Public sector contracting

[DaveB]

Just received this from an agency that some regard as being a bit Crap.

Overview

Following the Treasury review of tax arrangements for public sector appointees published on 23rd May 2012. The review outlined key recommendations for all departments to implement within three months. The review was announced by Rt Hon Danny Alexander, Chief Secretary to the Treasury who found there to be a lack of transparency around the tax arrangements of key public sector appointees, with over 2400 off payroll engagements identified in central government and arm’s length bodies around 85% are engaged for longer than 6 months.

Proposed approach

The review proposes a number of approaches by the Treasury to seek assurances required regarding the tax position of off-payroll contractors providing services in central government departments and their arm’s length bodies, for all new engagements and contract renewals as follows:

· board members and senior officials with significant financial responsibility should be on the organisation’s payroll, unless there are exceptional circumstances – in which case the Accounting Officer should approve the arrangements and such exceptions should exist for no longer than six months

· engagements of more than six months in duration, for more than a daily rate of £220, should include contractual provisions that allow the department to seek assurance regarding the income tax and NICS obligations of the contractor and to terminate the contract if that assurance is not provided

· these measures should be implemented within three months for new contacts and at the point of extensions for existing contracts and implementation will be monitored after one year, reporting back to the Chief Secretary to the Treasury and the Minister for the Cabinet Office

· if it emerges that any departments have not abided by these rules, sanctions will apply – with departmental resource budgets reduced by up to five times the payment in question. Departments should also seek to apply these principles to existing contracts, subject to ensuring value for money for the taxpayer and report to Parliament on the outcome as part of the 2012-13 annual report and accounts process.

Next Steps

Xxxxxx are currently in discussions with the Government Procurement Services to agree a way forward under the XXXXXX framework. We appreciate the urgency to let you know what is going on and as soon as we are in a position to confirm the new rulings we will be in contact with you. In the mean time please feel free to contact me with any questions.

Kind Regards

[Old Greg]

Just received this from an agency that some regard as being a bit Crap.

This affects me closely. Can you advise the agency name (or PM)?

[SimonMac]

I think for legit contractors I don't think there is going to be much change, its the disguised employee's that are going to suffer, hector may start coming down harder on IR35 cases but if we are careful to begin with I'm not worried

[Notascooby]

Where's NLUK with the link to the thread thay covered this last week?

[Gentile]

Just received this from an agency that some regard as being a bit Crap.

Overview

Following the Treasury review of tax arrangements for public sector appointees published on 23rd May 2012. The review outlined key recommendations for all departments to implement within three months. The review was announced by Rt Hon Danny Alexander, Chief Secretary to the Treasury who found there to be a lack of transparency around the tax arrangements of key public sector appointees, with over 2400 off payroll engagements identified in central government and arm’s length bodies around 85% are engaged for longer than 6 months.

This bit made me laugh. From personal experience, it takes the Public Sector three years to do something as simple as write a memo, let alone get a major policy change implemented in three months. I predict that in a few years' time there'll be many departments still carrying on BAU, with no fines being imposed since it would bring the whole inefficient gravy train grinding to a sudden halt.

[malvolio]

Waking up coffee smelling you should be.

PCG members are reporting these clauses being added to a whole pile of PS contracts. Some are seriously looking at walking away rather than sign up to bankrupting their companies by trying to meet the "all company income is liable to PAYE/NICs" requirement. This is serious, if you have a PS contract.

[SimonMac]

Waking up coffee smelling you should be.

PCG members are reporting these clauses being added to a whole pile of PS contracts. Some are seriously looking at walking away rather than sign up to bankrupting their companies by trying to meet the "all company income is liable to PAYE/NICs" requirement. This is serious, if you have a PS contract.

I guess it is all down to the wording, "all company income" is a red flag, but "income tax and NICS obligations" in the OP is fine, I pay all my obligations and not a penny more unless I am told otherwise

[DaveB]

Waking up coffee smelling you should be.

