Ed Lester gets new £135,000 a year Whitehall job

Ed Lester heads the land registry whose HQ was sold for £37m recently. Pic credit: trevorcoultart.wordpress.com

Ed Lester heads the land registry whose HQ was sold for £37m recently. Pic credit: trevorcoultart.wordpress.com

No problem for top people – even in centre of controversies – getting a new job in Whitehall.

Ed Lester, the former chief executive of the Students Loans Company, whose tax arrangements caused a furore and led to a Whitehall wide inquiry, has been appointed by the  Department of Business, Innovation and Skills to head the Land Registry.

Not surprisingly there is no mention of his controversial past in the Whitehall news release .The same ministry who approved his appointment to the SLC on a deal which meant he received no deductions for tax and national insurance at source, has now appointed him to head the Land Registry – the body  alongside Companies House I used to trace his company and address.

Mr Lester will get a £135,000 a year – somewhat less than at the SLC – and he will pay tax and national insurance at source. He will be eligible for a 20 per cent performance bonus.

Business and Energy Minister Michael Fallon said:
“Ed Lester has the right skills, experience and ambition to meet the new challenges that face the Land Registry. His previous experience of running the Student Loans Company will help to ensure that the Land Registry can become a more nimble, digitally driven organisation.

He is taking on a tough job. The Land Registry  is in  the middle of a controversial plan to slim down its workforce and could eventually be seen as a candidate for privatisation. It has to improve efficiency by 60 per cent and cut costs by £40m a year over five years.

He is likely to find himself under close scrutiny and his decisions will affect every home and business owner in the country when they come to sell or buy a property.

now with full cast of characters to appear before MPs

Westminster Confidential

On Monday BBC chiefs will appear before Parliament’s most powerful committee, the Commons Public Accounts Committee.

They will be there to answer questions on the vexed question of employing people through personal service companies to avoid paying tax and national insurance at source.

The BBC will be joined be civil servants from Whitehall and local government who have all been exposed of using this device to employ people and avoid paying tax and national insurance at source.

The scandal was first exposed by me on the ExaroNews website (http://www.exaronews.com)  and BBC Newsnight when it was discovered that Ed Lester, the Student Loans chief, had used this device to be paid £182,000 a year.

The furore that followed led Danny Alexander,Chief Secretary to the Treasury, to launch an inquiry which discovered that another 2500 civil servants were using the same device across Whitehall. The review’s findings were also leaked to…

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Ed Lester to quit head of Student Loans Company

Ed Lester to quit on January 31; Pic cap courtesy of Daily Telegraph

Ed Lester, the civil servant whose tax affairs led Danny Alexander, Chief Secretary to the Treasury to order a  Whitehall wide inquiry, is to step down from the job next January.

The official who took over £182,000 a year in salary and pension without paying tax or national insurance at source is to leave when his current contract ends on January 31 next year. The SLC is already advertising for a successor.

Full details of the decision are in my piece on the http://www.exaronews.com website. Suffice to say since the story broke earlier this year Mr Lester has had to go straight onto the public pay roll and can no longer be paid through management consultants, Penna, to his own personal service company, Placepass, based at his home on an island on the Thames near Marlow.

His company is in the process of being closed down and now 2400 other civil servants and senior NHS executives  paid off pay roll may have to become direct employees by September. A review announced by Danny Alexander to Parliament will also mean that the following tax year people who hold controlling posts in private industry will no longer be able to do this either.

All these changes came from one well placed Freedom of Information request which exposed Mr Lester’s tax arrangements which had even been approved personally by Mr Alexander and  David Willetts, the universities minister. Mr Alexander has admitted to me he didn’t even realise the tax benefits when he approved the post.

 To his credit since then he has ordered the review and been shocked by the findings. But I am expecting a strong reaction from business when  it sinks in what has happened.

Update: In a statement issued today (Saturday) about his decision Ed Smith, chair of the Students Loans Company, said: “Ed Lester’s was appointed as interim CEO of  Student Loans Company in 2010. In that time he has turned the company around and his leadership has been outstanding. He is highly regarded by the Board, BIS and colleagues across the Higher Education sector. “Following the period as interim CEO, Ed was offered a fixed two year contract as substantive CEO from January 2011. This contract is due to expire in January 2013 and Ed has always made clear his intention to move to a new role at that time. As recruitment to such senior posts in public sector can be elongated, we have started the process to recruit Ed’s successor now to ensure they are in place prior to him leaving.

“Ed’s planned departure from Student Loans Company has always been a matter of public record. It is in no way linked to the tax arrangements in his contract agreed by BIS, HM Treasury, HM Revenue and Customs and the Head of the Civil Service.”

