MPs voice concerns about 'off payroll' tax arrangements


Public Accounts Committee chairman Margaret Hodge: "It's wrong that individuals working in the public service aren't paying their fair share of tax"

Related Stories

The tax arrangements of some public sector workers, including thousands at the BBC, have been criticised by MPs.

A Public Accounts Committee report says too many make their own arrangements to pay tax and national insurance, which could allow them to contribute less.

It said it was shocked to find the BBC had 25,000 such "off payroll" contracts - 13,000 for people who were on air.

The BBC said many of these were short-term contracts, but it was carrying out a detailed review of tax arrangements.

The Public Accounts Committee began its inquiries into off payroll contracts after it emerged earlier this year that the former head of the Student Loans Company was being paid via a company.

The arrangement - agreed by the tax authorities - potentially saved Ed Lester tens of thousands of pounds in tax.

It triggered a Treasury investigation across the government, which revealed that for more than 2,400 civil servants, tax was not being deducted when their wages were paid through PAYE.

Start Quote

"The public sector must maintain the highest standards of propriety in its employment practices”

End Quote Margaret Hodge Public Accounts Committee

Committee chairwoman Margaret Hodge said: "It was... shocking to find out that no fewer than 2,400 central government appointees were benefiting from off payroll arrangements.

"Furthermore, the Treasury Review only covered civil servants. Tax avoidance in the public sector goes much wider."

The Labour MP said avoiding tax and national insurance when paying public sector staff was "almost always staggeringly inappropriate".

She urged the public sector to "show leadership in the fight against tax avoidance" and should avoid the practice of using off-payroll arrangements for staff.

Jonathan Isaby, political director of the Taxpayers' Alliance, which campaigns for lower taxes, said many people would be "astonished" by the findings.

"People are paying huge amounts of tax as it is for this country and they will feel even more angry if they think that those in public bodies, in the government, in local councils, and indeed their favourite TV presenters, are not paying their fair share as well," he said.

John Whiting, director of tax policy at the Chartered Institute of Taxation, said some workers make their own tax arrangements for legitimate reasons.

'Disguised employment'

"If you are just an ordinary freelancer, which is very prevalent these days - anyone from a plumber to journalist - working here and there, working through a company, then it is a perfectly sensible way of organising your affairs," he told BBC Radio 4's Today Programme.

"What this report is targeting are people who are in what is often termed as 'disguised employment' - they're really an employee but they are putting the aura around them of 'No, I'm operating for a company'."

This, he said, was the charge being made against some BBC staff and some public sector workers.

Mr Whiting said the authorities did have a "notorious" anti-avoidance provision to deal with this, named IR35, which has been operating since 2000, however the MPs' report pointed out that this provision was "not that easy to apply" and it was not being applied in as many situations as it could be.

"Therefore, people have been getting away with it," he said.

The committee said it still lacked full information about the number of people employed by the National Health Service or in local government who were paid through private companies.

Members acknowledged that ultimately, whether or not staff with off payroll contracts were paying the right amount of tax was dependent on HM Revenue and Customs properly enforcing the rules.

'Complying with legislation'

But they also expressed concern that in recent years, HMRC had reduced its enforcement of legislation designed to eliminate tax avoidance through the use of intermediaries.

The BBC said that the actual number of people who were not paying tax at source was far smaller than the figures suggested.

In a statement, the broadcaster said: "In many cases an individual - such as an occasional contributor to programmes - could be issued with a contract each time he or she is booked to appear.

"We note the conclusions of the PAC report and will respond to the points raised as part of our detailed review of tax arrangements."

David Smith, the BBC's head of employment tax, said the corporation was "complying with the legislation that is there".

Mr Smith said: "It's not necessarily staff positions we are using the service company route for.

"These are people who are freelance by their very nature, or certainly that's the way their services want to be provided to the BBC and the use of the service company is therefore there to protect the BBC from any unexpected exposure should HMRC disagree with that position."


More on This Story

Related Stories

The BBC is not responsible for the content of external Internet sites


This entry is now closed for comments

Jump to comments pagination
  • rate this

    Comment number 115.

    Once again another loophole thru which companies avoid taxation.

    BUT it's legal and so are offshore accounts, offshore companies headquarters to avoid corporation tax.

    So really I don't see anything wrong, these people are committing no crime.

    Just goverment who drag their feet in closing these loopholes.

  • rate this

    Comment number 114.

    The MPs shocked! A few years ago the Nation was shocked because our Members of Parliament had been caught with their noses stuck in the trough. Pot calling the kettle something I think it is called. If it hadn't been for a whistle blower, we would have been none the wiser. Now they are condemning those who take advantage of poorly drafted legislation and whosr fault is that?

