For the Avoidance Of Doubt – and Taxes
With all the furore going on with the recent revelations about offshore Tax Avoidance schemes, I think it is of interest to highlight how Post Office Ltd (POL) are involved in something similar and I can’t quite get my head around it. After all Post Office Ltd is owned 100% by the Government and the Government already subsidises POL to the tune of Billions of pounds of Taxpayers money. Why would the Government condone such an action and has it all been approved by HMRC? I have the answer to that one and I’ll come back to it later.
Subpostmasters (SPMRs) work for POL under the terms of an ancient contract that is so out of date it makes no reference to the error ridden computer system known as Horizon that has caused many SPMRs huge personal losses. That contract was originally worded very deliberately to ensure that SPMRs were not treated as Employees or Workers, yet still remained liable for Class I National Insurance contributions by virtue of a specific decision by HMRC to treat them as Office Holders. So SPMRs pay NICs and as a result POL are liable for Employer NICs, yet POL are not liable (allegedly) for such things as Sickness, Maternity and Holiday leave or more recently Workplace Pensions. The employment status of SPMRs is a messy business and has been, and will be in the future, tested in court with different results.
I have in my possession a letter from POL suggesting that I should change my contract with them. Just the words really, nothing else changes except that now instead of having a one to one relationship with POL I can change to dealing with them as a Ltd Company or a Partnership. Under a heading – Illustration and explanation of how potential benefit can be obtained – the letter shows how a SPMR currently earning £40,000 per annum and paying approximately £4,000 in NICs could save themselves £3,300 in NICs merely by changing their contract. It even goes on to tell me how to save extra on VAT payments!
Just to put my mind at rest, the letter explains that there would be little change to the terms and conditions of the replacement contract and any changes that there are would be “mainly because of the change to the type of legal entity entering into the contract”.
Now here is the bit that really sticks in my ‘craw’ – a £250 Payment! POL will make a £250 payment to me if I change my contract with them by a certain date. What they think this payment is for and what I think this payment is for may well be two completely different things but I see it as nothing less than a bribe for me to accept this proposal from POL to help them avoid paying taxes.
You see it’s not just the SPMR who is gaining from this, it is POL. They will no longer be liable for employer NICs which of course are payable to the Government. I have no idea of how much this saving could amount to now but consider that prior to Network Transformation all SPMRs were on this old contract and all were paying NICs so say 10,000 SPMRs on an average of £20k Pa would equate to £17m in Employer NICs.
But here is the rub. POL are owned 100% by the Government. Whatever NICs they pay the Government from their own account makes no actual difference on the face of it because POL are and always will be dependent on a Subsidy from the Government. So why are POL doing this?
It is, and can only be, down to the problem they have with the Network Transformation program which the Government has spent £2b on over the last 5 years. This was meant to result in a huge reduction in the annual subsidy payment but it has failed completely to achieve this. Now they are scratching for all the savings they can muster in areas unconnected with Network Transformation and to hell with their masters – they want to show them results not the fact that they are avoiding previously payable tax by a change of wording in a contract.
To sum up – a Government Organisation is offering employees, £250 to change their contracts so that they avoid paying taxes to the Government that has provided the Government Organisation with a massive subsidy.
Once again with POL, you just cannot make it up. They are totally unaccountable and completely incompetent.
My question is does Mr Javid know? After all he is the man in charge of the Government Department who has sanctioned this. Oh dear! The poor man doesn’t need this right now.