House of Lords to investigate personal service companies

A HOUSE OF LORDS SELECT COMMITTEE is to look into the use of personal service companies and their impact on tax collection.

A new select committee is to be formed to carry out the enquiry, with its chair Baroness Noakes leading the investigation.

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

There was controversy last year when it emerged the BBC employed 25,000 people who did not pay tax at source. The figure included about 13,000 on-air television and radio ‘talent’, with a further 12,000 off-air staff. About 3,000 were paid via private companies which could potentially have allowed them to reduce 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 review of the use of personal service companies. During the course of this new inquiry, we will consider extent to which personal companies are used and the implications for tax, national insurance 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 an interest or experience in this area to send us their evidence and contribute to the debate.”

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