guardian.co.uk,
Patrick Wintour, political editor, Wednesday 15 February 2012
 |
| Health secretary Andrew Lansley will be asked for a full explanation of the tax arrangements for senior Department of Health staff. Photograph: Steve Back / Rex Features |
The
Department of Health has apologised after documents sent to the Guardian showed
that contrary to assurances given to parliament, more than 25 senior staff
employed by the department are paid salaries direct to limited companies, with
the likely effect of reducing their tax bills.
In some
cases, the documents show the named individuals are being paid more than
£250,000 a year, as well as additional expenses.
The
department claimed the 25 were not civil servants, or technically even staff,
although a large number have been employed by the department for many years and
hold very senior positions. It said the arrangements will be subject to review
by the Treasury.
One
Whitehall source said: "We cannot defend these arrangements, but it may be
it is very common in Whitehall and this is just the tip of an iceberg."
Danny Alexander, the chief secretary to the Treasury, set up a cross-Whitehall review
this month into the extent of the pay arrangements after it was revealed the
Department for Business, Innovation and Skills had sanctioned a similar salary
deal for Ed Lester, the chief executive of the Student Loans Company.
At the time
it was presented as a rare practice.
The
payments amount to almost £4.2m for the year. The single largest payment was
£273,375. Nineteen of the staff are paid more than £100,000.
In the
majority of payments at the Department of Health, the fees were paid to
companies with the same address as the home address of the staff.
The
majority of companies provided to the department are registered as business and
management consultancies, yet the internal DoH payroll information also details
the health department offices in which they work, job title and email address.
In most cases the companies' names emerge to be little more than an adaption of
the individual's surname. The Guardian holds details of the payments to 25
individuals, month by month, for the tax year ending April 2011, the identity
of their limited company and their work in the Department of Health.
The staff
work in a variety of areas such as the policy, strategy and finance
directorate, medical directorate, the office of the chief scientific officer,
and commercial contracting.
The emails
handed to the Guardian also show senior civil servants at the department
discussing the possible reputational damage to the department and seeking to
avoid ways of revealing the nature of the payments sought in a written question
last December by Gareth Thomas, the shadow Cabinet Office minister.
Asked by
Thomas if any health department staff were paid by means of payments to limited
companies in lieu of salary, the health minister Simon Burns said in a written
parliamentary answer that no payments were being made to civil servants in this
way.
He also
stated: "It is not the department's policy to permit payments to civil
servants by ways of limited companies."
In a fresh
statement on Wednesday the department said: "The definition of staff in this
context refers to civil servants, and we can confirm that no civil servant who
is an employee of the department of health is paid in this way. To this extent
it was certainly not our intention to mislead anyone involved.
"We
would be happy to clarify the situation in greater detail with anyone who asks
and apologise for any misunderstanding involved. We are currently carrying out
a full audit of such arrangements in line with the recently announced Treasury
review of tax arrangements of public sector appointments."
Health
department sources said it allowed staff to define themselves for payroll
purposes neither as civil servants nor payroll staff.
In the
emails, Jason Skill, in the procurement centre for expertise, discusses the
motivation of the written question by Thomas, saying: "There is probably
an employment and taxation angle to this question though it might not be in the
mind of Mr Thomas.
"Salary
is paid to employee. It may be that some or all of the non-payroll workers are
in reality employees and the payments made to their limited companies would be
in lieu of salary, but we would not want to suggest that all payments to
limited companies are in lieu of salary."
The email
also goes on to discuss Revenue and Customs (HMRC) rules, including tests
"to differentiate between a contractor who HMRC deem to need to pay tax
like an employee and a contractor who does not".
It
continued: "The department would probably want to avoid anything that
implies its NPWs [non-payroll workers] are disguised employees reputationally,
to avoid unnecessary employers' national insurance and because HMRC may use
this to take forward IR35 cases with those NPWs."
The emails
also discuss whether it would be possible to reply that an answer cannot be
provided due to disproportionate cost.
Thomas said
he was writing to the health secretary, Andrew Lansley, to seek clarification.
"The question was clear enough and I am therefore very surprised that the
Department of Health was unable to provide a complete and accurate answer.
"Given
the importance of parliament being given accurate answers from government
ministers I will be writing to Andrew Lansley for a full explanation. I will
also be asking other departments to check whether their answers were complete
and accurate, and whether they have similar numbers of staff asking for their
salaries paid to companies to reduce their tax bill."
In the wake
of the students loans episode, Alexander said Lester's tax and national
insurance will in future be deducted at source. He urged Whitehall departments
to unwind similar schemes as quickly as possible, adding: "When we all
have to pull in the same direction to tackle the country's financial problems
it is essential we all pay our full and fair share."
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