts, year-end accounts, VAT returns and personal tax.

In order to further my experience and meet new people I made the decision to move on from there to a larger firm in Potters Bar. In September 2015, an exciting opportunity then presented itself to me, which I could not resist: to start a new cloud accounting department at Raffingers.

I have always been involved in cloud accounting after seeing the tremendous benefits it brings to businesses and in my opinion marks the future of the accountancy profession. I now look forward to building the department and promoting the benefits of cloud accounting to Raffingers’ clients.

Interests: I enjoy horse riding, attending concerts and the theatre. However, I especially love spending time with my son, partner and family.

Partners Report: Since Amy has been with us she has definitely made the office a livelier place with her rather cheerful “good mornings”. However, on a more serious note, she has made a huge difference to our cloud accounting service and I can see that this will only grow from strength to strength.

I have been impressed with Amy’s client service, which is excellent and her knowledge of Xero is second to none, I wish we had employed her years ago.

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● 31.30million people now in work ● Employment rate of 73.9% ● 747,000 job vacancies ● 2% increase in weekly wages The latest figures from the Office for National Statistics (ONS) are out and it appears that there is good news for the recruitment sector...

In the three months leading up to October 2015, the number of people in employment increased by 207,000, meaning that 31.30million people are now in work.

Of these 31.30million workers, 22.88million are in full-time work (338,000 more than a year earlier) and 8.42million are working part time (167,000 more than a year earlier).

These statistics are good news for the sector as it shows market confidence is still high. So high in fact that during this period, ONS reported that there were 747,000 job vacancies, 45,000 more than a year earlier and the highest figure recorded since records began in 2001.

Consequently, the employment rate remains high at 73.9% - again the highest rate recorded since records began in 1971.

The good news continues with unemployment falling by 110,000 and average weekly wages rising by 2%, excluding bonuses and 2.4%, including bonuses. This means average weekly pay excluding bonuses is now set at £463 per week (up from £455), and average pay including bonuses has increased to £493 per week (up from £484). This rise is to be expected with companies continuing to offer more benefits in order to attract and retain quality employees.

In our Recruitment Benchmarking Report 2015, 100% of agencies that responded declared bonuses as their key employee incentive. This was closely followed by flexible working and pensions.

(See page 8 for more details).

The employment market is evidently still strong and is benefiting from the steady growth the UK economy is currently experiencing. With growth expected to continue into 2016, it is expected that these employment figures will continue to rise.

Reducing the Cost of Business Rates RAFFINGERS SERVICE

The government demand to recover tax to offset national debt is now incessant. We have seen from the Autumn Statement that it is happy to systematically change legislation across all of its legitimate revenue areas. This means that property is being targeted, and most importantly business rates have not escaped the microscope.

Business rates are likely to be one the highest costs in your business right now and it is unsurprising that whether you own or lease property you will be looking to reduce your overheads. As well as reducing the costs now, you may also want to reduce the costs in the future.

Did you know that business rate periods usually run for five years? The current period which started in 2010 was extended for two years due to the 2015 general election. However, if you appeal your business rates after 31 March 2015 and agree a reduction you would only be entitled to a refund from 1 April 2015. When the new ratings period begins in 2017 you will also have to appeal again to make savings.

The government is almost operating stealthily by not bringing the savings directly to the attention of landlords and tenants. These legislation changes demand that a more diligent and professional service is required to underwrite rates, negotiations and appeals. However, those that have served the market thus far have a poor reputation with businesses and have been lambasted in the media in terms of service, delivery, tie in fees and fee levels.

Stage

What?

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The Service

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Process

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Enagagement

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Team

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Reporting

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Fee

So, a trusted source of guidance and advice is sought at the right fee level across the market, both at this time and in the transition to the new higher standards of diligence being demanded by the government.

We have teamed up with a provider who works through us in our capacity as a trusted advisor to you and your business. They offer a Business Rates Management Service that has not only been preprepared for the forthcoming legislative changes, it is a service that saves time and provides value for money to really help reduce the overhead of owning and/or operating property.

If you are landlord or tenant paying more ÂŁ20,000 of business rates then you may benefit, even if you have appealed before.

Why not appeal your business rates using their low risk Six Point Process below?

There is nothing to pay up front.

While the government is chipping away at your tax and business reliefs, it may be worth your while reviewing your rates bill and appealing for a reduction now and for the future.

For further information please contact: Barry Soraff 020 8418 2663 barry@raffingers.co.uk

Why? A managed process to help reduce overheads and enhance profitability No obligation analysis that is assessed for appeal success up front Once you are happy we will engage with the Valuation office Agency VOA We have an 85% success rate due to our relationship with the VOA Regular progress updates in line with the new VOA Check, Challenge and Appeal process You will not pay standing fees nor be tied in for long periods at no value to you

Your Business Our Passion

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2015 Recruitment Benchmarking Report We are pleased to announce the highlights from our 2015 Recruitment Benchmarking Report, which was sent out to over 1000 recruitment agencies.

