The Secretary of State for Defence (Michael Fallon)
A key requirement introduced as a result of HM Treasury’s review of the tax arrangements of public sector appointees (Cmd 8350 published in May 2012) was that Departments must exercise governance over appointments where the appointees are not engaged directly on departmental payrolls. Each Department therefore has an obligation to ensure that such appointees are paying the appropriate amount of tax and national insurance.
On 9 March 2014, my right hon. Friend the Chief Secretary to the Treasury, announced Departments’ compliance with the rules governing senior off-payroll appointments in central Government in the 2012-13 financial year, Official Report, columns 9 to 13WS. We have, however, subsequently established that the information provided for the Ministry of Defence was not correct, with the consequence that we did not fully conduct the necessary tax compliance checks in a timely fashion for 2012-13.
I apologise to the House for this error, which was due in part to a misinterpretation of the scope of the new requirements, and I provide a restatement of the position for the Ministry of Defence:
Annex 1: New off-payroll engagements between 23 August 2012 and 31 March 2013, for more than £220 per day and for more than six months, of which:
Department and ALBs | Number of new engagements whom assurance was sought of 31 March 2013 | Number for whom assurance was requested and received | Number for whom assurance was requested and not received |
|---|---|---|---|
MOD (core) | 101 | 59 | 42 |
MODALBS | 66 | 63 | 3 |
To comply fully with the Treasury rules and guidance, we are seeking retrospective assurance directly and individually from all of our senior off-payroll appointees that they are complying with the tax legislation. We are verifying the evidence received and will terminate the contract of any current appointee who fails to provide satisfactory evidence of tax compliance and refer the appointee to HM Revenue and Customs for further action as appropriate.
While the vast majority of off-payroll appointments have been made for legitimate business-delivery reasons, the Ministry of Defence is committed to ensuring that it demonstrates the highest standards of governance in this area. We are therefore also enhancing our own departmental controls for all such appointments so that they are not normally made until a formal declaration of compliance with tax legislation has been received from the prospective appointee. Full assurance will subsequently be sought in accordance with HM Treasury guidelines.
In the interests of transparency, a restatement of the Ministry of Defence’s 2012-13 position will also be published in our 2013-14 annual report and accounts, which are being laid before the House today.