During a recent House of Commons debate, it became apparent that personal service companies are not the biggest offenders when it comes to tax avoidance. Many have complained that IR35 legislation tends to target the smallest businesses while larger multi-national companies appear to get away with avoiding tax.
In 2013, this became clear when large companies such as Amazon, Google and Starbucks were shown to have complex tax arrangements with the aim of paying less tax.
The debate in question was about Carillion, which is the second largest construction company in the UK. Carillion, which has recently collapsed, was a major contractor used by the government for both private and public-sector contracts. The company took on contracts for a wide range of activities, from rebuilding Battersea Power Station to cleaning prisons.
Prior to the debate, a list was provided of companies who will take over Carillion’s projects to complete its contracts.
This prompted Jon Trickett, the Shadow Minister of the Cabinet Office, to comment: “Amazingly, one of the firms is currently under investigation by the Serious Fraud Office for suspected offence of bribery and corruption. Another has been previously caught red-handed mispricing contracts, underestimating their eventual cost … Another of the companies operates in the Cayman Islands and has been shown to use that location as a way of avoiding tax. Another of the firms is part of a group that has reportedly abused and exploited migrant workers in Qatar.”
The government was also criticised for having ignored the warning signs about Carillion, instead going on to give the company even more high-value contracts. In January, it was revealed that the company had tried to avoid making payments into its pension fund whilst still paying bonuses and dividends to its shareholders.