Government to end civil servant’s tax avoidance scheme
The government has ended a deal which meant the head of the Student Loans Company avoided thousands of pounds of income tax by being paid via his own private company.
The Chief Secretary to the Treasury, Danny Alexander, promised to “unwind” any tax avoidance schemes being used by top public servants – after it emerged that the Ed Lester’s £182,000 salary was paid into his private service company in full, potentially saving him tens of thousands of pounds a year.
The arrangement was set up in 2010 and only emerged after a Freedom of Information request by the BBC and Exaro News uncovered a letter from HM Revenue & Customs. In an emergency statement in the Commons, Mr Alexander said there was no place for tax avoidance in government – and the Student Loans Company would deduct tax and national insurance at source for the remainder of the contract in question.
Full internat audit
He also launched a review to find out exactly what happened, and to ensure there are no other instances of the same arrangement elsewhere in Whitehall. He is also getting government accountants to carry out a full internal audit by the end of March.
“At a time when we all have to pull in the same direction to tackle the country’s financial problems, it is essential that we all pay our full and fair share,” he told MPs.
It is essential that we all pay our full and fair share. Danny Alexander MP
Conservative backbencher Richard Bacon, said he was concerned that HMRC had allowed a senior civil servant to receive his gross pay through a personal services contract, describing it as “simply inappropriate”. He is backing a call for the Commons public accounts committee to investigate the arrangement.
Under the deal, Mr Lester was able to pay a 21 per cent corporation tax, rather than income tax at a 50 per cent rate. His pay would have been approved by Mr Alexander, in common with all civil service salaries over £142,000 – but a spokesman said that the chief secretary “was not made aware of any potential tax benefit to an individual”.
However, his Labour counterpart Owen Smith said the case raised “serious questions about the government’s credibility, when it comes to getting people to pay their fair share of tax”.
Official guidelines
The Student Loans Company said it had followed all government guidelines on Mr Lester’s appointment and pay. A spokesman said he had been offered the post after a “solid performance” as the interim chief executive, “where his leadership led to considerable improvement in the company’s overall performance.”
Mr Lester’s also been defended by the Business Secretary Vince Cable, who described him as “an exceptionally useful individual” who had helped to turn around the Student Loan Company. However Mr Cable did promise to pursue all matters of public concern over the tax issue.