HMRC Staff Off Payroll

My thanks to a loyal reader who pointed me to this press release from Kinsella Tax about the 2,400 civil servants who are avoiding tax by using an "off payroll" arrangement.

The full press release can be accessed via this link. However, one particular paragraph relating to HMRC has caught my eye. It appears that some of HMRC's own staff are using this arrangement:

"HM Revenue and Customs (HMRC) announced that nine staff has been paid ‘off-payroll’ and that since the discovery by Exaro News three of these positions have ended. 350 contracts that have paid civil servants ‘off-payroll’ have also ended; 35 civil servants have continued working under new terms and conditions."

Tut tush!

Tax does have to be taxing.

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More Ed Lesters - More Avoidance Hypocrisy

As I noted a couple of weeks ago, there will be more Ed Lesters coming out of the woodwork.

In today's Guardian there is an article that highlights more "Ed Lesters", which are but the tip of a very large iceberg.

Despite what HMRC and the government may try to have people believe, tax avoidance (perfectly legal) is fully supported by the state (and almost encouraged, when it keeps the salary bill down).

Here is the Guardian article in full:

"The Department of Health has apologised after documents sent to the Guardian showed that contrary to assurances given to parliament, more than 25 senior staff employed by the department are paid salaries direct to limited companies, with the likely effect of reducing their tax bills.

In some cases, the documents show the named individuals are being paid more than £250,000 a year, as well as additional expenses. The payments amount to almost £4.2m in one year.

The department claimed the 25 were not civil servants, or technically even staff, although a large number have been employed by the department for many years and hold very senior positions. It said the arrangements will be subject to review by the Treasury.

One Whitehall source said: "We cannot defend these arrangements, but it may be it is very common in Whitehall and this is just the tip of an iceberg."

Danny Alexander, the chief secretary to the Treasury, set up a cross-Whitehall review this month into the extent of the pay arrangements after it was revealed the Department for Business, Innovation and Skills had sanctioned a similar salary deal for Ed Lester, the chief executive of the Student Loans Company.

At the time it was presented as a rare practice.

The single largest payment was £273,375. Nineteen of the staff are paid more than £100,000.
In the majority of payments at the DH, the fees were paid to companies with the same address as the home address of the staff.

The majority of companies provided to the department are registered as business and management consultancies, yet the internal DH payroll information also details the health department offices in which they work, job title and email address. In most cases the companies' names emerge to be little more than an adaptation of the individual's surname. The Guardian holds details of the payments to 25 individuals, month by month, for the tax year ending April 2011, the identity of their limited company and their work in the DH.

The staff work in a variety of areas such as the policy, strategy and finance directorate, medical directorate, the office of the chief scientific officer, and commercial contracting.

The emails handed to the Guardian also show senior civil servants at the department discussing the possible reputational damage to the department and seeking to avoid ways of revealing the nature of the payments sought in a written question last December by Gareth Thomas, the shadow Cabinet Office minister.

Asked by Thomas if any health department staff were paid by means of payments to limited companies in lieu of salary, the health minister Simon Burns said in a written parliamentary answer that no payments were being made to civil servants in this way.

He also stated: "It is not the department's policy to permit payments to civil servants by ways of limited companies."

In a fresh statement on Wednesday the department said: "The definition of staff in this context refers to civil servants, and we can confirm that no civil servant who is an employee of the Department of Health is paid in this way. To this extent it was certainly not our intention to mislead anyone involved.

"We would be happy to clarify the situation in greater detail with anyone who asks and apologise for any misunderstanding involved. We are currently carrying out a full audit of such arrangements in line with the recently announced Treasury review of tax arrangements of public sector appointments."

Health department sources said it allowed staff to define themselves for payroll purposes neither as civil servants nor payroll staff.

In the emails, Jason Skill, in the procurement centre for expertise, discusses the motivation of the written question by Thomas, saying: "There is probably an employment and taxation angle to this question though it might not be in the mind of Mr Thomas.

"Salary is paid to employee. It may be that some or all of the non-payroll workers are in reality employees and the payments made to their limited companies would be in lieu of salary, but we would not want to suggest that all payments to limited companies are in lieu of salary."

The email also goes on to discuss Revenue and Customs (HMRC) rules, including tests "to differentiate between a contractor who HMRC deem to need to pay tax like an employee and a contractor who does not".

It continued: "The department would probably want to avoid anything that implies its NPWs [non-payroll workers] are disguised employees reputationally, to avoid unnecessary employers' national insurance and because HMRC may use this to take forward IR35 cases with those NPWs."
The emails also discuss whether it would be possible to reply that an answer cannot be provided due to disproportionate cost.

