Several government departments, in an effort to show they have reduced the number of civil servants they employ, have taken on “consultants” instead. To demonstrate that they are genuinely consultants and not merely individuals, they are instructed by the relevant department that, rather than invoice as sole traders, they have to set themselves up as limited companies to be able to invoice for their services. It is quite possible that some may pay less tax by this arrangement. Most do not, since their private companies have to pay corporation tax and they then have to pay income tax on the receipts from their companies.
These “civil servants” benefit from no holiday pay, sickness pay, employment protection, pension or employee rights. They can be laid off with a month’s notice or, in some cases, no notice at all. Far from being a matter of individuals trying to avoid paying tax, this arrangement is a matter of government departments trying to cook the books by showing a lower number of civil servants working in the department, and wishing to avoid their responsibilities as employers.
what the UK is doing is the envy of people in Washington.” We now know that the US has had 11 straight quarters of growth; Britain is in recession and output is lower than it was in the third quarter of 2010.