While consultants in the software industry have long had to worry about IR35 rules designed to promote employment and enforce higher tax rates, it seems the British Government previously chose to use just the arrangements it sought to stop. The Telegraph reports:
Jonathan Baume, general secretary of the First Division Association (FDA) which represents senior civil servants, said pay among the highest-ranking staff needed to be more “transparent”.
His comments come after it was disclosed that more than 25 senior Department of Health officials have had their salaries paid to limited companies, enabling them to reduce their tax bill.
However, Mr Baume said he believed such arrangements had allowed the Government to pay senior figures less and that cleaning up the system would mean salaries would have to rise.
Speaking on BBC Radio 4’s Today programme, he said: “What we have found is that in certain cases, because the market rate was so much greater than the salary that would have been offered in the civil service, various deals were being done and some of these are now being exposed.
IR35 is intended to ensure that people and firms do not dodge income tax, NIC and employment law:
The legislation ensures that, if the relationship between the worker and the client would have been one of employment had it not been for an intermediary the worker pays broadly tax and NICs on a basis which is fair in relation to what an employee of the client would pay.
And yet here’s the NHS, in particular, apparently using just such intermediary arrangements to enable excessive public sector pay. The hypocrisy stinks, but why are people being paid so much out of taxation and in a market so dominated by the state that it can scarcely be called a market at all? If people want large rewards, they should take the higher risks inherent in private business. If they want the security of a taxpayer-backed income, then it is at least disingenuous to call on a distorted market in aid of high pay.
For the General Secretary of the FDA to call for higher pay to deal with this mess shows just how out of touch some high-paid taxpayer-funded officials have become. Given that my constituents are yet again facing unwelcome changes to health services, we should be asking whether this entire system of reward serves the public interest.