• Chief
Secretary’s review finds over 2,400 people paid off payroll
•
Consultation on new tax rules for personal service companies and
other intermediaries is launched
New tighter rules governing ‘off payroll’ appointments in central
government will be brought in this year, the Chief Secretary to
the Treasury has announced today. The action comes after a review
of Government departments and their arm’s length bodies published
today revealed that over 2,400 key public sector appointees have
been engaged off payroll, in some cases for more than ten years.
The review was commissioned by Chief Secretary to the Treasury
Danny Alexander earlier this year. Each of the departments and
bodies involved has today published on their websites a list of
off payroll appointees who were engaged at an annual cost to the
department of more than £58,200 – the minimum salary for Senior
Civil Servants.
Of over 2,400 engagements identified by the review, 40 per cent
of appointees have been engaged off payroll for more than 2 years.
Other key findings include:
• departments pay intermediaries, such as employment agencies, in
around 85 per cent of cases, personal service companies in around
10 per cent and the self-employed in less than 5 per cent;
• over 40 per cent of those identified are IT contractors;
• the majority of those identified are paid on a daily basis,
with around 70 per cent costing the appointing department more
than £400 per day; and
• around 3 per cent of those identified have been engaged off
payroll for more than ten years.
The review recognises that there are circumstances where it may
be appropriate for an employer to appoint an individual off
payroll and that the fact that an individual is engaged in this
way does not mean that they are not paying the correct amount of
tax.
However, it is essential that Government employers are able to
assure themselves that their long-term senior staff are meeting
their tax obligations, so the Government is proposing to tighten
the rules associated with employing people off payroll:
• the most senior staff must be on the payroll, unless there are
exceptional temporary circumstances.
• departments will be able to seek formal assurance from
contractors with off payroll arrangements lasting more than six
months and costing over £220 per day that income tax and national
insurance obligations are being met. Departments should consider
terminating the contract if that assurance is not provided.
• this will be monitored carefully with financial sanctions for
departments that do not comply.
These recommendations will be implemented within three months.
Danny Alexander said:
"The review has identified
almost 2,500 off payroll engagements in central government
departments and their arm’s length bodies. The opaque nature of
those engagements has created the conditions where tax avoidance
could be taking place.
“We have to bring an end to the ‘don’t ask, don’t tell’ approach
to this issue. That’s why I am announcing these new, tighter rules
on off payroll appointments in Government and passing the detailed
findings of the review to HMRC.”
The Government is also today publishing a consultation on the
Budget proposal that all ‘controlling persons’ must by law be on
the payroll of the engaging organisation. The Government believes
that where an individual is in a position to control the major
activities of an organisation, but is engaged through an
intermediary, rather than on the payroll, the engaging
organisation must be able to be confident that the individual is
meeting their tax obligations.
This change in law will further tighten the rules ensuring that
people paid through personal service companies in both the private
and public sector pay the right amount of tax.
Notes for Editors
1. A copy of the review can be found here - http://www.hm-treasury.gov.uk/tax_pay_appointees_review.htm
2. The review requested information from central government
departments and their arm’s length bodies in relation to all
individuals engaged off payroll as of 31 January 2012, where the
cost to the department is in excess of £58,200 per annum (the
Senior Civil Service minimum). It also covered all departmental
board members, regardless of their cost. This information includes
individuals paid directly, or through an intermediary – but
excludes secondees, where individuals are on the payroll of the
seconding organisation.
3. The review into the tax arrangements of civil servants was
announced by Danny Alexander on 31 January 2012. His statement to
the House of Commons can be found here – http://www.publications.parliament.uk/pa/cm201212/cmhansrd/cm120202/debtext/120202-0001.htm#12020240000004
4. The consultation on the taxation of controlling persons closes
on 16 August 2012 and can be found on the HMRC website.
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