The last month brought some changes to the contracting industry, some of which may affect how you run your limited company. To help you keep up to date with this news, we have compiled the most important updates into a roundup.
Sick pay valued over other benefits
A study conducted by FreeAgent and The Freelancer & Contractor Services Association (FCSA) published some of their recent findings in the contracting industry. Their study, which polled 900 micro-business owners, found that 76% currently do not offer sick pay, maternity leave or holiday pay as employee benefits. 35% of all self-employed participants also stated that they do not currently have plans to fund their own retirement. Julia Kermode, chief executive at the FCSA said, “It is clear from our research that many have not made appropriate provisions to cover benefits that employees receive. The government should find a way of offering additional benefits, specifically to those people who want and need them.”
Savings for contractors
Compared to full-time employers, the self-employed don’t have access to benefits or employer pension contributions to support their savings. However, there are still options available. You can usually save up to £40,000 per year tax-free into a pension, while you can save up to £20,000 a year into an ISA. This should provide a greater level of security as a contractor.
Lack of funds holding back start-ups
A research survey by Yell Business has revealed that 40% of aspiring entrepreneurs cited lack of funds as the main barrier to starting a business. Of the 1,500 participants, 51% thought about starting their own business, but barriers such as the risk of failure (25%) and not knowing where to start (23%) were preventing them from doing so. However, the study found 40% of businesses were started on under £500, while 32% were formed on £250 or less. Further findings discovered that an impressive 93% who started a business recorded a profit last year and that 85% considered their business to be successful. The marketing director of Yell Business, Mark Clisby said, “As our research found, the current catalysts for taking the leap and starting a business include inheriting funds and being made redundant. Hopefully, the positive revelations around low start-up cost and high success will give the inspiration needed to entrepreneurs, so they don’t wait for scenarios like this to happen to them.” Despite a lack of funds, it seems that many contractors are enjoying successes with establishing and running limited companies.
Loans for start-ups
If you are unable to obtain investment, mentoring or support to launch your business, there is government funding available to help. The Start-Up Loan Scheme is available if you’ve been trading for less than 12 months and the size of the loan is determined by the direction of your business plan. There are other regional funding opportunities for start-ups depending on your eligibility, and the full list can be accessed via GOV.UK.
The changes to PSC reporting
New changes to the people with significant control (PSC) register means that all companies and limited liability partnerships (LLPs) are required to identify and record people with significant control over their company. Previously, a company or LLP would need to make changes to the PSC register as part of the annual confirmation statement submitted to Companies House. In June 2017, the rules changed and stated that all PSC changed must be directly reported to Companies House and not via the confirmation statement procedure. Those with outstanding updates to their PSC registers following the filing of their annual confirmation statements on or after 26th June 2017 will be subject to the 14-day deadline.
Identifying people with significant control
Companies need to register an individual who meets one or more of the following conditions:
• Owns 25% of the company shares
• Owns 25% of the voting rights
• Has the right to appoint or remove a majority of directors on the board
• Has significant influence or control over the company
• Has significant influence or control over a trust or company that meets one of the other conditions
Limited companies will also need to include the following details for each PSC:
• Address (both residential and service)
• Country of residence
• Date of birth
• Date the person became a PSC
• Which of the five conditions they meet
• Any restrictions on the disclosure
Businesses approve Prompt Payment Code
It is estimated that SMEs are collectively owed more than £26 billion in overdue payments and businesses are attempting to make steps to ensure that contractors are being paid for the work they undertake. Businesses have backed the Prompt Payment Code (PPC) to support limited companies who are dealing with late payments. This means that contractors should receive support in chasing late payments and invoices with a set of clear guidance on procedures. Suppliers to the government have willingly committed to pay 95% of invoices within 60 days and are working towards making 30 days the standard for paying invoices.
Steps for handling late payments
If a business has unpaid invoices, the assumption is that it may not be able to pay its suppliers on time. Actions have been suggested to help reduce the impact caused by late payments, including:
• Ensuring all transactions are under a contract which sets out payments and penalties
• Charging interest on late payments
• The use of up-front payments or taking down payments
• Discounts for prompt payments
Support from SJD
Our team of experts are always on hand to answer any of your questions or to provide advice about how these changes may affect you. To get in touch, simply call us on 01442 330890 or email firstname.lastname@example.org.