56% of agencies experienced an

increase in turnover in the last

A Brief Summary: To begin, it is worth noting that the majority of respondents (61% in total) reported a turnover of up to £1million, an 11% increase on 2014. This growth may mean nothing or it may be an indication that startup agencies are increasing and taking advantage of one of the fastest growing sectors. It will be interesting to keep an eye on whether this trend continues, and if so, whether the increase in competition will have a detrimental effect on some agencies.

Already, you could say that it has had a negative impact as 56% (30% less) of respondents reported an increase in turnover. However, after the substantial growth the recruitment sector experienced in 2014, it was hard to imagine how the sector could beat the growth achieved.

More promisingly, 78% of agencies still expect their turnover to increase in the next 12 months. Optimism is evidently still high; however, for this growth to be achieved it is getting essential that solutions are found for the ‘skill shortages’, now a concern for 36% of agencies. Currently, to help tackle the problem and to retain quality employees some agencies are beginning to offer more innovative employee benefits, such as mortgage schemes and loans and flexible working.

These types of benefits are expected to get more and more popular in the years to come.

In regards to the operational side of agencies, it is concerning that 16% (2% more than 2014) are still unaware of their automatic enrolment responsibilities, especially when all existing firms must have their

12 months

46% of agencies now experience ‘occasional’ or ‘often’ problems

with their cashflow

83% of agencies are

unaware of their automatic enrolment responsibilities

employees enrolled by April 2017 and all new employers

by February 2018. Time is running out for agencies to implement schemes.

Finally, in respect of ‘Your Accounts and Bookkeeping’, we are pleased to see that Xero users have doubled.

This is a software that we are advocating after seeing the positive impact it has had on our client’s businesses, and it is great to see the sector using the software to run their agencies more efficiently.

Recruitment Benchmarking Report 2015/16 Email, lauren@raffingers.co.uk to request your copy.

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Gifting Company Shares to Employees Gifting company shares to an employee can be a great way to reward them in a tax efficient manner. However, it is first important to establish the type of shares being gifted.

Readily Convertible Assets If the shares are a ‘readily convertible asset’ the treatment of the shares gifted will be different. A ‘readily convertible asset’ is usually comprised of shares that are listed on the stock exchange, but can include shares where the below conditions are met: ● The employer has made arrangement for the shares to be sold or turned into cash after the gift? ● The company in which the shares are gifted from is controlled by another company?

If, the shares are ‘readily convertible assets’ you will be required to operate PAYE/ NIC on the shares gifted (market value), as well as be required to pay the PAYE tax to HMRC by the 19th or 22nd of the following tax month of the gift.

The employee could be left in a deficit cash position as PAYE tax will be applied on both the shares as well as their cash earnings. If this is the case, the employee will have 90 days from the end of the tax year to repay the deficit to you.

Consequently, you may wish to provide a beneficial

Enterprise Management Incentives (EMI) Employers can help attract and retain employees by rewarding selected employees with a tax favoured scheme, such as an EMI.

For further information on gifting company shares and share incentives, please contact:

loan to cover the PAYE tax, which if below £10,000 will not be a taxable benefit.

None Readily Convertible Assets On the assumption that the shares you wish to gift are not ‘Readily Convertible Assets’, you will be able to gift shares to an employee without paying any tax.

Instead, the employee will be taxed on the market value of the shares at the date the shares were gifted.

The benefit will form part of the employee’s selfassessment tax return.

How the Company reports the gift Employers will be required to complete and submit a ‘Form 42’ detailing the transaction and PAYE operated (if the shares are a ‘readily convertible asset’).

This scheme is mainly targeted at small trading companies.

An EMI scheme gives employees the option to purchase shares within the company at an agreed price, giving the opportunity for growth. The option must be exercised within ten years in order to receive tax advantages.

Paul Dell 020 8418 2688 paul@raffingers.co.uk

Your Business Our Passion

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Introducing Chaser We understand how much it hurts when your customers do not pay their invoices on time, currently UK SMEs are owed £55billion in overdue invoices.

XERO ADD-ON

Polite, persistent chasing is the single most effective thing you can do to get your invoices paid, yet it is incredibly time consuming. This is where Chaser comes in, carrying out the whole process automatically.

Through simply chasing invoices, Chaser is able to reduce debtor days, on average, by 26 days, which is equivalent to a cashflow boost of over £7,000 for each £100,000 of turnover. This is like a free cash investment, which you can invest in growing your business. Chaser also saves, on average, 11.5 hours of manual chasing time each month. This is time you can spend on more exciting business activities or, dare we say it, use it to take a break!

