Use Of Personal Service Companies

It is likely that HMRC will re-double its efforts to check that the rules are being followed.

The Public Accounts Committee (PAC) has criticised the BBC for having about 25,000 off-payroll contracts, e.g. using staff operating through personal service companies with the consequence of no PAYE tax deduction at source obligations for the BBC.

This is not really new news because there were newspaper headlines some years ago about the then chairman, John Birt, being paid via his personal service company.

The first point to note here is that no details have been given about the nature of the duties of the 25,000 people in question. It is likely that the majority are genuinely self-employed artists or contractors, in which case there would be no reason to deduct tax at source. However, the BBC is to review these contracts and the PAC will be looking for assurance that the staff involved are paying the correct amount of tax on income received from the public purse.

There has, however, been a wider issue recently about people in senior positions in Government and public bodies who are receiving their remuneration via personal service companies.

Personal service companies are a commonly used vehicle in many businesses. In some cases, the 'employer' insists on their use in order to circumvent the employment protection legislation. Where personal service companies are used the employer does not pay for holidays, sick leave, maternity pay and there will be no question of redundancy payments.

The Government first became concerned about the use of personal service companies in the 1990s because of concerns that individuals operating through such structures were subsequently taking dividends from the personal service...