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 275.

    @259.John M
    "Paying tax should be a moral obligation in any decent society"
    If stealing 100% of my income is theft, at what % is it not theft?
    Why can't we choose to donate?
    Why must it be taken by threat of jail?
    If I can't steal £5 from 100 of my neighbours yearly for cheaper bus rides, why should my MP be able to do it for me?
    How's tax different to theft?
    How's it moral?

  • rate this

    Comment number 274.

    I would like to know how many of these contract workers have Government or BBC pensions?

  • rate this

    Comment number 273.

    Presumably all MPs' tax arrangements for their myriad side jobs are whiter-than-white and could NEVER be called into doubt.

  • rate this

    Comment number 272.

    @261. The Ace Face - having experienced the complete negligence and incompetence of our Public Services first hand, I can assure you that I don't need need MP's or the media to influence my opinion in any way.

  • rate this

    Comment number 271.

    261. The Ace Face
    Here we go again, more influencing of public opinion to attack public services and to justify privatising them.
    Agreed - but the truth is this ONLY happens where employees ARE 'outsourced'/kept at arms length from their employers - 'self-employed', freelance, 'agency'. It's the ones on PAYE ('real employees') that get stuffed

  • rate this

    Comment number 270.

    For decades now, people have been desperate not to call employee's, employees in order to absolve themselves of tax, employment rights, holiday and all other money saving reasons.

    Its aboyt time we clamped down on this and miuses of the tax system.

    They won't though.

  • rate this

    Comment number 269.

    Were they as shocked by the amount of public money fiddled from the house of thieves.
    No one has broken any law here,these laws were made by the numpty heads.

  • rate this

    Comment number 268.

    of course the better way is to fix the "service contracts" tax status so they pay the same amount of tax as the rest of us. Or, just slap these people under the same rules IT contractors can get handed - the IR35 rules were introduced to attempt to stop this kind of "I'm an employe but getting paid via a service contract" loophole. (but IR35 is not a good example of how to fix the problem)

  • rate this

    Comment number 267.

    This is a great headline, but the reality is that although the percentage of overall tax % is often lower when operating as a service company - the effect is that much MORE ACTUAL TAX will be paid - VAT (20%), Corporation tax, plus dividend tax, plus PAYE NI / income tax. Operating freelance as a company, I would be paid more reflecting the fewer benefits and higher risk but MORE TAX is paid.

  • rate this

    Comment number 266.

    As a contractor I resent being labelled a 'tax avoider'. I pay tax and NI at the appropriate rate (set by Treasury).
    That was the same excuse that MP's used in the expenses scandal, we claimed what the rules said we could, face in trough.

  • rate this

    Comment number 265.

    Oh and check the various new's updated pages...Student Loans Chief will now pay tax at source after two years as a 'contractor'....a contract originally signed off by who else....the government and MP's. enough said

  • rate this

    Comment number 264.

    Income tax is theft of private property, the fruits of your toil.

  • rate this

    Comment number 263.

    It’s interesting that this is being reported as a “Public Sector” problem, I would think that the vast majority of people paid by the public sector this way actually earn most of their money from the private sector.

    But the government won’t tell you that

  • rate this

    Comment number 262.

    Yeah, right: how many MPs pay their full whack?

    They may PAYE on their basic pay, but they play fast and loose with their expenses - and even the legitimate claims are not taxed as benefits in kind which happens to the rest of us if we have a generous employer.

  • rate this

    Comment number 261.

    Here we go again, more influencing of public opinion to attack public services and to justify privatising them.

  • rate this

    Comment number 260.

    If these people are employed, then the law must be changed so that the employer is forced to levy tax at a set rate . If then , they feel they have been overtaxed, they can make a claim to the inland revenue like everybody else. As for full time public sector employees , if they are avoiding tax , they must be sacked and suffer a loss of pension rights.

  • rate this

    Comment number 259.

    Paying tax should be a moral obligation in any decent society.

    Unfortunately our society is corrupt from its leaders to its wilful dependents and so many others in between.

    Address the unfairness and corruption in our society - then criticise those who use legal means to avoid funding wasteful and dishonest government.

  • rate this

    Comment number 258.

    To work these days you really need to have sufficient moral to try, because you won't succeed these days otherwise. I first started work in the NHS, working really hard, looking after altheimers people. I had a 6 month contract, and no proper security or work benefits. Every where idle thicj people were being well paid and getting loopholes. What does that do to motivation to work do you think?

  • rate this

    Comment number 257.

    @244 - "so i assume that the bbc won't owe them a pension ?" No they won't, it's one of the reasons why companies use contractors, they are not employees so there is no holiday / sick pay or pensions, they can be sacked (no redundancy) with often only a weeks notice and they usually have short term contracts. Contractors are ver important to companies as they provide a flexible resource

  • rate this

    Comment number 256.

    209.Philip C

    If you have a company ...... you aren't entitled to sick pay or holiday pay.
    Not true. Sick pay and holiday pay will be paid by your own company and the costs are included in the fee charged to the client (BBC).


Page 5 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.