Following on from VB’s piece last week exploring possible Isle of Wight council parallels with the National interest in Ed Lester and the views expressed by many that ‘Tax advantages of working through a limited company not PAYE are wrong’, Retired Hack sent us an opinion piece. We think, as ever, his questions have nailed it, so we’re going to forward them to Steve Beynon to get his views on them – Ed
Dodgy public-service employment contracts are back in the news with the revelation that the head of the Student Loan Company, Ed Lester, set himself up as a company and managed to dramatically cut his tax bill by opting out of paying income tax through the PAYE system. The irony is, of course, that it’s PAYE which collects debts run up by Britain’s hard-pressed students.
Ministers scramble to distance themselves
Government ministers, who are reported to have known about this all along, scrambled to distance themselves from the practice, where earnings attract only the lower Corporation Tax.
Barely 12 hours after BBC Newsnight’s revelation, Chief Secretary to the Treasury Danny Alexander was telling the Commons he wanted to know the extent of it nationally so it could be stamped out (“unwound” is the official term). Mr Lester has already been told to pay his dues.
Isle of Wight Council
VB readers will know (because they broke the story) that several senior figures working for the Isle of Wight Council are selling their services through exactly this type of company.
Most notable are Dave Burbage – sorry, Dave Burbage Consulting Ltd – Director of Resources and Head of Finance, and the recently-departed Roger Edwardson, aka Roger Edwardson Education and Childrens (sic) Services Ltd, whose parting gift to Island youngsters when his contract was ended a year early last month was bottom place in the national Key Stage 2 tables.
IW Council – Sanguine or brazen?
Up until now the IW Council has been quite sanguine about these contracts. Sanguine or brazen, depending on how you look at it.
A year ago chief executive Steve Beynon, reacting to media interest, wrote to councillors explaining what a good deal they were for all concerned (except the national exchequer, which he didn’t mention) and asserting that they were “standard within the industry”. He added: “We have employed persons at senior level in the past in this way.”
Pension perk
For those involved there is, of course, the added bonus that large early-retirement pensions from previous local government employers can be paid without falling foul of pension scheme rules.
I was wondering whether the view at County Hall has changed now that the can of worms is on the national political agenda and the Commons public accounts committee is on the case.
Questions
So I ask them these questions:
- Apart from Mr Burbage, how many other senior roles at the Council are filled by people on whose behalf PAYE and national insurance is not paid at source as a result of their contractual arrangements?
- In each of these cases, does the Council have HMRC’s specific written consent that payments may be made gross (i.e. without the deduction of income tax or national insurance), as was the case with the Student Loan Company and Mr Lester?
- Given Mr Alexander’s statement to the Commons on February 2, what steps are the Council taking to unwind these arrangements?
And while we have their attention, I thought I’d also lob this one in.
- What was the cost to the Council of ending Mr Edwardson’s company’s contract a year early? Specifically, what sums were paid to the company over and above those due for the first two years of the three-year contract?
As ever, we’ll let you know what Steve Beynon has to say on it.
Update 4:06 Encouraging to hear from Steve Beynon, who told VB that he anticipated having a full reply to us within 24 hours.
Update 8.Feb.2012: He later delivered them.
