Contractor Acronym Solver
The modern contractor can be faced with a barrage of confusing and unclear acronyms & jargon. This short guide aims to explain what a few of these acronyms actually stand for. If you have any other suggestions please contact us at info@contractorweekly.com.
| ACRONYM | ACRONYM DESCRIPTION |
|---|---|
| AWD/AWR | Agency Workers Directive/Regulations – European directive coming into force on 1 October 2011 concerning equal pay rights for agency workers. For more information see here. |
| BA | Business Analyst – an expert who analyses different areas of a business. Many BAs specialise in IT and are engaged on a contract basis. |
| CT | Corporation Tax – the tax imposed on companies in the UK. The rate in 2011 for companies with profits less than £300k is 20%. |
| CV | Curriculum Vitae – it is vital that every contractor’s CV is well polished. |
| EBT | Employee Benefit Trust – a method used to minimise income tax, often through an offshore scheme. Under attack from HMRC. Many tax specialists have always advised to steer clear of them. |
| EL | Employers Liability – an insurance required by law in the UK. It covers claims made by employees of a company. Companies employing only their owners may be exempt from having to hold a policy, although many agencies still demand that contractors do. More here. |
| HMRC | Her Majesty’s Revenue and Customs. Formerly the Inland Revenue before it merged with Customs and Excise. |
| IB | Investment bank. Many IT and business consultants have contracts with these financial institutions. |
| IR35 | Also known as the Intermediaries Legislation. IR35 is designed address the perceived abuse of the tax system where would-be employees set up and work under the guise of their own companies. Free IR35 Guide. |
| MSC | Managed Service Company – until April 2007 numerous companies offered a service that provided contractors with the financial benefits of having their own company, but removed the burden of administering it. Legislation was brought in to combat this. More here. |
| NI/NICs | National Insurance Contributions. Many limited company contractors will take a very small salary and high dividends, meaning their national insurance payments will be minimal. |
| Opt Out | The Conduct of Employment Regulations – limited company contractors working through agencies will be asked to ‘opt in’ or ‘opt out’ of these regulations. The purpose of these regulations is effectively to protect vulnerable workers and the vast majority of contractors will simply opt out. |
| P35 | The Employer Annual Return – a form completed by companies and due by 19 May after the end of the tax year. Box six of the P35 is targeted at contractors and asks if you are a ‘service company’. Most contractors will tick ‘yes’, although confusion still remains over what exactly constitutes a ‘service company’. |
| PAYE | Pay As You Earn – the method for paying income tax and national insurance. |
| PI | Professional Indemnity Insurance – insurance covering professional negligence. If a contractor misadvises a client causing financial loss and the client sues, the contractor’s Professional Indemnity policy can cover the legal costs and damages. Most recruitment agencies demand that contractors hold such a policy, often to a value of £1m. More here. |
| PL | Public Liability – insurance covering damage and injury caused to members of the public. Often required by recruitment agencies. |
| S660 | Section 660A – legislation designed to prevent passing of income to other family members to reduce tax. |
| SA | Self Assessment – the process of completing a tax return yourself, either online or by paper. |
| SC | Security Clearance – clearance granted to individuals to allow access to restricted or sensitive information. Many contractors will have to hold varying levels of clearance if working on public sector contracts. |
| SIPP | Self-Invested Personal Pension |
| TLC | Tax Liability Cover – an insurance policy designed by Qdos Consulting to cover legal costs and liabilities resulting from an IR35 enquiry. More here. |
| VAT | Value Added Tax – the VAT rate rose from 17.5% to 20% on 4 January 2011. |
| FRS | VAT Flat Rate Scheme. For more information visit HMRC. |
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