Large Scale Public Service Tax Avoidance identified in UK Treasury Review
The following is an extract from a statement issued 23rd May 2012 by Danny Alexander; Chief Secretary to the Treasury
“The review has identified over 2,400 off payroll engagements in central Government departments and their arm’s length bodies that were live on the 31 January this year.
That is an unacceptable number of off payroll engagements given the lack of transparency on the tax arrangements of the contracts.
Mr Speaker that lack of transparency cannot continue.
Today each department involved is publishing on their website a list of off payroll appointees who, as of 31 January, were engaged at an annual cost to the department of more than £58,200.
The majority of cases relate to technical specialists – in fact over 40 per cent relate specifically to IT specialists.
This data also shows that 70% of cases relate to arm’s length bodies.
Around 10% of the cases relate to payments made directly to a personal service company
Over 85% are to intermediaries such as employment agencies, where it isn’t possible to know whether the individual is or isn’t using a personal service company.
The other 5% are self employed and therefore subject to self assessment in the normal way.
Around 70% of all the identified cases are paid more than £400 a day.
Over 70 cases cost departments more than £1000 a day.
And around 900 of the cases date back longer than two years.
In fact over 20 cases date back more than 10 years, which some might consider an astonishing length of time to be on a contract.”
It seems that many of these arrangements have been used to avoid tax. The unfortunate outcome is that new legislation may be passed which would also impact on the private sector potentially impacting on employment flexibility and costs, due to public sector transgressions
The recent HMRC Tax gap analysis coupled with the revelations contained in this review indicate quite clearly that the UK’s issues around tax avoidance are very much homegrown.
Treasury (Full review)
HMRC (Consultation paper on taxation of controlling persons, PDF)