Thomas said he was writing to the health secretary, Andrew Lansley, to seek clarification. "The question was clear enough and I am therefore very surprised that the Department of Health was unable to provide a complete and accurate answer.

"Given the importance of parliament being given accurate answers from government ministers I will be writing to Andrew Lansley for a full explanation. I will also be asking other departments to check whether their answers were complete and accurate, and whether they have similar numbers of staff asking for their salaries paid to companies to reduce their tax bill."

In the wake of the students loans episode, Alexander said Lester's tax and national insurance will in future be deducted at source. He urged Whitehall departments to unwind similar schemes as quickly as possible, adding: 

 "When we all have to pull in the same direction to tackle the country's financial problems it is essential we all pay our full and fair share."

Tax does have to be taxing.

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To find out more, please use this link Taxwise



Tax Investigation for Dummies, by Nick Morgan, provides a good and easy to read guide for anyone caught up in an HMRC tax investigation. A must read for any Self Assessment taxpayer.

Click the link to read about: Tax Investigation for Dummies

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HMRC and Tax Avoidance

HMRC has rewritten its guidance to the disclosure of tax avoidance schemes (DOTAS) regime.
 
Although the number of schemes reported has reduced over the years, the government (ironically) is concerned that some avoidance schemes seem to be slipping the net (avoidance is of course perfectly legal).

Taxjournal reports that Graham Aaronson’s report on the merits of a general anti-avoidance rule (GAAR) concluded that "purposive interpretation [of tax legislation], specific anti-avoidance rules and DOTAS are not capable of dealing with some of the most egregious tax avoidance schemes".

Why does HMRC want to know tax arrangements, who has used such arrangements and how they work?

HMRC answer the question thus:

"On its own the disclosure of a tax arrangement has no effect on the tax position of any person who uses it. 

However, a disclosed tax arrangement may be rendered ineffective by Parliament, possibly with retrospective effect."

Retrospective legislation is a step on the road to dictatorship, and the government would be advised to steer clear from that particular course of action.

Moreover it is more than a little surprising that HMRC and the government are still pushing the anti avoidance message, given that both HMRC and the government support tax avoidance eg:

- Ed Lester

- Deepak Singh

- Vodafone/Goldman Sachs 

- Vodafone (again!)

Hypocrisy from the government and HMRC?

Surely not?

Tax does have to be taxing.

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What is TAXWISE?

TAXWISE is a tax-fee protection service that will pay up to £75,000 towards your accountant's fees in the event of an HM Revenue & Customs full enquiry or dispute.

To find out more, please use this link Taxwise



Tax Investigation for Dummies, by Nick Morgan, provides a good and easy to read guide for anyone caught up in an HMRC tax investigation. A must read for any Self Assessment taxpayer.

Click the link to read about: Tax Investigation for Dummies

HMRC Is Shite (www.hmrcisshite.com), also available via the domain www.hmrconline.com, is brought to you by www.kenfrost.com "The Living Brand"

Tax Avoidance Hypocrisy - GOD Approved The Ed Lester Deal

Documents obtained by Exaro show that Sir Gus (now Lord) O’Donnell (GOD), as cabinet secretary and head of the civil service, approved Ed Lester's special pay deal.

It also seems that Danny "Beaker" Alexander, chief secretary to the Treasury, was informed of the plan, although he has said that he was unaware of any potential tax benefit to Lester.


Tax does have to be taxing.

UK EXPATS: Reduce tax on UK Pensions
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Quote ID code "ABC" when contacting a QROPS specialist.

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What is TAXWISE?

TAXWISE is a tax-fee protection service that will pay up to £75,000 towards your accountant's fees in the event of an HM Revenue & Customs full enquiry or dispute.

To find out more, please use this link Taxwise



Tax Investigation for Dummies, by Nick Morgan, provides a good and easy to read guide for anyone caught up in an HMRC tax investigation. A must read for any Self Assessment taxpayer.

Click the link to read about: Tax Investigation for Dummies

HMRC Is Shite (www.hmrcisshite.com), also available via the domain www.hmrconline.com, is brought to you by www.kenfrost.com "The Living Brand"

Tax Avoidance Hypocrisy - Deepak Singh

Oh gosh how surprising, you know how I said earlier this morning in relation to the Ed Lester tax avoidance debacle, that others using tax avoidance schemes would be outed in the coming days?

Well here's one I told you about (relating to an HMRC employee no less!) in July 2010:

"Congratulations to HMRC's ex Chief Information Officer, Deepak Singh, who according to ifaonline was paid £149,500 by HMRC to work three months (June 2009 - September 2009) after his leaving date.

Singh's 3 year (£160K per annum) contract ended in June last year.

However, HMRC persuaded him to stay on for another 3 months in the guise of his consulting company Orwell Consulting.

