Reply to: BBC Presenters chased by HMRC

[cojak]

And this is wrong, i.e. tax inefficient.
Since when is paying more in tax and/or NIC a requirement to stay under HMRC's radar?

It may have been tax inefficient, but it wasn’t wrong.

I was happy with it. I didn’t earn as much as £18K but I paid full NICs.

It was whatever let’s you sleep at night.

[webberg]

From the admittedly limited research I've done, the reason agencies etc require a PSC is more in connection with transfer of debt provisions than tax.

I know that the myth is alive and kicking that a PSC in the chain puts you outside IR35, but I suspect even that one will struggle come April 2020.

In terms of the BBC, why are they any different from the Civil Service, the NHS or any public funded body?

If my licence fee is used to pay the tax of a contractor, then are my taxes going to be used to pay other peoples' tax?

[Hobosapien]

What caused it was the old issue of contractors doing a gig then disappearing, leaving their taxes unpaid and the agencies liable for them to HMRC. Not surprisingly the agencies insisted on the intermediary company to protect themselves under debt transfer provisions that are still in place.

So the ability for dodgy contractors to disappear and the agency be on the hook for tax should have been prevented.

If you get a self employed handy-man in to do anything from gardening to painting, plumbing, ... you don't have to check they're paying the taxes and become liable if they aren't.

Should all be covered in enforceable contract terms supported by HMRC to ensure the right entity is chased for taxes. If individuals can disappear then it's down to improving identity checks and fraud prevention not passing the buck back up the chain to ensure tax is paid.

[BR14]

The myth that we do so to avoid NICs and its associated tax dodger propaganda was all HMT's invention though, and has rather confused the picture.

That'll be why the taxdodger threads are becoming an axminster carpet then

[malvolio]

What caused it was the old issue of contractors doing a gig then disappearing, leaving their taxes unpaid and the agencies liable for them to HMRC. Not surprisingly the agencies insisted on the intermediary company to protect themselves under debt transfer provisions that are still in place.

That des not detract from the very real benefits of working through YourCo of course, and many people (myself included) used them for those reasons, rathe than taking the SE option, and paid all necessary taxes.

The myth that we do so to avoid NICs and its associated tax dodger propaganda was all HMT's invention though, and has rather confused the picture.

[Hobosapien]

Is there a timeline of regulation changes available to show that it was government that caused agencies and direct clients to require self employed to operate via a PSC rather than the contractor choosing to use a PSC for tax purposes?

i.e. Agency have long since required contractors to use PSC Ltd or umbrella. What caused that?

As someone seeking contract work rather than employment, if forced to use a Ltd then it is logical to use the accounting practices available such as income split between PAYE and dividends.

So there should be an amnesty on those pushed down the route that the government now considers tax avoidance and a clear route of operating put in place which allows true self employed to contract without a Ltd based on the nature of the contract that is agreed between client and contractor.

[andyg]

Good to read healthy debate.
The main thrust of the initial thread was is there mileage in the argument that contractors have been forced to use a vehicle such as a Ltd Co in order to secure work? And if so, how can this be brought to the fore?

[northernladuk]

What's needed is evidence.

Take a sample of contractors on minimum salary, and a similarly sized sample of contractors on higher salaries. Count the number of investigations in each group.

Until that's done, all you have is a plausible theory.

Indeed.

[NotAllThere]

Whether it will work I believe is up for debate but the theory seems pretty sound.

What's needed is evidence.

Take a sample of contractors on minimum salary, and a similarly sized sample of contractors on higher salaries. Count the number of investigations in each group.

Until that's done, all you have is a plausible theory.

[northernladuk]

And this is wrong, i.e. tax inefficient.
Since when is paying more in tax and/or NIC a requirement to stay under HMRC's radar?

When HMRC pick the worst offenders from the bottom of the list and those that have paid some are hiding nicely in the middle surrounded by people that genuinely early around 18k. Not worth unpicking it when they've got a massive list of people who've not paid anything.

Whether it will work I believe is up for debate but the theory seems pretty sound.

[pscont]

Yep, that’s what I did.

And this is wrong, i.e. tax inefficient.
Since when is paying more in tax and/or NIC a requirement to stay under HMRC's radar?

[malvolio]

Me too - until I realised the accountant was talking a load of rubbish, that I had paid several thousands in tax I didn't owe and it was immaterial in heading off an investigation anyway...

We need to distinguish between using companies for their proper purpose of limited liability (the clue is in the name) and efficient management of a variable income, and employers pushing employees into using them to avoid taxes - which is what the BBC (and many others) have done. The lost NICs - which is what IR35 is all about, not income tax - was saved by the employers, not the workers. The whole attack on the workers originated from HMT, whose staff have no idea of the real world we live in, wrongly advising a naïve chancellor in 1998: they'd tried it before and Thatcher and Major both told them to get lost. Then we got the idiot Blair and the venal Brown in power. The rest is history.

[cojak]

his sage advice was avoid declaring a teeny salary to avoid NI contributions, rather declare a 'decent' salary (18k at the time), pay the NI contributions as employer and employee, take the remainder in dividends, and hope to keep under the radar of HMRC.

Yep, that’s what I did.

[andyg]

The BBC's stance will be that using a PSC is a perfectly legal vehicle.Surely it is up to the individual directly involved with the PSC to determine how its payroll tax affairs i.e. PAYE/NI are dealt with. If the presenters who find themselves being chased by HMRC had paid the necessary taxes then the fact that they've remained in the same job would not be an issue.
I recall when I first incorporated my Ltd Co and met with my accountant for the first time to discuss PAYE/NI, his sage advice was avoid declaring a teeny salary to avoid NI contributions, rather declare a 'decent' salary (18k at the time), pay the NI contributions as employer and employee, take the remainder in dividends, and hope to keep under the radar of HMRC.

[malvolio]

It's the BBC avoiding the taxes, not the presenters. 13.8% off your wage bill is quite significant, not to mention all the other cost savings. As was pointed out by someone (can't think who... ) in about 2010.

There is a potential for this to become useful ammunition in the fight against IR35, but given the inaccurate, biased and plain mis-informed reporting I've seen to date I'm not hopeful