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THE NEXT STEPS FOR THE FINANCE SECTOR NOW THE NEW IR35 LEGISLATION IS LIVE

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Matt Fryer, Head of Legal Services at Brookson Legal

 

While there was a lot of attention being paid to the IR35 implementation date on April 6th, it is vital that finance businesses working with contractors and freelancers understand this is just the start of the journey.

With all medium and large financial service organisations affected by the new legislation, hirers now need to embed a completely new approach to contingent workforce management throughout their operations and their resource supply chains.

The end-hirer is now responsible for producing the Status Determination Statements (SDSs) of its contractors. This will decide whether the hiring business (or agency if one is in use) will deduct and pay over to HMRC the employment taxes (NI and income tax) for the contractor classed as inside IR35.

Managing this process properly is crucial to ensuring compliance with HMRC, as well as to attracting talented and experienced contractors in an increasingly competitive market.

 

Blanket bans and shortcuts

Prior to the deadline, many organisations will have taken short cuts to putting an IR35 solution in place. These solutions will not work as a viable long-term approach to compliance. Some could also create severe limitations on potential for business growth in the years to come.

Matt Fryer

A clear example of this is a blanket ban on the use of contractors. While blanket bans can seem appealing to organisations as a straight-forward, risk-free option, businesses using them will quickly discover that they will be missing out on the contractor talent pool that is working outside the IR35 regulations. Often highly skilled specialists or professionals, they are unlikely to be willing to take a pay cut to do the same work inside IR35.

In fact, data from HMRC’s CEST (Check Employment Status for Tax) tool indicates that only 30% of contractors whose status has been determined to date have been found to be inside IR35, with the remaining 70% made up of outside IR35 determinations (50%) or an undetermined statement (20%). Status determinations made by Brookson Legal mirror those of HMRC, with approximately 70% of contracts showing to be outside of IR35.

A further example of a short cut which appears to have been used by many large financial services businesses is attempting to shift the risk and responsibility by “outsourcing” certain services traditionally provided by contractors. This is a high-risk strategy, as getting the outsourcing arrangements wrong or relabelling the provision of labour as an outsourced service is unlikely to shift the risk and responsibilities away from the end user of the contract labour.

 

IR35 and attracting talent

As we begin our journey out of lockdown and the economy begins to recover, it is important that finance businesses don’t limit the talent they can recruit through the use of a blanket approach or a hastily implemented IR35 solution.

Using data from Jobfeed, Brookson Legal research found that only 6% of contractor job advertisements in the insurance and finance sector mentioned IR35 in the w/c March 8th, 2021. In comparison, the IT sector mentioned IR35 in adverts for 24% of contractor roles on the same date. This indicates that the financial services sector has not responded as proactively to the IR35 changes as other sectors have and could therefore be losing out on the top contractor talent to other organisations who have taken the time to understand the legislation and ensure that it is correctly applied.

 

Business as usual

For financial service organisations that have taken appropriate steps already, now is the time to carefully evaluate their contingent workforce management for business as usual going forwards. This work ranges from processes for recruitment and contract management to checking that you have the right systems in place for the correct payment of wages and tax. It is also essential to ensure that you have visibility of this compliance throughout your resource supply chain. If you do not know how IR35 is being managed by your suppliers, you need to ask them. At the end of the day, it is the end hirer that HMRC will hold accountable for recovery of tax and even fines.

Although the IR35 implementation deadline has passed, taking the time to evaluate your solution now will help ensure compliance, mitigate risk and prevent surprise fines and tax bills from HMRC in the future.

 

Business

IS SCARCITY OF TALENT THREATENING THE UK’S FINTECH CROWN?

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Opinion From Rafa Plantier, Head of UK and Ireland at Tink

 

From the Square Mile to Canary Wharf, London has been the historic centre of global finance, with long-established trading exchanges and trusted financial institutions. In the digital era, it has also ensured that it’s moved with the times to become a thriving hub for fintech.

But the UK financial services sector is now at an inflection point. In the past year, London’s position as a global fintech leader has been under threat. Earlier this year, Amsterdam overtook The City as the largest European share trading hub. The European Banking Authority moved from London to Paris. And Dublin, Paris and Frankfurt are all competing to win a greater share of the European financial marketplace.

The culprits of the shift are the twin challenges of the pandemic and Brexit, combined with the speed of technological transformation in financial services – disrupting the traditional flow of people, capital and ideas. So the pressing question for the industry is: how do we maintain and, more importantly, accelerate momentum to retain London’s fintech crown?

The answer revolves around one key thing — people.

 

Diverse talent drives innovation

Attracting the best talent is crucial if the UK financial services sector is going to continue to thrive and retain its global position as the preeminent financial centre.

In February 2021, the Kalifa Review laid out a strategy and delivery model for the UK to lead the fintech revolution, covering five key areas. These included skills and talent, investment and international attractiveness and competitiveness. But what became clear was that access to the right level of highly skilled talent was one of the biggest challenges for UK fintech, with barriers spanning both domestic skills shortages and the need to access foreign talent seamlessly.

As a native Brazilian in the UK, working for a Swedish-owned fintech, I understand these challenges as well as anyone. I love London, but we must recognise that fintech firms need unique talent and skills, and such a talent base can’t be met by a single city – not even one as resourceful as London. Not only do fintechs require technology and data specialists, but also experienced managers with good knowledge of high-growth companies and financial services.

