Thursday
Feb022012
Inquiry ordered into civil servant tax deals
Thursday, February 2, 2012 at 2:21PM An inquiry is to be held into civil servants’ pay arrangements after it emerged that the head of the Student Loans Company (SLC) had a special deal to allow him to receive his £182,000 salary at a lower tax rate.
Ed Lester, SLC’s chief executive, had his remuneration package paid via a private service company, meaning his pay was subject to corporation tax (21 per cent) rather than the higher rate of income tax (50 per cent) and he would have been able to save tax on his expenses.
The deal potentially saved him thousands of pounds a year.
The agreement with HMRC, and signed off by senior ministers, came to light in a freedom of information request made by Exaro News and BBC Newsnight.
SLC said it had followed government guidelines on pay, and there has been no suggestion of illegal practices.
However, the revelation that government employees are getting ‘special’ treatment over tax is embarrassing after ministers unveiled reforms to limit excessive executive pay last month.
Chief secretary to the Treasury Danny Alexander said he had been unaware of the situation and has ordered an urgent review of the tax affairs of top civil servants as a result.
“I have asked Treasury officials to urgently review the appropriateness of allowing public sector appointees to be paid through an agency by a personal service company,” said Alexander.
"I have also written to my cabinet colleagues asking them to carry out an urgent internal audit to ensure that all senior consultancy appointments provide value for money. As I have said before, I believe everybody should pay the right tax at the right time and that it is why I’ve taken this action.”
BBC Newsnight alleged that Universities Minister David Willetts signed off the deal with HMRC because the government needed to secure the right talent to turn around performance at the SLC.
Salaries in excess of £142,500 a year must also be signed off by Alexander, but the chief secretary said that he had not been aware of the contract’s special arrangements.
A select committee inquiry is also expected to dig deeper into Lester’s remuneration deal.
Public Accounts Committee (PAC) member MP Richard Bacon said the arrangements were “inappropriate” and called for a full investigation to uncover further public servants that may be enjoying such tax breaks.
Margaret Hodge MP, chairwoman of the PAC, told Newsnight: "Civil servants must be seen to be paying their fare share of tax in an open and transparent way. If the allegations you've brought to me are true, then we will want to ask some questions of the department's permanent secretary and the cabinet secretary about why they signed off this deal."
Ed Lester, SLC’s chief executive, had his remuneration package paid via a private service company, meaning his pay was subject to corporation tax (21 per cent) rather than the higher rate of income tax (50 per cent) and he would have been able to save tax on his expenses.
The deal potentially saved him thousands of pounds a year.
The agreement with HMRC, and signed off by senior ministers, came to light in a freedom of information request made by Exaro News and BBC Newsnight.
SLC said it had followed government guidelines on pay, and there has been no suggestion of illegal practices.
However, the revelation that government employees are getting ‘special’ treatment over tax is embarrassing after ministers unveiled reforms to limit excessive executive pay last month.
Chief secretary to the Treasury Danny Alexander said he had been unaware of the situation and has ordered an urgent review of the tax affairs of top civil servants as a result.
“I have asked Treasury officials to urgently review the appropriateness of allowing public sector appointees to be paid through an agency by a personal service company,” said Alexander.
"I have also written to my cabinet colleagues asking them to carry out an urgent internal audit to ensure that all senior consultancy appointments provide value for money. As I have said before, I believe everybody should pay the right tax at the right time and that it is why I’ve taken this action.”
BBC Newsnight alleged that Universities Minister David Willetts signed off the deal with HMRC because the government needed to secure the right talent to turn around performance at the SLC.
Salaries in excess of £142,500 a year must also be signed off by Alexander, but the chief secretary said that he had not been aware of the contract’s special arrangements.
A select committee inquiry is also expected to dig deeper into Lester’s remuneration deal.
Public Accounts Committee (PAC) member MP Richard Bacon said the arrangements were “inappropriate” and called for a full investigation to uncover further public servants that may be enjoying such tax breaks.
Margaret Hodge MP, chairwoman of the PAC, told Newsnight: "Civil servants must be seen to be paying their fare share of tax in an open and transparent way. If the allegations you've brought to me are true, then we will want to ask some questions of the department's permanent secretary and the cabinet secretary about why they signed off this deal."
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