PCG members are reporting these clauses being added to a whole pile of PS contracts. Some are seriously looking at walking away rather than sign up to bankrupting their companies by trying to meet the "all company income is liable to PAYE/NICs" requirement. This is serious, if you have a PS contract.

Not seen any actual clauses yet, was putting this up there so people could see what was coming out of the woodwork. I've already asked a number of questions of the agency regarding the expected assurances.

EDIT: Gentile, it's not the PS organisations that need to do anything in a hurry. They are passing it off to the agencies and telling them to sort it out. The agencies will do it in order to keep the business. All the PS bodies need to do is have something in place for a years time that says they have a way of confirming these assurances are in place.

[bracken]

A nonsense...

Just received this from an agency that some regard as being a bit Crap.

I'm one of the 2400 and have also received the same e-mail this morning. In some ways, it doesn't bother me too much given that its requirements are going into new contracts and existing ones on renewal (I'm renewed through to the early part of next year at which point I don't think I'll be hanging around).

Nevertheless, what I do struggle to get my simple head around is this part of the e-mail

...should include contractual provisions that allow the department to seek assurance regarding the income tax and NICS obligations of the contractor and to terminate the contract if that assurance is not provided


Unless I'm missing something simple, I really don't see how this can work without making the end 'contractor' personally a party to the contract (they are not at the moment) as the end contractor seems to be perfectly entitled to say 'my tax affairs are between me and HMRC so thanks for asking but 'naff orf'...' maybe the point here is that the govt do want the end 'contractor' to be party to the contract?

My sense is that there will be very few people who will renew / take new contracts on such terms - I for one will not.

There's also a bit of an imbalance here in that although I'm through the said agency, there are loads of contractors also here supplied through other companies and they are not being hit by these new rules...the whole thing is a nonsense and will surely lead to the drying up of contractor resource for HMG. That may not be a problem for some depts but I know that where I'm working, we have a significant % of contractors and it would decimate the department if they were not prepared to renew.

I guess we're still wrestling with the unknown at the moment as until we can see exactly how this will work, it's hard to get too excited. I do hope that when we do know more, PCG will be there providing advice and support as it's easier to fight the battle en-masse rather than individually. I suspect that the said agency will not be too happy with the new arrangements either and will be lobbying hard for changes.

B

[Old Greg]

I'm one of the 2400 and have also received the same e-mail this morning. In some ways, it doesn't bother me too much given that its requirements are going into new contracts and existing ones on renewal (I'm renewed through to the early part of next year at which point I don't think I'll be hanging around).

Nevertheless, what I do struggle to get my simple head around is this part of the e-mail

...should include contractual provisions that allow the department to seek assurance regarding the income tax and NICS obligations of the contractor and to terminate the contract if that assurance is not provided


Unless I'm missing something simple, I really don't see how this can work without making the end 'contractor' personally a party to the contract (they are not at the moment) as the end contractor seems to be perfectly entitled to say 'my tax affairs are between me and HMRC so thanks for asking but 'naff orf'...' maybe the point here is that the govt do want the end 'contractor' to be party to the contract?

My sense is that there will be very few people who will renew / take new contracts on such terms - I for one will not.

There's also a bit of an imbalance here in that although I'm through the said agency, there are loads of contractors also here supplied through other companies and they are not being hit by these new rules...the whole thing is a nonsense and will surely lead to the drying up of contractor resource for HMG. That may not be a problem for some depts but I know that where I'm working, we have a significant % of contractors and it would decimate the department if they were not prepared to renew.

I guess we're still wrestling with the unknown at the moment as until we can see exactly how this will work, it's hard to get too excited. I do hope that when we do know more, PCG will be there providing advice and support as it's easier to fight the battle en-masse rather than individually. I suspect that the said agency will not be too happy with the new arrangements either and will be lobbying hard for changes.

B

But it is also your Ltd's tax affairs. The Ltd states that it will put all income via NI / PAYE.

I expect that if I were to be offered renewal it would be on these terms. How are they distinguishing via a consultancy, that seeks to make a profit out of the consultant being put in, and my consultancy that seeks to do the same? It is a pain.