Has the PCG compromised its independence?

The decision of the trade association, the Professional Contractors Group (PCG), to market an umbrella scheme, has jeopardised its ability to speak effectively on behalf of IT contractors to authorities in Whitehall, Westminster and Brussels. This is the view of Barry Roback, Chief Executive of JSA, specialist accountants for IT contractors.

JSA claims that the PCG argues that a major part of its role is to ensure that the voice of freelancers is heard in the corridors of power, and that it wants to put across the competitive advantage afforded to the UK by its highly skilled, highly mobile and flexible freelance workforce.

Although the PCG was originally created in 1999 solely to fight the IR35 proposals, it boasts that it is now a fully-fledged, not-for-profit professional body representing knowledge workers who choose to be independent rather than employed.

Independent

However, according to Mr Roback, the PCG has only become an effective spokesman for contractors over the last few years because it has been seen as independent and authoritative. It will now find it much harder to argue with HMRC, for example, on the thorny issue of umbrella companies, because it will be seen to have a vested interest in promoting one particular business in that area.

Barry Roback He acknowledges that the PCG's intentions have always been well intentioned in the past and that it covered itself in glory in supporting the case of Geoff and Diana Jones of Arctic Systems, for example, in their landmark victory against the taxman. Partially due to the PCG's efforts, the appellate judges threw out the government's attempt to force small, family-run firms to pay thousands more in tax.

Indeed, JSA made a significant contribution to the PCG's fighting fund for this case, because it believed in the PCG's ability to take on the HMRC effectively. Mr Roback argues that by appointing one firm to provide an umbrella solution, it is unlikely that it will be listened to very seriously in future.

Associate member

JSA has been an associate member of the PCG for several years and recently became one of the first accountancy firms to be accredited by the group under its 'Quality Accountant' scheme.

While Mr Roback accepts that his own firm is now effectively in competition with the PCG, and that he may therefore be perceived as having a vested interest, he still believes that the PCG should rethink the wisdom of entering the umbrella market.

He points out that the Chancellor has already threatened to prevent, as he puts it, 'promoters of mass-marketed managed service company schemes disguising employment income as dividend', although nothing much has happened since then.

Mr Roback acknowledges that the PCG scheme does not involve dividends (so far), but he fears that this subtlety will almost certainly be lost on the Government. He said: "This is clearly an issue which the PCG will have to tackle in the near future with the Treasury, yet will the taxman listen to a body that is actively marketing an umbrella scheme?"

Sort out the Treasury

Roback argues that IT contractors need the PCG more than ever to help sort out the Treasury's muddled thinking over self-employment, which has, in his opinion, put into jeopardy the vast majority of managed service schemes that are entirely legitimate under current tax rules.

He also maintains that the whole industry may suffer from the handful of rotten apples in the umbrella barrel that offer quasi-legal or totally illegal schemes which amount to tax evasion and sometimes involve an 'offshore' company or trust.

He said: "HMRC has put a stop to several of these schemes and is actively targeting others, but in its ardour to sort out this problem, it is in danger of hurting both the interests of contractors and those of the many legitimate umbrella company providers. We need a clear and independent voice to ensure that the baby doesn't get thrown out with the bathwater.

"Every seasoned lobbyist knows that if an industry or business sector is represented by a well recognised and united trade or professional body, it is much more likely to be listened to and respected.

"Admittedly the current Government hardly sets a good example in the united front department, but that is no excuse for the PCG to throw away its growing reputation for effective advocacy, for the sake of some limited extra income."