Investigation of Personal Service Companies

A new select committee is to be formed by the House of Lords to look into the use of personal service companies and their impact on tax collection.

Area scrutinised by the committee will include; the extent to which staff are engaged through personal service companies in the public sector and whether doing so is justified, whether individuals are being forced into using a personal service company as a prerequisite for being considered for work, the effectiveness and efficiency of th intermediaries legislation which was introduced in 2000 and the wider benefits and drawbacks of personal service companies beyond tax and national insurance.

It emerged that last year the BBC employed 25,000 people who did not pay tax at source and this caused much controversy.  The figure included on-air television and radio talent of approx 13,000 and a further 12,000 off-air staff.  About 3,000 were paid via private companies which could potentially have allowed them to reduct their tax liabilities.  There was also controversy when 2,000 senior office holders of public bodies were revealed to be receiving payment off-payroll.

Baroness Noakes said “This inquiry will form a wide-ranging view of the use of personal service companies.  During the course of this new inquiry, we will consider the extent to which personal companies are used and the implications for tax, national insuranse and other wider issues, both from the point of view of workers and those who engage them.

“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 interest or experience in this area to send us their evidence and contribute to the debate.”