United Kingdom

Details

  • Service: Tax
  • Date: 24/05/2012

Proposals to change tax rules for Personal Service Companies aimed at government departments could hit private sector employers, says KPMG 

  • If preventing government departments from hiring senior staff via personal service companies is the policy objective, why not just introduce a ban, asks KPMG
  • Proposals as drafted add complexity and cost to ALL employers – private sector and public sector
  • Measures to tackle abuse via personal service companies  under IR35 were already outlined earlier this month by HMRC


Commenting on today’s consultation document on the taxation of controlling persons issued by HMRC and HM Treasury, tax partner and head of employment tax for KPMG in the UK, Jayne Vaughan said:

 

“The essential ‘problem’ that the authorities are trying to ‘fix’ is that of government departments engaging senior ‘controlling persons’ via personal service companies (PSCs).  They are attempting to address this by changing the rules for ALL employers – not just government departments.

 

“The knock-on effect of this for many private sector employers is that it could become more complicated, more expensive and more difficult for them to obtain the services of the people they need when they need them.  At a time of economic difficulties with the focus very much on growth, making it easier and more flexible to hire people seems to make sense.  In  a number of sectors  (such as construction, Engineering, IT) there are likely to be a number of individuals who are routinely engaged via PSCs and could be caught by the definition of “controlling person”, suggested to include for example having managerial control,  controlling budgets and/or the workforce etc.

 

“A simpler and easier approach would be to simply introduce a policy under which government departments were not allowed to use these personal service companies if that is the objective being sought.

 

“There are concerns about wider tax leakage from the general use of PSCs but these are already being addressed via changes already under way to the IR35 regime.  All in all today’s condoc seems surplus to requirements.”

 

KPMG will be covering this subject in more detail at a future Employers Club Webex on 12 June 2012.

 

-Ends-

 

For further information please contact:
Margot Cowhig, KPMG Corporate Communications
Tel:  0207 694 4246 Mobile: 07920 274856: margot.cowhig@kpmg.co.uk

KPMG Press Office: 0207 694 8773

 

Notes to editors

KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and operates from 22 offices across the UK with over 11,000 partners and staff.  The UK firm recorded a turnover of £1.7 billion in the year ended September 2011. KPMG is a global network of professional firms providing Audit, Tax, and Advisory services. We operate in 152 countries and have 145,000 professionals working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity.  KPMG International provides no client services.