  • rate this

    Comment number 113.

    Once agin Politician are trying to deflect attention from the huge corporate tax evaders such as Mr Green (TopShop) and Vodafone, who are putting their prices up soon despite not paying over £6bn in tax. Stop chasing the little fish and develop some authority.

  • rate this

    Comment number 112.

    Re 1.HaveIGotThatWrong
    “But, if you are in the Public Sector I can't see why you would not be a full time employee ?”

    Because most public sector organisations are not allowed to employ people, they have to outsource a service that is why the government wastes billions of pounds paying £20 for a light bulb etc. They can’t employ a caretaker to do it, they have to outsource it

  • rate this

    Comment number 111.

    I'm amazed anyone is so naive to think that people working as contractors for public and private sector organisations is anything other than entirely normal! This sort of report just panders to the tabloid mentality of screaming about an issue which is far less interesting or important than it pretends to be.

  • rate this

    Comment number 110.

    What angers me is the crass hypocrisy of the left leaning BBC who give us regular sermons on moral responsibility only to have tax arrangements every bit as good as footballers and businessmen. Come on George Osborne, level the playing field.

  • rate this

    Comment number 109.

    "53.Philip C
    ....If you pay into a pension or an ISA you are avoiding tax...."

    ISA's and pensions are legitimate tax-free savings schemes set up by the government to encourage people to save.

    There is a huge difference between taking advantage of schemes of that nature and paying 10% Tax on an income of £60K by paying yourself with share dividends instead of salary.

  • rate this

    Comment number 108.

    The Unions and Labour party dont really understand project based work and peak demands and flexibilty

    Rumour has it Dawn Primolo was dumped by a contractor . The reason for IR35 creation

    I am under IR35 and I pay taxes , receive expenses (like everyone else if their company offers it) and pay gross into a SIPP Pension

    im not entitled to sick,holiday pay,contribution unemployment benefit

  • rate this

    Comment number 107.


    If ever the phrase 'the pot calling the kettle black' was more apt I'm a monkey's uncle.

  • rate this

    Comment number 106.

    @89 Steve "If someone suggested that nearly a Million NHS workers should bill for services as Companies to avoid PAYE ,"
    If this Govrment get their way the above might be true.. Privatisation through the back door!

  • rate this

    Comment number 105.

    Working in the world of farming in 2001 politicians did not know sheep were being trucked around the country released the foot and mouth affair. Now MPs don't know about tax arrangements. Bill Clinton was the most powerful man on the planet and could not recollect the incidents with Monica. The day an MP know something will be of concern, they don't know about railways either. The list is endless

  • rate this

    Comment number 104.

    The point, surely?, is that there should not be any loopholes to allow "Legal Tax Avoidence".

  • rate this

    Comment number 103.

    Are Ed Balls and Yvette Cooper still claiming double bubble MP's housing allowance for 2 different houses even though they are married?
    If Mrs Hodge can answer that without saying, "Well actually the real question is this" or totally avoid it, I might have more interest in her trying to criticise others not on the Westminster gravy train.

  • rate this

    Comment number 102.

    ..our Chancellor with His own personal a Blind tax efficient Trust..Beloved Leader and His Deputy..families who made the big bucks out of advising on tax avoidance..
    ..or our shadow PM who seems unsure (really??) if he's a millionaire, and whose mortgage arrangements would be a revelation to the typical ex-comprehensive schooled, ie. they're all at it, you silly boy.

  • Comment number 101.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 100.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 99.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • rate this

    Comment number 98.

    @67 Dave Windsor.

    No YOU are incorrect. Corporation tax is paid on company funds that are paid out as dividends. Or more accurately, no money for dividends would be available unless you made some profit, which is taxable.

    The real issue is how come earnings outside salary attract different rates of tax and no NI contributions?? Let's start by discussing the 10% tax credit on dividends.

  • rate this

    Comment number 97.

    Many people work off payroll. Many do so because the freelance nature of their work means that their 'main' source of income changes far more quickly than HMRC could keep up with, so it is more efficient to handle tax in one go.

    IR35 requires that they pay their Income Tax and National Insurance. The purchaser of the services is not avoiding tax, they are just paying it as part of the fee paid.

  • rate this

    Comment number 96.

    I am self employed, we have clients from 1 to 15 per week, all billed separately, then I waste time chasing my money. if you are paid on the dot, work for nobody else you are an employee , full stop, you have to risk capital and risk not getting paid, they have to prove contracts are fair, say get 3 quotes in for a job etc...


Page 13 of 18


More UK stories



BBC © 2014 The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.