Back in 2012, tighter rules were introduced for contractors working in the public sector following Treasury recommendations contained in their review of May of that year.
The rules were designed to introduce greater transparency of ‘off-payroll’ contracts by requiring:
Cabinet Office guidelines state that where a department is dissatisfied with the quality of a freelancer’s assurance, then they may refer the matter to HMRC for further investigation.
The Treasury have now conducted their first evaluation of the new rules which reveals that 1,815 (94%) of contractors working within the public sector provided satisfactory evidence that their tax affairs were o.k.
Of the remaining 125 (6%) of cases, former government contractors were unable to provide the required assurance resulting in them having their details passed to HMRC for investigation.
The vast amount of public bodies are correctly applying the rules in respect of senior level appointees although two departments were fined as follows:
So satisfied are the Treasury with this newly created transparency and integrity that the Chief Secretary, Danny Alexander, has asked the Secretary of State for Health to carry out a full investigation into all contractors in the NHS, operating at senior level, to ensure that potential ‘tax avoidance’ is being eliminated.
Mr Alexander said:
“The vast majority of off-payroll contracts are in place for legitimate reasons and those workers are playing an important role by satisfying short term needs for specialist advice and services.
However, it is right that the public sector sets the highest standards in terms of its tax arrangements and that departments continue to assure themselves that all their workers are paying their fair share of tax.
I am pleased that this guidance is working and that compliance has been so high. The minority of cases which do not appear to be consistent with the guidance have been passed on to HMRC who will now investigate these.”
The Treasury will continue to monitor the application of the rules and conduct a similar review for 2013/14.