The Public Accounts Committee’s damning new report into ‘off-payroll’ public sector remuneration packages risks generating more heat than light, some industry experts have warned.
The main thrust of the report is directed against disguised employment in the public sector, but some of the rhetorical flourishes risk over-generalising the complaint to infect completely legitimate contractors who work via fully IR35 compliant limited companies. Although freelancers who work via PAYE umbrella services are exempt from the criticisms, the report could yet foment an ‘anti-contractor’ sentiment amongst public sector hirers.
The report expresses shock that the BBC uses 25,000 off-payroll contracts (13,000 of which apply to on air talent) and disapproves of the 2,400 off-payroll arrangements for senior civil servants. Committee spokesperson Margaret Hodge MP gave a hint at the PAC’s leanings in remarks to the BBC, in which she slammed the practise of avoiding tax and national insurance in public sector pay arrangements as “almost always staggeringly inappropriate.”
The PCG’s managing director, John Brazier, was quick to respond, saying that current UK tax policy was not fit for purpose in the 21st century and permitted a minority of individuals to avoid tax; however, he added, “the solution is not to outlaw freelancing wholesale within the public sector, as Margaret Hodge and her colleagues are dangerously close to suggesting within their report.”
He urged the Government to accept that the jobs market has changed irreversibly and to devise a tax system that does not unfairly penalise the increasing practise of contracting.
John Whiting of the Institute of Taxation said that freelancing through personal service companies was a perfectly legitimate practise adopted by many workers, from plumbers to journalists and beyond: the real problem was disguised employment.