As the closing date for comments passed for the consultation document, 'The Taxation of Controlling Persons', the Chartered Institute of Taxation (CIOT) has told the Government that these proposals are unnecessary as the existing rules can deal with full time senior executives of organisations who are being paid via their personal service companies.
The CIOT points out that as the problem lies within the public sector rather than the private sector, then the answer is to simply extend the rules for public sector appointments rather than by imposing new legislation that will impact upon the private sector.
IR35 Rules
The CIOT said that whilst much has been made of people only paying corporation tax of 20 – 25% instead of paying up to 50% in income tax, nevertheless the existing IR35 rules are there to 'police such situations'.
The Institute suggests that the recently leaked rules for 'off payroll' civil service appointees should be applied to local government and other public sector bodies rather than introducing legislation that will catch both public and private sectors and force them to operate PAYE and NIC's on their senior managers and other 'controlling persons' pay.
John Whiting, Tax Director of the Office of Tax Simplification but speaking in his capacity as CIOT Tax Policy Director, said, “There seems to us to be little need to introduce new rules for the private sector. The consultation document does not identify a particular mischief that is occurring in the private sector that is not already addressed by the IR35 rules and the rules on agency workers. In particular, we do not think the document makes the case for intervention by way of deduction of PAYE/NICs at source, not least in view of the complexity that this would add for those individuals affected, end-users and HMRC.
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