Council top brass use 'tax avoidance schemes'

2012-03-15 Author: Chris Warmoll


Nearly 100 top local authority employees are being paid through limited companies - allowing them to secure lower tax bills.

A BBC investigation discovered that scores of council big earners are allowed to make their own tax arrangements instead of being paid through the PAYE system. The situation was dubbed a ‘tax avoidance scheme, which is totally wrong’ by public accounts committee chair Margaret Hodge.

It emerged after BBC Radio 4's File on 4 programme submitted a Freedom of Information request to more than 400 local authorities throughout the UK.

East London’s Hackney Council had the highest number, with 39 of its permanent staff paid through external companies.

Hammersmith and Fulham Council, also in London, said 11 posts were filled in this way and a number of smaller councils had substantial numbers too.

In one case investigated by File on 4, the chief executive of Hammersmith and Fulham Homes Ltd – the council’s housing arm - was paid more than £900,000 through his company over a four year period.

Following concerns about the situation raised by the opposition, PwC was called in to see if the council risked facing a bill for unpaid tax.

In a secret report seen by the BBC, PwC told the council that there was a ‘medium-to-high risk that there was a PAYE obligation’ on the council. In a statement, Hammersmith and Fulham Council said it did not believe Nick Johnson was required to be on its payroll.

The Local Government Association said councils adhere to strict HMRC rules.

Craven in North Yorkshire also had eight staff paid in this way, while St Edmundsbury in Suffolk and Ashfield in Nottinghamshire had five a piece.

Some officials may be paying PAYE through their limited companies but they have the option to pay themselves via dividends, which are taxed at a lower rate. The arrangements also mean they can pay national insurance contributions at a lower rate.

The new findings follow the recent revelation that Ed Lester, head of the Student Loans Company was paid through a private firm - an arrangement agreed with tax chiefs.