Vixen Consulting

Revenue pays former official £149k to do his old job

Robert Watts Sunday Times 25/07/10

BRITAIN’S tax authority paid a senior official nearly £50k a month after he had left his job because it could not find a replacement in time.

When Deepak Singh’s three ­year contract as chief information officer at HM Revenue & Customs came to an end in June last year, he stayed in his post being paid as a contractor until September.

Singh, 46, was paid through his own private service company – a practice for which the Revenue has pursued others because it can help them to avoid paying income tax.

Before Singh became a contractor, his pay had been about £160k a year. Under the service company arrangement, the Revenue paid him almost as much as his annual salary to do the same job for three months.

Accounts filed by the Revenue last week read: “For the period June 19, 2009, to September 18, 2009, £149,500 was paid to Orwell Consulting for the services of Deepak Singh.”

Singh said this weekend he had negotiated a daily fee with the Revenue when his three­ year contract came to an end. “I said I wanted to become a contractor for personal reasons,” he said. “I told them my daily rate and they were willing to pay it.”

It is understood Singh’s fee is similar to the rates charged by senior IT experts hired out by KPMG, Deloitte and other consultancy firms.

Accountants have attacked the way the Revenue hired a consultant and paid him through a service company to do work that was to all intents and purposes a job.  “This is precisely the type of arrangement HMR&C itself has spent a lot of money trying to stamp out in the private sector,” said a partner at a leading accountancy firm.

“The Revenue has hit people hard who are paid through service companies but who are effectively employees in all but name because it allows the employer to avoid National Insurance and the workers to pay less income tax.”

By being paid through a service company, Singh could be liable to corporation tax of up to 28% rather than income tax at 40%.

Singh said it had not been decided how he would be taxed on his three-month consultancy as he would not have to file the relevant tax return until January 2011.

He said he would consult the Revenue and pay the tax that the department said should be paid on the earnings.

The Revenue said it would ensure no tax would be avoided as a result of the arrangement.

It said the size of the payments to Singh’s company reflected the fact that, as a contractor, he would not receive life insurance, pension contri­butions and holiday pay.

In the LibCon Coalition’s full programme for Government, the new Government declares it will:

Review IR35 as part of a wholesale review of all small business taxation, and seek to replace it with simpler measures that prevent tax avoidance but do not place undue administrative burdens or uncertainty on the self employed, or restrict labour market flexibility.

The commitment appears as the fourth of 20 priorities for improving the UK’s ability to do business.

This was taken in 200posted in 2007 when I was working at the airport.