Chief Secretary to the Treasury, Danny Alexander has informed MPs that some 2,400 senior civil servants are working via their personal service companies to save tax.
At least 70% of these individuals are on contracts worth £400 per day. By claiming to be self-employed it is estimated that they may be saving at least £23k in tax and National Insurance.
Some contracts have been in place for over 10 years.
Mr Alexander admitted that "Off Payroll Engagement" is endemic in the public sector system, however all will have go on staff and be subject to PAYE from September.
We presume that the 2,400 civil servants affected will now be seeking professional advice and accounting for tax under IR35.
The new measures will apply to all in controlling positions, but not genuine freelancers. Local authorities and the BBC excluded from changes.
What is "Off Payroll Engagement"?
It appears that the phrase "Off Payroll Engagement" has been used by Mr Alexander because it sounds more palatable than "false self-employment".
False self-employment is what HMRC tend to use in relation to workers in the construction industry.
Off Payroll Engagement is a new term in the tax lexicon.
