The BBC has found that 2,000 civil servants are being paid through their own limited companies. That lets them split their income with others, reducing the income tax bill; pay dividends to avoid a national insurance bill and claim expenses an employee could not offset.
When these people are employees that's obviously wrong. HMRC are clear on the point. But top civil servants have turned a blind eye.
That ignoring the requirements of law is worrying in itself. It indicates a civil service that has been corrupted by greed and the ethos of personal gain.
But it also very clearly suggests that there's a culture in place that thinks tax avoidance is acceptable. That's more important - because tax avoidance undermines democracy by denying to governments the funds reasonably due to them. When the civil service can't see that we're in trouble.
2,000 tax avoiders is an issue. The cultural issue is a much more important one.
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This number excludes those on similar deals in the NHS and Local Authorities.
What needs to be looked at is why the people were employed on this basis and I suspect we would find that in many instances it was the civil service, NHS or local authority that insisted on this manner of employment:
1. They can claim to have lowered headcount and employee costs
2. Such contracts do not have associated employeee costs such as pensions, sick leave normal leave etc
3. It lowers the cost of employing these contractors as his pay is subsidised the reduced taxation.
This is an unbelievable fraud by the state.
An inevitable consequence of some of the well-meaning recommendations of the Fulton Committee’s review of the civil service in the late 1960s, Richard, and the creation of the ‘revolving door’ between the civil service and government and the private sector.
A few years ago when I researched the influence of IT consultants on e-government policy I came across this in the 2007 annual report from the Civil Service Commissioners:
‘In some cases, notably the posts offered to external candidates…salaries were considerably in excess of those quoted…This differed markedly from the practice followed for the appointment of Civil Service candidates, where it was not uncommon for salaries to be less than the advertised rate.’
The point I was making when using this quote was that successive governments had created a situation in the civil service (and I’d add, in public service generally) where it was blatantly obvious that if you had a public service background you were by definition less valued and valuable than someone from the private sector. My overarching interest, as you might imagine, were the power relations this creates, which is in itself highly corrosive of organisational culture, as, of course is the unequal and unfair treatment that the Commissioners note, because more and more people are forced to conclude that self interest and greed does pay – at least in the short term.
Now we are becoming increasingly aware that it wasn’t enough that some people were being paid salaries that were above the accepted norm. Others had to be paid in a way that lessened the tax they paid as well. And don’t kid me that many senior people aren’t complicit in this underhand activity as well. Just wait until we have the figures from local government and the NHS!
Has Hartnet given up, joined Bored of Inland Revenue, if so so why is he still being paid?
Do any of these civil servants on this racket include those at HMRC or Treasury?
Surely its time for HMRC to start to do its job properly, does anyone there actually believe in countering tax avoidance any more?
HMRC’s job is to implement the government of the days tax policies as laid down by the treasury, its not really resourced to enact the government of the days tax laws!
HMRC were perfectly happy to prosecute IT contractors who were sole proprietors of their limited companies. Just search for IR35.
If the company cannot supply a different member of staff to perform the service, then it is an employment contract and it should be paid and taxed as such.
I agree
Unfortunately, it seems most don’t
The other night I attended an event with a bunch of engineers in the gas industry. All of them worked for the same employer and all were sub contracting through their own companies. Everyone above a certain level in the industry apparently does it. I must be out of touch I had not appreciated this abuse of PAYE is so widespread and flagrant. It would appear HMRC have lost any control they ever had of the operation of PAYE. Andy above, implies HMRC have effectively conceded running the tax system to accountants through SA because they lack the trained resource to do so themselves. A few pin prick prosecutions will have no effect. Accountants have catered for this abuse just as surely as HSBC have assisted money launderers and it is the accountants and bankers who have allowed standards to slip so appallingly who should be prosecuted. I’d put Hartnett in the dock alongside them as he has effectively presided over the wrecking of this countries revenue raising capacity.