Limited company tax-saving row ‘hurting public contracts’

Contractors fear the public sector is set to stem the flow of freelance, interim and contract opportunities due to unfavourable press coverage of government wages being ‘channelled’ through personal service companies.

A poll of 170 freelancers found that 67 per cent of respondents think the media ‘witch-hunt’ against high-profile public servants paying less tax by virtue of being a PSC will make state contracts harder to come by.

“Since the news broke of the questionable circumstances of Ed Lester, head of the Student Loans Company – operating as a contractor but receiving benefits…the aftershocks have been felt far and wide,” said the PCG, which ran the poll.

Evidencing their members’ fears, the freelance trade group said that since the adverse reports of limited company usage, which on Sunday extended to George Galloway MP, some one-person companies have been handed early termination notices on their contracts.

Seemingly because their engagers want to head off accusations of ‘tax avoidance’ or ‘disguised employment,’ these notices were issued before a plan in last month’s Budget to force all senior interims onto the payroll and tax them at source as employees.

A PCG member reflected: “We need this new review and consultation to step in and we need it fast in order to stop the attacks and to ensure that everyone understands the difference between the Ed Lesters, the dodgy disguised employees, and real freelancers that are genuinely in business and getting on with helping growth in the public sector.”

Despite the majority of the polled freelancers being concerned, one third said they did not believe there would be any impact on contract creation, saying they can foresee no negative effect on public sector opportunities.

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Written by Simon Moore

Simon writes impartial news and engaging features for the contractor industry, covering, IR35, the loan charge and general tax and legislation.
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