The furore over the use of personal services companies in the public sector and the BBC shows no sign of abating (although it has just been pushed off of the tax news front pages by the story that Starbucks has paid no UK corporation tax for the last three years). Sadly the discussion does not seem to be able to move beyond comparing the 20% small companies corporation tax rate with the 50% higher income tax band.
In reality it is far from simple to do a true like for like comparison as there are a number of tax rates that need to be taken into account at various points in the calculation depending on individual circumstances. In case anybody is interested they include 2%, 10%, 12%, 13.8%, 20%, 32.5%, 40%, 42.5%, 50% and 62.5%.
This has been amusingly illustrated by the fact that three eminent tax commentators have got themselves in a twist over calculating the potential savings that can be achieved through using a personal service company. One even stated that in certain circumstances individuals operating in such a way can end up paying more to HMRC (that is presumably the case when they fall foul of the IR35 regime and have to pay penalties and interest).
I won’t name these people to save them any embarrassment but if accountancy experts are struggling to make a sensible calculation under current tax legislation, what chance does the average taxpayer, or even a hard pressed employee of Her Majesty’s Revenue and Customs, actually have?
Typical! You do a blog about Justine Greening, and how she is using her accountancy skills to enhance her role as a Cabinet minister, when before you know it her old department is embroiled in a scandal about how it failed to make the numbers add up when awarding the west coast rail franchise.
It has since emerged that an excel error made by a DFT minion seems to have been the main cause of the problem. That in itself is not a surprise as too many people still seem to implicitly trust anything that gets produced on a spreadsheet.
However what really struck me was that such is the turnover of ministers in the Department of Transport that it was possible to point the figure of incompetence at any number of parliamentary individuals, who of course all duly denied any culpability.
To be fair to our elected representatives (as you have to occasionally) it seems unreasonable to expect them to grasp the complexities of their departments in the short time they seem to occupy the portfolio. Equally, to be fair to the departmental minions, it must be difficult to chop and change the way you do things in order to satisfy the latest incumbent. But of course the whole process is terribly unfair on the poor saps that have to pay for the whole thing i.e. you and me (but apparently not Starbucks…..).
Meanwhile I am going back to check my spreadsheets yet again….
Grateful thanks to all who have supported my British Swiss Marathon Challenge so far. I successfully completed the first leg in London in a better than expected time of 1:52:42 and am now busy training for the Lausanne half marathon in a week or so’s time. You can still sponsor me at