As the BBC reports this morning:
Almost 100 permanent posts at local councils are being filled by people paid through limited companies, the BBC has learned.
Dozens of high-earners are allowed to make their own tax arrangements rather than be paid through the PAYE system.
Public accounts committee chair Margaret Hodge described the situation as a "tax avoidance scheme, which is totally wrong."
The Local Government Association said councils adhere to strict HMRC rules.
PWC have apparently advised one of the councils involved that it is hard to see how the payment through a company can be justified. I have to agree given the facts described. We might learn more in the programme tonight for which this is a trailer. That is File on 4 on BBC Radio 4 on Tuesday, 13 March at 20:00 GMT and Sunday, 18 March at 17:00 GMT. Listen again via the Radio 4 website or download the podcast. I should add I am on the programme - but have not heard it all and had nothing to do with this part of the story.
What the story does however suggest, in the light of recent similar tales, is that firstly disguising employment through companies is becoming more common place; second the culture of tax compliance is breaking down; thirdly that the language we have to describe such situations is currently inadequate and without sufficient gradation and fourth that there is clearly an issue needing addressing here which is not just about tax avoidance, but about the wholly inappropriate forms we now have for contracting that do not meet the requirements of the twenty first century economy.
I'll be returning to these themes.
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I do agree that this is a large and growing problem; what though is the proposal for dealing with it? Personally, I would abolish Corporation Tax and make Income Tax and NI payable on dividends. I have never seen the logic of taxing retained profits in businesses, not from either a socialist or capitalist perspective.
The other question I would ask is why the IR35 rules seem to have had such little effect. Is it that HMRC does not have the capacity to enforce them or are they inadequate? On the face of it, these 100 council workers seem to fall well within its terms.
I am working on solutions
This matter is less about tax avoidance and more about how some senior public sector workers are defrauding the fiscus.
It is a simple scam – take early retirement, ill-health retirement or be “made redundant”, take a big pay off and retain your very generous pension pot and then simply be re-employed in the public sector immediately but retain all the benefits because it is a “company” that is being employed and not the individual.
Prevalent in at local government and the NHS but even goes as far as the fire services.
The tax situation is wrong but it is a smokescreen for a far greater evil.
Given you seem to think government evil I think we’ll take that with a pinch of salt