In the private sector, when headcounts are being reduced, a well known "fiddle" is to sack someone then rehire them as a consultant (thus avoiding them appearing in the headcount figures).

Needless to say, I am sure that this was not the intention or the case here.

One rather nice little benefit for Singh of this arrangement, is that he is only liable for corporation tax of up to 28% (editor update: I have subsequently been advised that the rate was in fact 21%) on his earnings for these 3 months, compared with the higher-rate of income tax of 40%.

I have no problem with tax avoidance. However, HMRC claims that it disapproves of it (when dealing with non HMRC staff)."

My oh my, this is proving to be a right old clusterfuck of hypocrisy isn't it?

More outings soon!

Tax does have to be taxing.

UK EXPATS: Reduce tax on UK Pensions
HMRC QROPS provider. Unlock your UK pension and access a 25% lump sum today.

Quote ID code "ABC" when contacting a QROPS specialist.

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What is TAXWISE?

TAXWISE is a tax-fee protection service that will pay up to £75,000 towards your accountant's fees in the event of an HM Revenue & Customs full enquiry or dispute.

To find out more, please use this link Taxwise



Tax Investigation for Dummies, by Nick Morgan, provides a good and easy to read guide for anyone caught up in an HMRC tax investigation. A must read for any Self Assessment taxpayer.

Click the link to read about: Tax Investigation for Dummies

HMRC Is Shite (www.hmrcisshite.com), also available via the domain www.hmrconline.com, is brought to you by www.kenfrost.com "The Living Brand"

Tax Avoidance Hypocrisy - The Ed Lester Debacle

As we all know, the government is skint. Therefore over the last year or so the government and its bureaucratic arm, HMRC, have been doing their best to promote the idea that tax avoidance (which, unlike tax evasion, is perfectly legal) is somehow akin to tax evasion and morally wrong, and have attempted to whip the media up into a moralistic crusade against avoidance.

In January this year Cameron said the following:

"I think we need a tougher approach and one of the things we’re going to be looking at this year is whether there’s going to be a more general anti-avoidance power that HMRC can use, particularly on very wealthy individuals."


This of course is rather hypocritical, given that many MPs sit on boards of companies that operate tax avoidance schemes.

Anyhoo, imagine my amusement last night when coming home from the pub and settling down to watch Newsnight only to discover that the government and HMRC have happily signed off on a tax avoidance scheme.

Ed Lester, the CEO of the Student Loans Company, is happily receiving his £182K per annum without deductions for tax or National Insurance.

How?

He is using a tax avoidance scheme, whereby his pay is is transferred gross to his private service company, which has been signed off by HMRC!

This is the same HMRC that has been bleating that tax avoidance is somehow morally wrong!

In classic damage limitation mode, feigning surprise and shock, Danny "Beaker" Alexander has ordered an inquiry. Rather pointless given that the state signed off on this deal, ie the state knows about it.

Beaker claims that he was "not made aware" of the potential tax benefits to Mr Lester when he approved his appointment and salary levels.

Bollocks!

Mr Lester's deal was signed off by Universities Minister David Willetts and was passed to the Chief Secretary to the Treasury Danny Beaker Alexander for approval because his salary was above the prime minister's pay.

By the way, those in government and HMRC who are claiming that this is a one off had better take a stress pill or two, there will be others outed in the coming days who also have a similar arrangement.

Hypocrisy from the state and its bureaucratic arm (HMRC), who would have thought it?

Therefore, despite the bleating by HMRC and the anti avoidance campaign pushed by the state and HMRC, have no qualms about using tax avoidance schemes; the fact that the government and HMRC signed this one off shows that they perfectly happy that people use them, they just don't have the guts to admit it.

UPDATE

In the fallout from this clusterfuck of hypocrisy, the government has just announced that Ed Lester will now have his tax deducted from his income at source!

Tax does have to be taxing.

UK EXPATS: Reduce tax on UK Pensions
HMRC QROPS provider. Unlock your UK pension and access a 25% lump sum today.

Quote ID code "ABC" when contacting a QROPS specialist.

Professional Cover Against the Threat of Costly TAX and VAT Investigations

What is TAXWISE?

TAXWISE is a tax-fee protection service that will pay up to £75,000 towards your accountant's fees in the event of an HM Revenue & Customs full enquiry or dispute.

To find out more, please use this link Taxwise



Tax Investigation for Dummies, by Nick Morgan, provides a good and easy to read guide for anyone caught up in an HMRC tax investigation. A must read for any Self Assessment taxpayer.

Click the link to read about: Tax Investigation for Dummies

HMRC Is Shite (www.hmrcisshite.com), also available via the domain www.hmrconline.com, is brought to you by www.kenfrost.com "The Living Brand"