How the Student Loan tax scandal broke

Here is a short video produced by Exaro showing how I got hold of the original story and the repercussions that followed. For those interested in this you can view it here.

It also partly a tribute to Whitehall sources who decided this scandal had to stop and  a warning to ministers how clever some Whitehall people are in slipping stuff through right under their noses.

Buried in the Budget:Freelance company tax rules ” shake up ” on way

Almost entirely missed by the press coverage of the Budget this morning, George Osborne, the Chancellor, announced a radical review of  freelance  tax employment rules through what is known as IR 35.

Not mentioned in his speech – the changes were hidden away in the full Budget document. The full story of this change written by Alison Winward  and Frederika Whitehead is on the Exaro news website  at http://www.exaronews.com.

For those worried by the changes to the IR 35 rules   the official Treasury document uses the dreaded word simplification – the same phrase used by the Chancellor to impose a ” Granny Tax ” – a  future loss of  income for 4.5 million pensioners  by freezing tax allowances for most of  those who have  incomes above the state pension. Like pensioners this could affect millions of people.

The full section in the Treasury  reads:

 ” Personal service companies and IR35

 The Government will introduce a package of measures to tackle avoidance through the use of personal service companies and to make the IR35 legislation easier to understand for those who are genuinely in business.

This will include: strengthening up specialist compliance teams to tackle avoidance of employment income; simplifying the way IR35 is administered;

and subject to consultation, requiring office holders/controlling persons who are integral to the running of an organisation to have PAYE and NICs deducted at source by the organisation by which they are engaged. (Finance Bill 2013)”

Basically Hmrc are giving a warning that the  wheeze that enabled Student Loans Company chief Ed Lester to hold one official position in Whitehall, will be banned everywhere. It will also effect local government, the NHS and now the private sector, as people won’t be able to claim it as freelance earnings through a  personal services company. They will have to go through PAYE and pay national insurance.

There is at least a year’s grace before this happens – as legislation is planned for next year’s finance bill – and implementation could be delayed until 2014.

In the meantime the small print announces a crackdown from Hmrc on freelances who use this method. The revenge of Danny Alexander, chief secretary of the Treasury, who missed the whole Ed Lester arrangement when he personally approved all high paid Whitehall staff, looks like being rather more widespread than people anticipated.

Student Loans Chief Ed Lester’s personal company bites the dust

An idyllic scene at Temple Mill Island, which used to be the home of Ed Lester's personal service company.

Student Loans Company chief executive, Ed Lester, is closing down his personal service company after the furore over the revelations of his tax arrangements.

 A notice in today’s London Gazette reveals he and his partner Dolores Hawkins have applied to Companies House to have the firm called Placepass struck off the register.

Full details of the story are on the website http://www.exaronews.com  but suffice to say the company has been around for 14 years during the time Mr Lester worked for the Office for Government Commerce, NHS Direct and Motability and has had various home addresses from Cambridge to London Docklands.

The firm was used  as a ” tax efficient” way for the chief executive  to funnel his £182,000 pay and pension package and his £28,000 in expenses from the Student Loans Company. It was based at his home on Temple Mills island on the River Thames at Marlow, Buckinghamshire. The island is a gated community.

Ed Lester’s decision is interesting . The story of his tax arrangements  is already causing alarm among thousands of other people working for government departments, agencies ,the NHS and local government. The chancellor, George Osborne, is also looking at changing the tax laws covering this in tomorrow’s budget. It will be complicated and people need to watch for the small print in the Budget statement to find out what will happen.

Revealed: Whitehall angst and a KPMG U-turn on Lester’s tax affairs

ImageNew e-mails and financial advice put up today on the Exaro news website (http://exaronews.com) reveal more of the background surrounding the extraordinary decision to grant Ed Lester, the chief executive of the Student Loans Company, an arrangement when he was not taxed or paid his national insurance at source.

It shows that senior civil servants were really uneasy about the deal. In one e-mail, Daniel Jenkins of the Department of Business, Innovation and Skills legal department wrote: “Applying the tests of employment status, I wonder whether it is possible for a CEO to be anything other than an employee/office-holder, given the degree of integration into the company which he presumably needs to carry out his duties.”

In another e-mail Michael Hipkins, then a BIS appointee to the SLC board writes:

“The risk, which nearly the whole interim industry currently runs, is that a contract for ‘supplying an individual’ is deemed to be an employment contract, rather than a commercial contract for services. So it appears there is a risk, and there is a judgement whether the risk is worth running.

“For my part, I note that when the terms of the interim CEO’s remuneration were cleared with Treasury, they raised no objection to the form of the contract, nor that there was an agency acting as intermediary.”

