Local Government: Recruitment

HM Treasury written question – answered on 15th January 2015.

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Photo of Tessa Munt Tessa Munt Liberal Democrat, Wells

To ask Mr Chancellor of the Exchequer, if he will take steps to limit the use by local authorities of personal service limited companies for hiring personnel.

Photo of David Gauke David Gauke The Financial Secretary to the Treasury

The government is committed to tackling all forms of tax avoidance and evasion and to ensuring that everyone pays their fair share of tax.

Off-payroll workers including those working for limited companies play an important role in helping public sector organisations meet short term needs for specialist advice and interim services. However, it is essential that these workers are meeting their tax obligations.

Decisions on recruitment are a matter for individual Local Authorities. However, the Secretary of State for Communities and Local Government published guidance in 2012 and 2013 which said local authorities should actively review their use of arrangements which could be seen to minimise tax payments.

In addition, the Government has made it increasingly difficult for payments made to sole traders or contractors working in local government to be hidden from the public. The Transparency Code 2014 now means authorities are legally bound to disclose information on all payments of £500 or more to bodies acting in a business capacity.

New tighter rules governing ‘off-payroll’ appointments in central government were established in May 2012 when the Chief Secretary to the Treasury published the Review of the Tax Arrangements of Public Sector Appointees. The recommendations of the Review mean that the most senior staff must go on the payroll, and departments will be able to seek assurance in relation to the tax arrangements of their long-term, high paid contractors.

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