The working practices of the chief information officer at HMRC have been called into question. Deepak Singh was employed by Revenue and Custom’s for three years ending
in June 2009. However, at this point he became contracted to HMRC through his personal service company, Orwell Consulting Ltd, to fill the same position. His three month contract was worth approximately £50,000 per month which was equivalent to his previous annual salary.
HMRC’s accounts read: “For the period 19 June 2009 to 18 September 2009, £149,5000 was paid to Orwell Consulting Ltd for the services of Deepak Singh (a director of that company) who held the position of Acting CIO.”
This practice would allow Mr Singh to reduce his tax burden by paying himself in dividends and not paying NICs. Subsequently this would result HMRC reducing their overheads. Mr Singh, due to working through a personal service company, would be liable for corporation tax at the lower rate.
Speaking to Contractor UK, Qdos Consulting’s Seb Maley stated: “The Revenue had for some time been concerned about the hiring of individuals through their own service companies, so as to exploit the ‘fiscal advantages offered by a corporate structure. Employees were being handed their P45 on a Friday only to return to the workplace on the following Monday to do exactly the same job but, hey presto, as a contractor this time.”
He continued: “Consequently the contractor could now pay themselves dividends and, by so doing, avoid NIC [for both employer and worker] and reduce the [overall] tax burden.”
In a statement provided to Contractor UK, a former tax inspector commented: “The circumstances here appear to be a so-called ‘Friday to Monday’ (employee on Friday – limited company supplier on Monday) scenario, which was the main reason for the introduction of IR35 by the tax authority in the first place.”