Ritchie on tax avoidance in the civil service

That ignoring the requirements of law is worrying in itself. It indicates a civil service that has been corrupted by greed and the ethos of personal gain.

The answer, of course, is that the State administered by the corrupt and greedy must be given more power over the rest of us.

Facepalm.

11 thoughts on “Ritchie on tax avoidance in the civil service”

  1. He also said:

    “The BBC has found that 2,000 civil servants are being paid through their own limited companies.”

    Errr, like him and his book publishing?!

  2. I wonder how many of the BBC’s employees aren’t but are under contract through their own limited companies? A rather higher percentage than in the formal civil service, I would expect. And at more inflated rates.

  3. “a civil service that has been corrupted by greed and the ethos of personal gain”

    Public Choice Theory spotted in the wild then. I wouldn’t expect the left to take that observation to its logical conclusion…

  4. Nice one Gary. However, as all goodthinking people know, public choice theory is impossible so it must be another reason.

  5. Philip Scott Thomas

    I wonder how many of the BBC’s employees aren’t but are under contract through their own limited companies?

    I seem to remember Auntie going to some lengths to explain that the £18,000,000 wasn’t actually paid to Wossy himself but to his production company.

  6. was there ever a man so delighted to parade his own stupidity and lack of knowledge in full public view?

  7. was there ever a man so delighted to parade his own stupidity and lack of knowledge in full public view?

    Arnald, almost every politician since Satan first invented them, lefty comedians (do you remember when Ben Elton was funny?), anybody who appears on zzz-Factor …

    The societal acceptance of public moronity has become passe. Richie is doing nothing worse than appearing in motley. Irritates the fuck out of us, of course, but pays his bills.

  8. @Tim:

    While it is true that use of the limited company route is to avoid Employers and Employees NI on what are essentially payments that should be subject to PAYE, it is also possible to avoid paying full whack on income tax as well.

    Payment of dividends is treated as tax paid due to corporation tax and comes with it a 10% grossed up tax credit.

    Say I receive a gross payment from the NHS into my limited company of £100,000 for services rendered (ha! ha!).

    Say I pay running costs / expenses of £20,000 (a lot of which covers short term commuting costs which most people have to pay without the ability to reclaim)

    I then also pay £8,100 in PAYE on which no tax is paid and it also covers my entitlement to a UK state pension and benefits (regardless of the difficulty in claiming).

    This means that I have a gross profit of £71,900 on which I pay Corporation Tax at 20% (£14,380) giving me a net profit of £57,520.

    From these net profits a dividend of £30,941 is made with a dividend tax credit of 1/9 and upon which no further tax is due.

    The remainder is then left in the company to cover whatever ‘costs’ I can claim (including commuting which is expensed without tax) or to pay for a future dividend in a year where I am not working or non-resident.

    So with all of this I am able to withdraw the money without evasion (although some mitigation), gain the benefit of deferral on income tax until such time as I can withdraw the cash without paying additional income tax, which might be several years in the future or even after I have retired.

    So I can get away with paying 20% tax on all of this, rather than the actual money that would be due on a PAYE equivalent.

    E.g. Salary of £88,782 (+ Employers NI @£11,218 = £100,000) on which is paid Income Taxes of £25,395 and Employees NI of £5,113 resulting in a net salary of £58,273.

    So you are comparing an effective rate of 20% + lots of ability to discharge otherwise personal costs against the company versus the PAYE drone who for a cost to the employer of £100,000 (including Employers NI) receives a net salary of £58,273 so an effective tax rate (including income tax and employees NI) of 41.7%

    Who wouldn’t want to go the Limited Company route – only an idiot would go PAYE if they could avoid to. The problem is that most can’t avoid it.

  9. It is about IR35. While HMRC have spent millions persecuting genuinely independent contractors for employer / employee taxes, the government seems to be treating its own employees as if they were independent. The stink is not envy, it is hypocrisy.

  10. It is about IR35. While HMRC … The stink is not envy, it is hypocrisy.

    I know we all like to believe the worst of the government but, no, it’s not about IR35. It is about inflexible pay scales for civil servants. If you want to hire somebody in at a pay rate different to that of band for the grade their desk has been allocated, you can’t do it through the PAYE system. So you have to employ them as contractors.

    HMG reckons an appropriate pay band for the job I do is up to about £156 per day. I’m doing some work today, for a charity, at a heavily discounted rate of £450 + VAT & exes. So, when they want me to play, they need to employ me either as a contractor or on a get-out scheme not available to the normal CS (which caps at £548 – still much less than my commercial rates. And the bloody pension is based on the £156 …)

    No, this doesn’t make the government flouting its own regulations any less abominable.

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