So, how does Chaser work?

We at Raffingers will help you securely connect your Xero account to Chaser. You can then set the chasers that you want your customers to receive and when.

All of this is completely customisable by you. Then, all you need to do is sit back and let Chaser chase automatically; all while doing so with a human touch to maximise the effectiveness of the emails sent.

Chaser will never chase any unpaid invoices without notifying you beforehand. Plus, it will always have up

if you get just one add-on for Xero, make it this one.

to date information from Xero so invoices that have been marked or reconciled as fully paid will never be chased. Chaser will also give you the flexibility to match what you would do if chasing personally: to chase different customers in different ways; and to chase multiple invoices for the same customer in one chaser rather than sending multiple ones.

Raffingers are proud to be Chaser partners. If you are interested in using Chaser’s 90 day free trial, please contact Chaser using the contact details below or email our Xero Manager, Amy Townsend at amy@ raffingers.co.uk.

For further information on Chaser please contact: David Tuck, Co-founder and CEO david.tuck@chaser.io www.chaser.io

*Example of a Chaser email

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Events 2016 Upcoming Events

Last Chance to Save Tax before the 2016 Budget Date: 11 February 2016 Venue: Prince Regent, Chigwell

Budget 2016 and Recruitment Sector

With the Budget just around the corner, we invite you to join us for breakfast to discuss what you can do to mitigate tax beforehand.

the

Date: March 2016 This is a must attend event for agency owners and finance directors and managers who want to see what the impact the Budget will have on their business and how they can overcome any changes.

At this exclusive event, we will delve into pensions, dividends and all things tax. We even have an update on the current status of HMRC enquiries from a former HMRC tax inspector. Other speakers include, Wealth Management Expert, Sheriar Bradbury and Lee Manning, Partner at Raffingers.

Topics to be discussed:

Annual Charity Golf Day

• Key changes coming in to force in 2016 (including those affecting dividends and buy to let properties) • Pensions update • Death benefits • Current status of revenue enquiries • R&D eligibility

Date: July 2016 Our annual charity golf day is now in its tenth year and will this year be raising money for the Raffingers Foundation.

Who should attend?

We recommend you should attend if you: • Draw dividends from your trading company • Own investment properties • Would like to know whether your business can take advantage of the very favourable R&D tax credits • Would like to know the latest on the new pension rules legislation and how you can take advantage • Do not want to be caught by the current aggressive stance being taken by HMRC

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To secure your place at any of our events, please contact: Danniella Cross 020 8418 2709 danniella@raffingers.co.uk

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Your Business Our Passion

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UK Employees Amongst the Least Loyal in Europe

In a recent study by APD, leading global provider of Human Capital Management (HCM) solutions, it was discovered that although UK employees are the most optimistic in Europe about their future, they are also the least loyal. The study looked at over 11,000 working adults in Europe and explored their attitude to work.

From the research, it was discovered that UK employees have the most amount of faith in their company’s ability to compete for business and talent across other countries. However, we also have the least loyal employees. In fact, as many as 47% of British employees aim to change jobs in less than three years, compared to as little as 34% across Europe.

The UK also contains the least engaged employees amongst Europe. A staggering 52% of employees feel there is a lack of engagement with their organisation, whilst only 44% of employees across Europe feel the same. The key factor that is believed to have impacted this outcome is the lack of financial benefits offered to UK employees. For example, up until recently, businesses have not been required to create a pension scheme for their employees, so therefore many have not. From the study it is apparent that financially focused employees lead to more loyal employees.

Not surprisingly, it was also highlighted by the survey that flexible working is another strong factor for engaging and motivating employees.

However, as many as 28% of employees within the UK are not provided with any technical training or tools by their employer to make this possible. With schemes such as flexible working, technology should be of high priority to offices so employees can adopt a working pattern that suits them.

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Why are Face-to-Face Interviews Still the Best Recruiting Method?

With the recruitment industry continuing to grow, it would seem that traditional methods of recruiting, such as face-to-face interviews, are slowly becoming devalued and replaced with quicker, online methods. Here we take a look at the top four interviewing techniques.

Skype Conducting interviews via Skype has given recruiters and business owners more freedom. No longer do they have to be present in every single interview. It is common in these interviews to have a pre-recorded video of the interviewer asking the questions, with an allocated time given for the candidate’s answers. Not only does this free up the time of those interviewing, but it also removes the obstacle of travelling, opening up jobs to more, potential candidates.

