20 Nov 2013 02:05pm

Lords to review personal service companies

Former ICAEW president Baroness Noakes is to chair a House of Lords inquiry into the use of personal service companies

A new 11-strong select committee has been set up for the purpose of the inquiry which will consider the consequences of the use of such companies for tax collection.

It will be trying to establish the extent of their use, particularly in the public sector, and whether public sector staff should be banned from working through them. It also wants to know what the benefits (and drawbacks) are – apart from the obvious issues of tax and national insurance contributions.

Other questions it is seeking to answer include: the effectiveness and efficiency of the intermediaries legislation (introduced in 2000); whether more guidance and advice might be needed to help people judge the status of business transactions for themselves or whether HMRC might need more resources for its compliance work; and whether people are being forced to set up personal service companies as a prerequisite for work.

“This inquiry will form a wide-ranging review of the use of personal service companies,” Baroness Noakes said.

“In these economically difficult times, it is important that the government receives the tax it should rightfully be receiving, from all those who should be paying it. Equally, we need to ensure that our tax system does not place unreasonable burdens on taxpayers. Of course, this is a complicated topic.

“This is why I would encourage anyone who has an interest or experience in this area to send us their evidence and contribute to the debate.”

The deadline for written evidence is 31 December 2013.

Last year, UK Treasury research revealed that at least 2,000 senior civil servants may have been avoiding at least £30m a year in taxes by putting their earnings through personal service companies, even though many of them would have been regarded as technically employed and therefore ineligible to do so.

Julia Irvine


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