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Service companies

I am getting irritated about the current media coverage on government officials and BBC presenters being paid via service companies.  I read that the Treasury review on the use of service companies is expected to conclude that such schemes must end for full-time permanent staff, even if the arrangement led to a financial gain for government departments (emphasis mine).  Am I the only person who believes that if a worker agrees to have his fees paid to a service companywith a 13.8% saving on those fees to the engaging company ("the employer")the employer should accept the offer?

Where the employer is a government department it can always notify HMRC of the arrangements.  There are provisions in place to tax service companiesso they have to pay PAYE on the fees as if they were salary, if the circumstances indicate an underlying employer/employee relationship.  

Surely a proper application of the law would yield the correct tax result without increasing government costs at a time when we can least afford it.




Date: 29th February, 2012
Author: Cathy Corns


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