Reports of more limited company arrangements in government departments must not create a witch-hunt, PCG warns

Revelations in the Guardian newspaper that Ed Lester, the Chief Executive of the Student Loans Company, is not the only senior government official to be paid through a limited company is generating more heat than light, according to the PCG.

The Lester story is likely to have annoyed many jobbing contractors working through umbrella companies or limited companies. The former pay taxes and national insurance contributions as they earn, while the latter, fearing the swooping net of IR35, are exceptionally scrupulous in handling their tax affairs, frequently employing specialist (and expensive) contractor accountants to ensure they do not fall foul of HMRC.

The Guardian report that 25 senior figures at the Department of Health are also being paid through limited companies is already leading to speculation that this is “just the tip of the iceberg,” as one anonymous Whitehall source told the newspaper. The implication is that there is something intrinsically dodgy about limited companies.

PCG Chairman Chris Bryce was quick to quell synthetic outrage, warning against a “witch-hunt” targeting the country’s smallest businesses. He said:

“The Government is right to look closely at how public servants are being remunerated and where there is disguised employment or tax evasion it should be stopped and fully investigated by HMRC. However, it is fundamentally inaccurate to brand all one-person limited companies as employees attempting to avoid tax.”

“We should ensure those rushing to attack limited companies don’t trample the only green shoots of recovery we have seen for quite a time – freelancers.”