As someone lucky enough to have worked with startup and scale-up fintechs across the world,  I understand the unique grounding that comes from being a part of a high-growth global company. That’s why I believe it’s vital that we attract people from across the world with commercial experience at ambitious, rapid-growth businesses — so they can bring this experience to bear on the UK financial services sector.

At the same time, many companies face renewed pressure to create new services and products to meet expectations for growth. That is why it’s critical that the UK has access to people with the right technical skills in areas such as software engineering, DevOps, Cybersecurity and data science.

Put simply, having the smartest minds delivering the best products is good for everyone. It drives efficiency, productivity,  growth and, ultimately, prosperity.

 

The UK is open for fintech

The UK should be proud of being a fintech pioneer and the driving force behind legislation that helped usher in the era of open banking. There is now an exciting opportunity to take this even further. Having access to a diverse pool of talent and skills will empower the financial services industry to create innovative products to tackle complex social challenges, such as better B2B payments, financial inclusion and climate change.

The good news is that the UK government clearly recognises the role the industry has to play in driving growth and innovation. The 2021 Autumn Budget reaffirmed commitments to reskill the nation. With £3.8bn budgeted for skills and a formal criteria for the long-awaited Scale Up Visa, the Chancellor announced a set of proposals that will support the breadth of our sector — from startups right through to unicorns and incumbent banks. This will be essential for fintechs like ours to continue to trailblaze and for the UK to differentiate itself on the global stage.

In an increasingly competitive global landscape, and to sustain momentum, we must keep talent avenues open to attract the best of the best in the industry. As one of the fastest-growing areas of the UK economy, the benefits of nurturing UK fintech to drive productivity, growth and lead the UK’s post-pandemic recovery, cannot be overstated. 2021 has seen a surge of activity in the industry and I am eager to see what London’s fintech sector can achieve in 2022.

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THE EVOLVING TECHNOLOGY NEEDS OF THE FINANCE DEPARTMENT

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THE EVOLVING TECHNOLOGY NEEDS OF THE FINANCE DEPARTMENT

Jennifer Sims, Senior Consultant at Xledger

 

The world of finance software is evolving quickly, but with many new software contenders entering the market it can be a mindfield for organisations. Many finance teams are already using multiple accounting apps and software packages for bookkeeping, payroll and invoicing to service individual needs. Whilst it may work fine for now, this segregated approach isn’t sustainable for long-term growth. The world is swiftly moving to agile, automated ways of working. As a result, there is a growing need to choose suppliers that can fulfil multiple functionalities within the one platform.

Financial software is evolving at such a pace that it can be difficult to keep up. Changing up a finance solution is a big step and ease of migration can be a substantial factor in determining which solution provider to go with. But how do you choose a solution that will grow with your business and still offer something innovative in five or ten years down the line? The fear is always that non-techie organisations will end up falling behind, but in such a highly concentrated industry, how do you decide which solution would work best for you?

 

Cloud-first: the term that makes all the difference 

You could find a ‘cloud-based’ service with an application that comes with automated audit trails to make it easier to meet compliance and record-keeping obligations, for example. But for a solution to offer all of the many future benefits promised by the cloud, it needs to have been built specifically for a cloud environemt from the outset – ie. not an on-premise built system that has been later adapted. Cloud-first services (true cloud) were always intended to leverage economies of scale, cope with live updates, be accessible from anywhere with an internet connection, and to scale rapidly, to name just a few of the many benefits.

When we talk about innovation in financial technology, we’re not just talking about software that makes it easier for the financial controller to create reports. If eliminating reliance on Excel spreadsheets is the only tangible benefit you have to really shout about, you are missing out on the real deal. With ‘true’ cloud finance software the sky is the limit.

Finance and accounting technology needs to directly meet the needs of the finance function and support the wider business needs.  When looking at accounting software platforms you’d be hard pressed to find one that doesn’t now promise ‘cloud-based’ enterprise resource planning (ERP) capabilities. The cloud is nothing new, but it’s the way that a solution harnesses this environment that makes a real difference. And here is where there is a need to read between the lines.

 

Automate more with true cloud 

Historically, repetitive and manual tasks are typical of the finance role – from invoice postings to expense claims handling – these can overwhelm the finance team. Research by Xledger[1] has found that an enormous 91% of CFOs and finance decision makers are carrying out at least one of these repetitive tasks as part of their job. What’s more, senior finance leads are averaging a whopping 25 hours per week carrying out repetitive and manual tasks, compared with 15 hours for other finance decision makers.

A modern, true cloud finance system can enable your business to automate repetitive tasks and provide one source of truth so that teams can make informed business decisions that will help to scale a business. Bank reconciliation, dashboard creation and reporting are just some of the tasks that can be handled automatically.These capabilities are aiding overtasked finance teams and saving hundreds or thousands of hours a year.

Whilst different companies are at different stages in their digital transformation what is clear is keeping up with the latest technology is fundamental to the future success of an organisation.

Xledger is a true cloud finance solution. The basics include invoicing, robust general ledger accounting, detailed slice and dice reporting, purchase orders, billing, VAT reporting, and cash and bank payments. It also adds process and structure to the enterprise with procurement and inventory, budgeting and forecasting, and project accounting. Users are always on the latest version of the software and with regulation more stringent than ever today, Xledger is ISO 27001 accredited.

Choosing the right provider for your financial ERP solution comes down to whether it has the fundamentals right. When hosting all of your vital data in the providers’ own servers, it should evidence a highly tested security process that comes with backup services as standard.

As our demand for technology capabilities grows and as ERP models progress, innovation will become the structure for growth – and there is no end to the possibilities.

 

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