Telephone Interviews Telephone interviews are another great way to hire the right candidate. Indeed, phone interviews do visually deprive the interviewer; however, it is still possible to judge the candidate’s personality and passion through their tone of voice. Phone interviews have become a popular way to ‘weed’ out weaker candidates before a formal interview.

Face-to-Face Interviews Despite alternative interviewing techniques, face-toface interviews are the only ones in which you can see, truly a candidate’s social cues, passion and personality.

Consequently, this method of interviewing allows the interviewer to form a realistic opinion about their candidates, which in the long run helps to produce a stronger work force.

Workshops and Tests Face-to-face interviews are a great way to get a sense of a candidate’s personality, but unless you set a test or even hold a workshop (where you can invite all potential candidates to carry out a task or team building exercise), you are unable to get a true idea of a candidate’s expertise. Workshops particularly are a great way to see which skills candidates have and whether or not they would integrate into your existing team.

When it comes to each individual interviewing technique, it would be fair to say that they each hold a great amount of value. Ideally, Skype and telephone interviews should be used in conjunction with faceto-face interviews and workshops, but never on their own (if feasible).

Your Business Our Passion

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Partner’s Perspective

Has HMRC Gone Soft on Recruitment Companies?

Prior to the Autumn Statement there were so many leaked changes concerning IR35 that I was already preparing myself for delivering bad news.

However, after the Chancellor’s announcement on Wednesday 25 November 2015 it appears that the government has taken a step back, where IR35 is concerned anyway.

At the statement, the Chancellor made no reference to IR35 and it appears that no immediate action will be taken. Although, umbrella companies and Personal Service Companies (PSCs) are not in the clear yet as IR35 reforms are still highly likely, so watch this space.

However, the Chancellor did confirm that they will be going ahead with travel and subsistence expense reforms. The Summer Budget highlighted changes concerning claims for travel and subsistence by umbrella companies and PSCs. Original proposals were to remove home to work travel and subsistence tax relief for workers engaged through an employment intermediary.

Travel and subsistence expenses will be restricted for umbrella workers as of 6 April 2016. However, PSCs seem to have got off lightly as the restriction will only apply to individuals working through a PSC if caught within the current “IR35” legislation, essentially meaning that if a worker would be considered selfemployed if they were not working through a PSC, they can continue to claim tax relief for their travel and subsistence.

In regards to travel and subsistence expenses PSCs look to have been let off. However, we now need to wait

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Travel and subsistence expenses will be restricted for umbrella workers as of 6 April 2016.

with baited breath to see if the changes to IR35 will be given the go ahead. In my opinion, changes are going to be taken to tighten up the rules on IR35 and hopefully due to the excellent lobbying by organisations such as APSCO the far reaching proposals outlined prior to the Autumn Statement might be watered down. This will hopefully mean the onerous additional administration work that the recruitment companies were going to face might not be so bad after all.

Lee Manning 020 8418 2662 lee@raffingers.co.uk

Recruiters ‘Getting to Grips with Intermediaries Reporting’ Recruiters placing contractors and freelancers are coping well with the reporting requirements outlined by the employment intermediaries’ legislation, new research suggests.

A survey of more than 100 recruitment agency professionals, conducted by ADVANCE, found that most have adjusted well to the regulations.

Just 11% of respondents said the additional layer of admin has had a major impact on their agency, with 25% experiencing either very little or no impact.

A majority (54%) agreed that HMRC had been helpful and managed the introduction of the reporting and record-keeping requirements well.

There was, however, some strong criticism from those who felt the launch could have been handled better.

One recruiter stated: “HMRC’s advice has been unclear and ambiguous, and in some instances unhelpful and threatening.”

Another said: “Hardly any information has been provided prior to, during or

since the introduction. We would not have been aware the legislation had been introduced if it wasn’t for the umbrella companies we work with.”

Introduced earlier this year as part of government efforts to combat false self-employment, the reporting requirements mean a staffing firm must keep a record of all contract and temporary workers who are not paid through its own PAYE scheme.

This data must be sent to HMRC via a quarterly online return. The current reporting period ends on 5 January 2016.

Founded in 2010, ADVANCE is the only provider to have passed Freelancer & Contractor Services Association (FCSA) audits for limited company, umbrella company and self-employment solutions.

The company supports contractors, freelancers and recruitment businesses operating in a range of sectors, from IT, technology and engineering to construction and manufacturing. *Source: APSCo - www.apsco.org

Your Business Our Passion

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Head Office 19-20 Bourne Court, Southend Road, Woodford Green, Essex, IG8 8HD Tel: 020 8551 7200 Fax: 020 8551 0912 Email: info@raffingers.co.uk London Office 3rd Floor, 5-10 Bury Street, London, EC3A 5AT Tel: 020 7167 6880 www.raffingers.co.uk

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