I had an article on Comment is Free this afternoon, talking about the fuss made about the BBC paying contract staff without iperating PAYE.
For the record, I condemn them for doing so when it was inappropriate, but add:
I am quite sure all the newspapers jumping up and down about this issue at the BBC pay many of their "staff" as contractors.
In that case this is not really an issue about the BBC at all, it is a systemic one. On that I said:
There are four problems that follow. The first is that this is always done for better-paid staff: the impression that tax avoidance is for the well-off is reinforced. This is a divided country.
Second, because the penalties for this abuse always fall on the contractor and not on the paying company (as a result of large business lobbying) there is nothing that can really be done right now to stop this practice.
Third, with HMRC still sacking thousands of staff a year, there is no real prospect of any effective challenge at contractor level to this abuse. Even if it increases the number tenfold, just 230 cases will be raised a year: that's practically no deterrent at all.
Last but not least, the government deficit will grow as long as this abuse is not stopped. And that is the paradox. We have a government whose chancellor says tax avoidance is repugnant. And it says deficit reduction is its number one priority. And yet it will do nothing to stop such abuse, preferring to impose cuts on the poorest instead.
This is not an issue about the BBC. That's important, but a sideshow. This is an issue about the whole ethos of government and its right to charge and collect tax to pay for essential public services in his country. And unless action is taken, it follows as surely as the BBC News being on at 10 that those public services will have to be cut.
In which case, is that what the blind eye the government is turning, indicated by record low levels of investigation, really all about?
That I think is the political issue at the heart of this: why is our government simply not trying to stop tax avoidance, as increasing evidence suggests is the reality? Is it that they really want a deficit, and a gutted tax authority, too under-resourced to ever collect the tax owing so that there is no option but cut services? That looks to be the case to me.
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This is maybe a little off topic, but just wondering if you have seen this article on the BBC:
http://www.bbc.co.uk/news/business-19846152
I am sure you will recognise that Chas Roy-Chowdhury Head of taxation, ACCA is unable to calculate the amount of income tax payable on a dividend from a Limited Company (he clearly overstates it). I am unsure how he calculated the PAYE income tax either (he appears to be understating it). What is obvious is that he came out with the opposite result to the one he should have reached, which is rather useful for the BBC right now …
Thanks – I did see it – ater spatting on it on Radio 5 on Friday night
Now posted a blog on it
Thanks
In fairness, like exporting our manufacturing & starting wars for the sheer hell of it, this was v much a policy of nu-labour, not the Tories.
Peter Mandelson had this brilliant idea. If I come in & fix your computers (usually check they’re plugged in & if you’ve switched them on & off) & I work for you, I’m a bureaucrat. If I do the same, but through my own Company, then, hey presto, I’m an entrepreneur !
You can’t really blame New Labour for this because the source is really 1988. Many of these people were previously self-employed, but HMRC didn’t like it very much so they passed the Agency Workers Legislation, which was included in TA 1988 and subsequently carried over to ITEPA 2003. Employment agencies were no longer allowed to treat these individuals as self-employed and had to operate PAYE on all payments. Needless to say it wasn’t long before these people started to get their own companies, which was in fact more tax efficient than being self-employed and today the agencies push hard for this sort of structure. New Labour attacked this with both IR35 and MSC legislation.
More recently the introduction of the AWR (Agency Workers Regulations – EU origins) has resulted in a big push from end clients and agencies to move people into their own Limited Companies. Whilst the AWR (aimed at protecting worker’s rights and ensuring fair and equal treatment) might make sense for the lowly paid it doesn’t make sense for highly paid city IT workers, so this is something of an own goal for the government and flies in the face of IR35 and the MSC legislation.