The reasoning behind the plan is sensible, everyone that is in effect an employee, direct or indirect, of a public sector body should pay tax at the appropriate rate, the problem lies in the detail, for example when considering an employee and a consultant performing similar tasks;
An employee gets paid a salary for being in employment, whether a task is completed or not.
A Consultant gets paid at an agreed daily rate, related directly to the delivery of agreed task
An employee is in employment and by definition his or her salary will turn up no matter what
A Consultant has to find placements, has to advertise their Company’s ability and availability, has to travel to pitch for work and frequently work across many locations to perform a task, all of this costs money, money which under the new legislation must come out of the Consultants Nett Salary
An employee doesn’t have to perform any form of self-promotion, doesn’t need advertising brochures, business cards, websites with their technical consultants, support staff performing analytics for them, the Consultant needs and pays for all of these.
As you might guess there are many other examples which show why although a consultant appears to be paid at a higher rate than an employee, frequently this is not the case.
Most Consultants operating directly or through what are known as Personal Service Companies already pay tax through a PAYE scheme operated by those Companies.
Not satisfied with a completely botched plan to Tax those already paying Tax, the onus is being passed to the Engaging Employer, be it Council or Hospital Trust or any other public body to perform the tax take, and to do so based on a questionnaire that is not even yet available, but which will require every single person affected by this change to provide answers to some pretty intrusive questions, there is not as yet, a mere 6 weeks before assumed implementation, any comprehensive guidance for either worker or engager.
Another little beaut about this debacle is confirmation that although workers must pay tax and NIC, they are not necessarily entitled to any of the benefits of employment, such as paid holidays, sick pay or pension contributions, so, welcome to the world of 2nd class employees, 2 people doing similar jobs one of whom is entitled to a range of benefits the other is not.
The Employment Tribunals will need to operate 24/7 to even register the claims when this kicks in !
So in short, 10’s if not 100’s of thousands of people are going to face at least financial disruption, many may choose to withdraw their services, all because of a stated aim to recover £440M in unpaid tax.
It is estimated that the Total cost of bailing out British banks to date is £850 Billion