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 195.

    So it seems the BBC don't want people to hear the truth.

    I'll say it again, why is Ms. Hodge focussing on this when a certain gentleman who has advised the government, and is known to run a Top Men's fashion shop has been allowed to get away with not paying £285 million in tax? If you want to stop tax cheats, start at the top.

  • rate this

    Comment number 194.

    I detect a bit of jealousy here, how did the captains of politics miss out on this loophole. Listen the bloke in my street averages 5 cars per week, all his taxes paid? He drives a huge truck at night for his employer....what else does he have to do with his spare time during the day...I'd have thought sleep...So next time you see an artic lorry weaving'll be him

  • rate this

    Comment number 193.

    Could it be that our feeble politicians emboldened after their success over the Murdoch empire are turning their attention to the Beeb it's payback time for exposing their expenses scandal.

  • rate this

    Comment number 192.

    I wonder how long it will be until sloppy journalism (or deliberate spite) turns this to "Civil Servants" rather than those who have come from the private sector to work in the public sector, but only on their terms.

  • rate this

    Comment number 191.

    You don't say?

    As I said in another article, the civil servants cost the taxpayer far more than a person on benefits ever will, but no doubt the Tory mouthpiece, the BBC will issue another "Dave Distraction" in order to take the focus off this,

    Oh look, there's an unemployed single mum, quick get the branding irons out!

    JC staff are amongst the worst culprits.

  • rate this

    Comment number 190.

    The public sector employs thousands this way because it is cost efficient for them to do so. The individual is tax efficient yet has to fund all those expenses which would be employer funded if on payroll. They mostly live contract to contract with no security at all. The public purse probably benefits overall. It is all legal and quite normal. This is all nonsense.

  • rate this

    Comment number 189.

    @181 There is nothing illegal about tax avoidance, you could argue that the BBC is actually being a responsible public organisation by keeping it costs down as far as possible.

    The "BBC out of control" with "alleged paeophiles at it's heart" I assume you mean the Saville reports? One person 30 years ago, hardly a fact

  • rate this

    Comment number 188.

    The tax system needs updating and new laws put in place. If you're freelance or self employed [ as many people are these days ] I would imagine they would have to fill in tax returns. They would have to PROVE their earnings and expenses. It's the off shore bank accounts whose owners DON'T pay tax that needs looking at.

  • rate this

    Comment number 187.

    Income tax is way too complex and everybody believes it is unfair against him or her self. (E.g.: Can it be right that someone who spends his income on imported Chinese sofas pays tax zero times but someone who invests it in UK businesses pays tax three or more times?)

    Sometime, some country is going to experiment with a tax code that taxes only expenditure, not income. Why shouldn't it be us?

  • rate this

    Comment number 186.

    // yellowdream
    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.//

    True enough, but it doesn't excuse BBC hypocrisy.

    I wouldn't mind quite so much if the BBC didn't choose to rail against cuts and fatcats all the time.

  • rate this

    Comment number 185.

    Are MPs really surprised ? if they are they are not very well informed. This is common knowledge.

    I suspect the truth is that this has been conveniently ignored. I suspect a lot of MPs use this type of tax arrangement themselves.

    Clearly the law needs updating. Stop wittering and pass legislation to deal with it.

  • rate this

    Comment number 184.

    Contractors do not "avoid" tax unless they are being paid cash-in-hand or are making fraudulent tax returns. It is not for the company or public body employing them to be concerned about if or when a contractor pays tax. Any avoidance is peanuts compared to the institutional fraud being committed by banks and MP's and the Lords.

  • rate this

    Comment number 183.

    There's a wider question to be asked here: Has the drive to allow profit driven processes infected the BBCs mindset in both its working practises and motives?

  • rate this

    Comment number 182.

    Politicians and bureaucrats with statist ideologies are as greedy as anyone. They just think its justified by their “motivation” to help the people. Stalin had his Dacha’s and privileges. Kinnock on the EU expenses gravy train. Blair – enough said. Miliband refusing to admit he is a millionaire.

    “All animals are equal but some are more equal than others” Animal Farm

  • Comment number 181.

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

  • rate this

    Comment number 180.

    ANY MP who has not used tax avoidance loopholes, however legal, step forward and be 'shocked'

    However, I fear this queue might be very, very short!

    HMRC are far too busy chasing the small man for a few quid here and there than closing the loopholes that benefit the millionaires of this nation (and that includes most MPs).

    'Do as we say, not as we do' we're your GOVERNment, after all...

  • rate this

    Comment number 179.

    Whats new, everyone's at it if they get away with it, but PAYE people have no chance, but they would do the same thing. Just about everyone in this Country is now corrupt so why worry, does your blood pressure no good. BBC cheat but woo betide you if you have no TV licence.

  • rate this

    Comment number 178.

    oh, here we go again!!!

    the government chasing a few small offenders whilst allowing big corporates away with billions. They really need to prioritise the offenders here.

    What this report forgets to tell you that most MP' get paid through limited companies thus paying the same as FreeLance private employees if not less.

  • rate this

    Comment number 177.

    When I worked in the public sector & people were hired with these kind of arrangements, as with those who got special pensions &/or bonuses, we were told it has to be done like this because thats what they would get in the private sector & they'll just go there if we don't

  • rate this

    Comment number 176.

    Still no one who is capable of explaining why its ok for

    Freelancers to pay taxes under IR35 as disguised employees

    But treated as self employed re contribution based Unemployment benefit and Mortages/Loans

    Any comments from left wings . Of course , they are still too busy singing the red flag song of the maxists and communists


Page 9 of 18


More UK stories



Copyright © 2015 BBC. 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.