Icas calls for crackdown on ‘personal service’ abuse

SCOTTISH accountancy body the Institute of Chartered Accountants of Scotland (Icas) has called for a crackdown on the abuse of “personal service companies” which it estimates costs the exchequer £390 million a year.

Icas said it was “hypocritical” to criticise Barclays Bank for taking advantage of tax loopholes but not target personal service companies whereby high flying consultants charge for services through companies at much lower tax rates than if they were employees.

Icas highlights examples such as Ed Lester, the chief executive of the Student Loans Company, who was allowed to avoid paying tens of thousands of pounds in income tax until chief secretary Danny Alexander came under pressure to end the arrangement last month.

Icas estimates that there are anywhere between 30,000 and 650,000 personal service companies in the UK, and reckoned that if just 30,000 of these were “artificial”, each could be worth £13,000 each to HMRC.

Elspeth Orcharton, assistant director of tax at Icas, said: “It is hypocritical to criticise Barclays publicly but not put a serious challenge to HMRC, the Treasury and senior officials over the widespread use of personal service companies.

“The Chancellor needs to update clearly the roadmap for anti-avoidance measures.”