Personal services companies in the civil service were the lead item on last night’s ‘Newsnight’, 13 years after the notorious IR35 press release was first issued. Simon Sweetman was not impressed.
Margaret Hodge is shocked (and so is Danny Alexander) by the revelation that “2000 senior civil servants are using companies to avoid or mitigate tax”. But is it what it seems?
Part of this illustrates, as always, how little the media understand about tax. The BBC ran this on ‘Newsnight’ with Tory MP Richard Bacon, Jonathan Baume from the First Division Association, and Emma Boon from the self-styled Taxpayers’ Alliance – a body that represents nobody and won’t say how it is financed. It is extraordinary that the BBC continues to give credibility to this lobby group. Admittedly their spokesperson had a problem here since in general they approve of tax mitigation, but don’t approve of civil servants.
So who are these 2000? It would be surprising – and genuinely shocking – if any of these were real career civil servants. Most of them are contractors on short term contracts and it is a fact that some government departments insist on taking them on through companies to avoid creating employment rights : the rest, one suspects, are people brought in from the private sector, who bring their limited companies with them. Such people will not, technically, be civil servants at all, and mostly owe their position to the absurd belief that the private sector is always better, an ideology Cameron shares with Tony Blair, who was responsible for most of the damage here in the first place.
The recommendation is that everyone taken on for more than six months should go on the payroll (not, you notice, that they should have IR35 status checks, though that would seem the correct way to proceed). It seems that some 40% have been in place for more than two years (though whether on single contracts or repeated short ones we do not know).
Much was made of the difficulty of breaking contracts, but surely all departments have to do is ask HMRC for an IR35 ruling. And if – as many of them may be – they are office holders, there is no question but that they ought to be on PAYE.
Of course, the added fuss about pension rights, sick leave and other employment rights is froth and nonsense, since they won’t have these if they operate through companies.
It’s not just a storm in a teacup, since if it is wrong for the private sector to fiddle about with employment status it is wrong (indeed, more wrong) for the public sector to do so, but it really ought to be presented as it is rather than as it is imagined to be.