Monday 14 November 2016
Off-payroll Review 2014-15
The Treasury has concluded its annual evaluation of Departments’ compliance with the rules governing off-payroll appointments in central Government for 2014-15. Specific rules implemented in 2012 require Departments’ most senior staff to be on payroll, and Departments now have stronger powers to seek assurance in relation to the tax arrangements of their long-term, high-paid contractors who are off-payroll. These rules do not cover other off-payroll engagements, which will include a broader category of staff and public sector organisations.
Below board-level off-payroll engagements
These rules apply where a new off-payroll engagement is for more than six months with a daily rate above £220. All engagements from 23 August 2012 meeting these criteria must include contractual provisions that allow the Department to seek assurance that the worker is either not a disguised employee, or, if they are, that they are paying the right amount of tax and national insurance contributions. If assurance is not provided the contract must be terminated. For any individuals where their engagement has either been terminated, ended as a result of the assurance process, or ended after assurance was sought but before it was received, Departments have been asked to provide personal details of the worker to HMRC for further investigation.
In accordance with the guidance, Departments adopt a risk-based approach in deciding which contractors to seek formal assurance from. In 2014-15, Departments sought assurance on the tax affairs of 3,034 of their contractors and informed the Treasury that they received satisfactory assurances from 2,530 of these engagements. In the remaining 504 cases, contracts were either terminated or came to an end before assurance was received. Referrals to HMRC occurred in all relevant cases across Government.
The review found that not all relevant contracts contained the clause required to allow Departments to seek assurance. At the time of the review period the rules had been in place for over two years, and it is reasonable to expect Departments to have these clauses in place. Departments can expect to be fined if breaches of this nature are found in the next review.
Board-level and senior appointments
The rules also specify that board-level appointments and those with significant financial responsibility should be on the payroll of the Department or other employing body, unless there are genuinely exceptional circumstances. Any such exceptions should not exist for longer than six months.
The review has uncovered two cases where there have been breaches of these rules. The Ministry of Defence and Department for Communities and Local Government have brought to my attention instances where a board member or senior official with significant financial responsibility at their arm’s length bodies remained off-payroll for longer than six months. Steps have been taken to resolve these breaches and, as the value of the salaries in question was considerably below the £58,200 annual rate at which Treasury monitors non-board level appointments, I have decided not to impose sanctions this time.
As in previous years, the review found instances where off-payroll workers at board level or with significant financial responsibility have been seconded to the Department from another organisation. Where the full value of payments from the Department to the individual are put through the payroll of the seconding organisation this has not been treated as a breach of the Treasury rules.
The Treasury will continue to monitor Department’s compliance with these rules and will conduct a similar review for the 2015-16 financial year. The Treasury is keen to increase compliance both with the Treasury rules, and also with the ‘intermediaries legislation’—the tax rules for disguised employees.
While not directly covered by this review, the ‘intermediaries legislation’ will apply to some of the engagements covered by the Treasury rules, and the Government’s overall assessment is that compliance with this legislation, across the contractor population as a whole, is only one in 10. A separate consultation published on 26 May 2016 proposed moving the responsibility and liability for applying the intermediaries rules from the individual to the public sector engager or agency. The government will announce the outcome of that consultation shortly.
The statement and attachments can be viewed online at:
HMRC Contract: Concentrix
HM Revenue and Customs (HMRC) has concluded discussions with Concentrix regarding the negotiated early exit of its contract to investigate fraud and error in the tax credits system.
As previously announced to the House, HMRC acted quickly to address the unacceptable level of customer service that tax credits claimants faced when contacting Concentrix and as a result, HMRC took back a significant number of cases. All 181,000 cases HMRC took back from Concentrix have been finalised. As of 13 November HMRC has completed around 28,500 of the approximately 32,500 requests for review of Concentrix decisions (known as mandatory reconsiderations) and will continue to handle any new cases as they arise.
On 14 September, the House was informed that HMRC would not be extending its contract with Concentrix beyond its scheduled expiry date in May 2017. On 26 October, the House was further updated that HMRC had entered into discussions with Concentrix on a negotiated early exit from the contract. Those discussions have now concluded and the chief executive and permanent secretary of HMRC has decided to bring the contract to an early close.
As a result of the contract ending, around 250 Concentrix staff have transferred to HMRC following completion of appropriate checks and HMRC has put in place a programme of induction and training. All these new staff are to receive formal training and support from team members, their managers and from subject experts. Managers will also receive bespoke management training to assist them in supporting teams.
The latest estimated saving to the Exchequer from reducing fraud and error as a result of this contract is £193 million. The amount paid to Concentrix over the life of the contract is approximately £32.5 million.
The £32.5 million overall cost of the contract includes the following:
HMRC has paid approximately £15.3 million in 2016-17 with respect to work completed or work in progress at the end of the contract.
As part of this, HMRC has applied the provisions of the contract that allow for reductions in payment when Concentrix has not achieved the required levels of performance against the indicators. For 2016-17, HMRC reduced payments to Concentrix by £1.9 million, and over the lifetime of the contract payments to Concentrix were reduced by a total of £3.5 million.
HMRC has paid approximately £500,000 towards some of Concentrix’s exit costs from its subcontracts.
Tackling error and fraud in the tax credits system remains a priority for the Government, and HMRC will continue to bear down on this. However HMRC recognises that the service provided to tax credit claimants deteriorated in recent months, which is why HMRC has negotiated an early exit from this contract. The National Audit Office has announced a wider examination of the contract, and HMRC will be working with them on their report.
Exiting the European Union
General Affairs Council: November 2016
The General Affairs Council (GAC) on Tuesday 15 November is expected to focus on: preparation for the December European Council; October European Council follow-up: the mid-term; review of the EU’s multiannual financial framework (MFF); the Commission work programme 2017 and a joint institutional declaration on legislative programming for the coming year; rule of law; and the roadmap for the European semester 2017.
Preparation for the December European Council
The annotated agenda for the December European Council has been issued and will cover: migration, security, economic and social development—youth, and external relations. In line with the PI’s commitment, the UK will play a full and constructive role at the December European Council and in discussions at the GAC to prepare it.
October European Council follow-up
The presidency will present an update on the implementation of the October 2016 European Council conclusions on migration, trade, Russia and other global and economic issues.
Mid-term review of the EU’s multiannual financial framework (MFF)
Following initial discussions in September and October, there will be a further discussion on the Commission’s proposals regarding the mid-term review of the multiannual financial framework.
Commission Work Programme 2017
Commission first vice-president Frans Timmermans will present the Commission work programme (CWP) 2017. The CWP is adopted annually by the European Commission. It contains a list of the legislative and non-legislative priorities that the Commission intends to bring forward in the course of the following calendar year.
Inter-institutional agreement on ‘better law-making’
The Council, Commission and Parliament are to agree a ‘joint declaration’ on the priorities for the EU for the year ahead, based on the Commission work programme 2017 which was published on 25 October. The presidency will update on progress at the GAC.
Rule of law
The Slovak presidency will present a paper, based on written returns from member states, assessing the effectiveness of the annual rule of law discussions among member states.
European Semester 2017
The presidency will present the timetable for the 2017 round of economic coordination with member states, otherwise known as the European semester.