Dispatches: Low Pay Britain
Last night Channel 4’s Dispatches investigated the reality of employment for many in modern Britain and how some big name brands utilise complex schemes to save hundreds of pounds on their wage bill. Intouch Accounting’s Managing Director, Paul Gough, watched the programme with interest to see what the future looks like for Low Pay Britain…
30 years ago it was commercially acceptable and almost socially acceptable to mitigate your personal or corporate tax liability based upon what an accountant might call tax planning. Tax planning in this context is a legal means of putting your business or employment affairs in good order in a manner which reduces your tax liability. (Lord Clyde agreed)
“No man in the country is under the smallest obligation, moral or other, so to arrange his legal relations to his business or property as to enable the Inland Revenue to put the largest possible shovel in his stores. The Inland Revenue is not slow, and quite rightly, to take every advantage which is open to it under the Taxing Statutes for the purposes of depleting the taxpayer’s pocket. And the taxpayer is in like manner entitled to be astute to prevent, so far as he honestly can, the depletion of his means by the Inland Revenue”
Lord Clyde, 1929
In the past planning was an acceptable way to arrange your affairs in such a manner that reduced taxes so long as the loser was perceived to be HMRC and if, by a little imagination, you could derive a legal tax advantage, then good for you. Not so any more.
In 2015 Britain if a person or corporation arranges his affairs with the effect of reducing the amount of taxation payable by them, to the detriment of another (worker or supplier) then that is now deemed by HMRC and many other taxpayers as morally corrupt. In times of austerity the public needs the tax.
Dispatches correctly highlighted that the lower paid and vulnerable workers often do not understand the differences between being an agency employee or an Umbrella worker or even the full implications of being self-employed. These workers do need and should get protection from their unions, the GLA and HM Government and it’s politically and morally right to level the playing field making sure we all pay our fair share of taxation in order that we can protect our hospitals and roads and education. But how do you do it?
The programme’s use of the Only Fools and Horses theme tune and in using vocabulary like: corrupt, dodgy, tax avoidance and tax evasion present the case that arrangements or structures designed to reduce tax payable to the Treasury are no longer acceptable means of keeping more in your pocket. Increasingly such avoiders are being seen as not making a fair and equitable contribution to the nation’s coffers and that is not the British way.
Who are the losers?
The losers are all of us. We work hard and pay our taxes and yet abuse of the low paid is allowed to continue in the largely unregulated temporary employment sector. From the political expediency of Job Centres pushing unsuitable workers into self-employment to end-hirers wanting to share costs reductions with agencies and Umbrellas who are willing to facilitate aggressive tax schemes to reduce the tax take.
The problem is that I and I expect you, do not know where the line is between normal business and personal objectives which use commercial good sense to reduce costs (of which taxation is one) and unlawful “wriggling” to the outside of tax legislation to remove or reduce a tax burden that would in part be used to pay for the things we all expect to have like a functioning NHS.
We understand legal boundaries and the need for protection of the vulnerable, but more and more the arguments being put forward are that it’s not fair, or the playing field is tilted, or the Nation needs more tax so dig deep.
I think abuse and exploitation are legitimate targets for anti-abuse legislation and punishment however care is needed in targeting only the guilty, for there a many organisations providing stimulus and jobs in the UK temporary worker, freelancer and contractor sector that do not deserve to be called guilty, even if the way they operate enables their independent Umbrella workers, the genuinely self-employed and those with personal service companies to utilise tax allowances, incentives and reliefs which only exist because they were created by the Government ! Let’s keep the debate about legality and not about morality.
Do you work for an Umbrella? Read our Travel and Subsistence: It’s robbery blog to find out what HMRC’s current review of T&S claims might mean for you.
This blog has been prepared by Intouch Accounting. While we have made every attempt to ensure that the information contained in this blog has been obtained from reliable sources, Intouch is not responsible for any errors or omissions, or for the results obtained from the use of this information. This blog should not be used as a substitute for consultation with professional accounting advisers. If you have any specific queries, please contact Intouch Accounting.