Government never heard of IR35??

The Public Accounts Committee has dubbed the behaviour of the BBC, the Treasury and the Cabinet Office as “staggeringly inappropriate”.

The stinging criticisms were made by committee chair Margaret Hodge MP as it published its findings on off-payroll arrangements in the public sector.

Hodge said: ‘Avoiding tax and national insurance when paying public sector staff is almost always staggeringly inappropriate.’

The spending watchdog’s report said “the public sector must maintain the highest standards of propriety in its employment practices if it is to show leadership in the fight against tax avoidance.”

It called for the sector to shun the practice of using off-payroll arrangements for staff who should be on the payroll - a practice which generates suspicions of complicity in tax avoidance and which fails to meet the standards expected of public officials.

The Barking MP said: ‘Those whose income is derived from monies raised through taxation have a particular obligation to make sure that they do not use tax avoidance schemes.

‘We welcome the prompt response by the Treasury following revelations about the appointment of the Chief Executive of the Student Loans Company through a personal service company. But it is of great concern to learn that no part of government - including the Treasury - Cabinet Office and HMRC - had properly challenged that appointment.

It was also 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.

‘We were shocked to discover that the BBC has about 25,000 off-payroll contracts. 13,000 of these are for individuals who are on our screens and on the radio every day. They are the public face of the BBC.’

She said her colleagues on the committee “suspect that many individuals and employers in local government and in the health service do not pay their proper tax and national insurance contributions.”

In May 2012, the Treasury published its report on the use of off-payroll arrangements in central government, which showed that over 2,400 staff, each earning more than £58,200 a year, were being paid 'off-payroll'.

The committee said HMRC must be seen to be “properly enforcing tax rules to ensure employees, regardless of whether or not there is a personal service company, pay tax as employees”.

However, HMRC had “progressively reduced its enforcement of the legislation designed to eliminate the avoidance of tax and NICs through intermediaries like personal service companies, putting at risk any deterrent effect the rules might have on tax avoidance”.

In 2010-11, just 23 investigations took place, down from over 1,000 in 2003-04, the report revealed.

More details are available from the UK Parliament website.