FCSA refutes Telegraph’s claims that personal service companies are inappropriate

Following a Telegraph report (22nd July 2016) that suggested the BBC has acted inappropriately by allowing key personnel to work through personal service companies FCSA has refuted any claims that personal service companies are inappropriate and stressed that they are a legitimate way of working for genuinely self-employed workers.

The Telegraph article suggests that: “The government has tried to crack down on the practice across the public sector, with the House of Commons public accounts committee describing it as “staggeringly inappropriate”.  However, The House of Lords Select Committee on personal service companies report published in April 2014 does not align with this apparent “crack down” as they concluded that “there will be circumstances in which public sector organisations, just like private sector organisations, may need to acquire services from those who operate through personal service companies. For this reason, we believe that any blanket restriction on public sector use of personal service companies would not be beneficial to the delivery of public services.”

Furthermore, FCSA believes the public accounts committee has been misquoted.  In October 2012, Rt Hon Margaret Hodge MP, Chair of the Committee of Public Accounts, actually said: “Avoiding tax and national insurance when paying public sector staff is almost always staggeringly inappropriate.”  This is very different to the assertion that operating through personal service companies is staggeringly inappropriate.

Julia Kermode, Chief Executive of FCSA, the UK’s largest independent trade association for accountancy providers and umbrella employers said:

Whilst we don’t support the inappropriate engagement of individuals through personal service companies what we seem to be seeing here is a select number of high profile freelancers coming under the spotlight which overlooks the average contractor who has chosen to work for him or herself and does so in line with current tax legislation.

Individuals choosing to be self-employed are in a very different position of security to someone who is a permanent employee with all the statutory benefits that come with that.  We dispute that personal service companies are a mechanism to avoid tax and it is important that HMRC does not tar all freelancers with the same brush. Personal service companies give a freelancer freedom to contract with end-clients through their own business.  It also provides clients with the flexibility to engage skills on a temporary basis, as needed, enabling firms to scale up or down according to demand.

Freelancers have been widely credited with helping the UK’s economic recovery and so it is important that this latest move by the BBC is not used as an excuse by HMRC to crack down on legitimate freelancers and contractors.

Published on: 22 August 2016 - By: FCSA