MP Warns That Council High Earners are Using Tax Avoidance Schemes

BLACKPOOL, England, March 14, 2012 /PRNewswire/ --

Almost 100 posts at local councils across the UK are being filled by limited company contractors and many of the high earners are using tax avoidance schemes, according to the BBC.

Findings by a Freedom of Information request by BBC Radio 4's File on 4 programme show that several councils employ staff through limited companies but Margaret Hodge, the chair of the Commons Public Accounts Committee, said the situation was a "tax avoidance scheme which is totally wrong."

According to the discovery, dozens of high earners are allowed to make their own tax arrangements rather than be paid through the PAYE system but the Local Government Association said that councils adhere to the strict HM Revenue & Customs tax legislation rules.

The FOI request showed that Hackney Council in London had the highest number with 39 of its permanent staff being paid through external companies; whereas Hammersmith and Fulham Council in the capital had 11 posts filled in a similar way. Moreover, Craven in North Yorkshire had eight staff paid in this way and St Edmundsbury in Suffolk and Ashfield in Nottinghamshire had five.

Mrs Hodge said that people who set up a scheme to avoid paying tax is "income forgone to the public purse" and issues such as these would be pursued. She added that she fears HMRC lack the expertise to stay ahead of clever private sector operators who set up complex tax avoidance schemes.

Sir Merrick Cockell, chairman of Local Government Association, said that organisations sometimes have to meet short-term staffing needs through interim contracts because it provides flexibility and reduces potential costs.

Recently the Freelancer and Contractor Services Association warned MPs to rein in the rhetoric against personal service companies and limited company workers because it fears that genuine self-employed contractors could be stigmatised and wrongly perceived as 'tax dodgers'.

An expert contractor accountant like Nixon Williams can help freelancers pay the proper taxes by working out the finances on your behalf. They can help contractors maintain all the books legally and accurately.

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