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Lords committee hears from personal service companies experts

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House of Lords Select Committee hearing

The House of Lords Personal Services Companies Select Committee hearing took place on Monday 2 December. Oral evidence was heard from Professor Judith Freedman, Pinsent Masons professor of taxation law at the University of Oxford; Kate Cottrell, tax consultancy expert and managing director of Bauer & Cottrell; Robin Williamson, technical director of the Low Incomes Tax Reform Group; Frank Haskew, head of the Tax Faculty at the ICAEW; Jason Piper, technical manager of tax and business law at the Association of Chartered Certified Accountants (ACCA); and Patrick Stevens, tax policy director at the CIOT.

Baroness Noakes opened the hearing with some figures, saying: ‘HMRC believes that personal service companies have grown from around 90,000 in number when the IR35 legislation was introduced, to 200,000 now – while there has been a lack of clarity about these precise numbers, where is the growth coming from, and what’s behind that?’ Judith Freedman, Kate Cottrell and Robin Williamson broadly noted that this was due to different factors: a change in working practices over the past decade, increased flexibility, reduced headcount within organisations, and the recession, commenting that part of the problem was there was no standard definition for what a personal service company actually is. Judith Freedman said that there were different reasons why a worker might set up a personal service company – for example, a more entrepreneurial type might set one up with the intention of serving lots of clients, only to find that circumstances change and they only end up serving one – while Kate Cottrell noted that the IR35 population is ‘massive’: ‘The statistics are questionable because no one exactly knows what a personal service company is, and the intention of a company can change after being set up.’ Robin Williamson further pointed out that workers often have no real option; that for many low-paid workers, it was often a choice between working for an employer on their terms – even if that included personal service companies, umbrella companies, zero-hours contracts or a payday-by-payday arrangement – or not working at all. Written evidence can be submitted to the committee, to arrive no later than 31 December 2013, preferably by email.