Buried in the Budget:Freelance company tax rules ” shake up ” on way

Almost entirely missed by the press coverage of the Budget this morning, George Osborne, the Chancellor, announced a radical review of  freelance  tax employment rules through what is known as IR 35.

Not mentioned in his speech – the changes were hidden away in the full Budget document. The full story of this change written by Alison Winward  and Frederika Whitehead is on the Exaro news website  at http://www.exaronews.com.

For those worried by the changes to the IR 35 rules   the official Treasury document uses the dreaded word simplification – the same phrase used by the Chancellor to impose a ” Granny Tax ” – a  future loss of  income for 4.5 million pensioners  by freezing tax allowances for most of  those who have  incomes above the state pension. Like pensioners this could affect millions of people.

The full section in the Treasury  reads:

 ” Personal service companies and IR35

 The Government will introduce a package of measures to tackle avoidance through the use of personal service companies and to make the IR35 legislation easier to understand for those who are genuinely in business.

This will include: strengthening up specialist compliance teams to tackle avoidance of employment income; simplifying the way IR35 is administered;

and subject to consultation, requiring office holders/controlling persons who are integral to the running of an organisation to have PAYE and NICs deducted at source by the organisation by which they are engaged. (Finance Bill 2013)”

Basically Hmrc are giving a warning that the  wheeze that enabled Student Loans Company chief Ed Lester to hold one official position in Whitehall, will be banned everywhere. It will also effect local government, the NHS and now the private sector, as people won’t be able to claim it as freelance earnings through a  personal services company. They will have to go through PAYE and pay national insurance.

There is at least a year’s grace before this happens – as legislation is planned for next year’s finance bill – and implementation could be delayed until 2014.

In the meantime the small print announces a crackdown from Hmrc on freelances who use this method. The revenge of Danny Alexander, chief secretary of the Treasury, who missed the whole Ed Lester arrangement when he personally approved all high paid Whitehall staff, looks like being rather more widespread than people anticipated.

Student Loans Chief Ed Lester’s personal company bites the dust

An idyllic scene at Temple Mill Island, which used to be the home of Ed Lester's personal service company.

Student Loans Company chief executive, Ed Lester, is closing down his personal service company after the furore over the revelations of his tax arrangements.

 A notice in today’s London Gazette reveals he and his partner Dolores Hawkins have applied to Companies House to have the firm called Placepass struck off the register.

Full details of the story are on the website http://www.exaronews.com  but suffice to say the company has been around for 14 years during the time Mr Lester worked for the Office for Government Commerce, NHS Direct and Motability and has had various home addresses from Cambridge to London Docklands.

The firm was used  as a ” tax efficient” way for the chief executive  to funnel his £182,000 pay and pension package and his £28,000 in expenses from the Student Loans Company. It was based at his home on Temple Mills island on the River Thames at Marlow, Buckinghamshire. The island is a gated community.

Ed Lester’s decision is interesting . The story of his tax arrangements  is already causing alarm among thousands of other people working for government departments, agencies ,the NHS and local government. The chancellor, George Osborne, is also looking at changing the tax laws covering this in tomorrow’s budget. It will be complicated and people need to watch for the small print in the Budget statement to find out what will happen.