Tax saving scheme….not again!

Okay, so tax saving schemes may not be your cup of tea for various reasons. However, the reporting on this area has led many people to believe that vast swathes of highly paid individuals are avoiding tax. But, the reality is somewhat different, the following article from Accountancy Age points out the starting point for some individuals is only above £58,200 per year. Not quite the millionaire range that we’re led to believe!

The Commons Public Accounts Committee will question the BBC after a Treasury review found that around 2,400 civil servants earning more than £58,200 a year were paying corporation tax instead of higher rate tax by working as off-payroll consultants, reports the Financial Times.

Being paid in this way is not illegal, but is seen as inappropriate for people holding public office, where the employer does not make national insurance payments.

Danny Alexander, chief secretary to the Treasury, has already vowed to rein in the practice after he conducted a review that found more than 2,000 public officials were being paid in this way.

Labour MP Margaret Hodge, chair of the committee, is concerned that BBC staff, paid via the license fee, should have their tax affairs scrutinised.

The BBC’s CFO, Zarin Patel, and its head of employment tax, David Smith, will face questions over their staff on Monday.

A Freedom of Information request in 2011 found five BBC staff earning more than £150,000 were remunerated through personal service companies, while 36 on more than £100,000 were paid in the same way. In total, 300 BBC staff are paid using the method.

Despite freelancers working for several organisations legitimately using the mechanism, MPs are concerned higher earners are using it for tax avoidance reasons.

“If you earn your wage on the back of the taxpayer, and they do in effect because they get their money from the license fee, you have a moral imperative to lead by example,” said Hodge.

She added: “If the pure motive of this is for the BBC to avoid paying is contributions under NICs, then that’s just not on.”

The BBC said its use of service companies to pay on-air talent afforded both parties flexibility on how they worked together.

A spokesman said BBC contracts “stipulate that talent must pay the appropriate amount of the tax” and that it “provides HMRC with a detailed annual report of all payments made to such companies”.