Two thousand senior civil servants could be minimising their tax by being paid off the Government payroll, it has emerged.
That people who are not really eligible for not PAYE are getting paid through not PAYE is indeed pretty dodgy.
However, this of course is bollocks:
Being paid through a service company allows the recipient to be taxed at the corporation rate tax rate of 21 per cent rather than pay up to 50 per cent in income tax.
The deal was estimated to allow Mr Lester – who received £182,000 a year via a headhunter to his own service company – to save as much as £40,000 a year in tax.
Because when you take the money out of the company as a dividend then you\’ve got to pay the extra income tax to take you up to the regular rate.
Where you do save is on national insurance. But this causes another problem:
But he added: “I also believe that departments should be able to assure themselves that highly paid specialist staff are meeting their income tax and [national insurance] obligations.”
Under the new crackdown Mr Alexander will force any official who is not on the pay roll, has been employed for more than six months and is paid over £220 a day – the equivalent of a senior civil servant’s salary – to prove that they are paying their fair share of tax.
If cannot prove they are paying the same income tax and National Insurance Contributions as an employee, they will have their contracts terminated.
The major saving is in fact on employers\’ national insurance. And it is that that the government itself hasn\’t been paying on these wages as a result of the paying through service companies. So it is in fact the government that has been dodging taxes here.
Which is amusing, isn\’t it?
And to add to John B\’s comment:
\”Departments have provided the Treasury with information in relation to all individuals engaged off-payroll – for payment in excess of £58,200. Over 2,000 such individuals have been identified,\” he said, before adding that around 1,500 are paid more than £380 a day.
He continued by stating that around 1,600 people have been working for their departments for more than six months. Of these, 1,200 have been working for in excess of a year and 800 of them have been working for at least two years.