“It looks as if the company would be running no greater a risk than any other company employing interims on consultancy contracts; and the fact that the Treasury raised no objection to the proposed arrangement in the case of the CEO must mitigate that risk further.”

But the angst is nothing to the role of KPMG, the auditors and advisers to the SLC, who gave contrary advice in the space of a month.

 First they said – as subsequently was proved right by Chief Secretary to the Treasury,Danny Alexander’s decision to cancel the deal,- that no office holder could be a  limited company.

 Then they changed their mind saying; HMRC “may agree on a concessionary basis”, under a provision known as the extra-statutory concession, A37, to override the rule that all company office-holders must pay tax and national insurance.

It said that Lester’s pay can then be treated as “income of Penna (who acted as the recruiting agency for Ed Lester) for corporation-tax purposes and not income of EL for income-tax purposes.”

KPMG said that the SLC should make no expenses or bonus payment direct to Lester, but only through Penna to his personal company, otherwise it would invalidate any concession.

Even more interesting  given the developing furore over this issue the memo reveals that KPMG had done this before.

 It said KPMG “have been successful in the past in agreeing with HMRC that the concession can be extended to circumstances similar to the arrangements in place here. However as this is a concession (rather than a statutory provision) there is no guarantee that HMRC will agree that the concession  applies in this case given the agency and personal service company arangements in place.”

The next questions in this saga will be who else has benefitted from this arrangement and what George Osborne, the chancellor, proposes to do to close this loophole in the budget this month. The full story is revealed in four new articles on the Exaro website.

Victory: Ed Lester now started paying full tax

Following the exposure by the joint  Exaro News and BBC Newsnight investigation  Ed Lester, head of the Student Loans Company, is  now having  his tax and national insurance deducted at source.

 The deal backdated to February 1 will mean he will be on the pay roll until his contract ends in February 2013. The change will mean that he will have to pay full National Insurance contributions. The SLC – which has avoided paying NI will have to pay £17,000 to the tax authorities  this coming year.  Calculations by accountancy specialists means that on his £182,00o salary (including £14,000 bonus and £28,000 pension ) he will be possibly have to pay £26,000 in tax which he could have avoided by placing the contract through his personal service company, Placepass, based at his home on an island in River  Thames  at Marlow, Buckinghamshire.

He could also be charged benefits in kind on his Glasgow flat which the government is funding as part of a £550 a week expenses package.

This is the statement from the Student Loans Company:

“We are taking forward the changes to Ed Lester’s contract, following the announcement by Universities Minister, David Willetts on 2 February 2012.

“Ed Lester will be a Student Loans Company employee with effect from 1 February 2012 and tax and NI will be deducted at source. His salary and bonus arrangements will be consistent with his previous contract.”

One down, how many more to go, when the investigation by Danny Alexander, chief secretary to the Treasury, starts to bite.

Did the former Cabinet Secretary unwittingly sanction “tax avoidance”?

Gus O'Donnell: Tax avoiders friend in Whitehall? Pic Courtesy: Daily Telegraph

The huge  row following the disclosure  of the tax  ” avoidance” arrangements for Ed Lester, chief executive of the Students Loans Company, has concentrated on how government ministers approved the arrangement.

Not highlighted was the role of the then Cabinet Secretary, Gus O’Donnell, recently retired on an index linked pension and getting £300 a day for every day he turns up as a newly ennobled peer.

Documents released to me under the Freedom of Information Act reveal that Gus O’Donnell when he heard Lester was not going to be on the pay roll of the Student Loans Company rightly demanded an ” urgent clarification “. He also insisted on an explanation about the ” costs to the Exchequer” of the arrangement. He was then sent a detailed document which showed that if he was paid through an agency it would cost less than if he was on the staff. Details of  the document are published tonight on the Exaronews website (www.exaronews.com)  and also detailed in a story by Rajeev Syal on the Guardian website(http://bit.ly/yWOy7H ).

Basically it is a scam explanation – revealing huge fees (£83,000) to be paid to Penna Consulting, the management firm, who acted as middlemen to pass money on to  his private company – if he was taken on the pay roll. It also suggested that his expenses of £550 a week for a flat and fare would have to be grossed up to cover his personal tax bill if he was on the staff.

Meanwhile the savings side if he was not on the pay roll included a whopping £17,000 to the SLC for avoiding paying the employers national insurance contribution.

 Any cursory glance at these figures by anybody reasonably intelligent would suggest that these were sham calculations and could have been knocked down, particularly the big fee to the agency. Yet the e-mails show Gus was ” content”.

Frankly this is as bad as Danny Alexander, chief secretary to the Treasury, not realising the tax implications of the deal. Here one of the most highly paid people in Whitehall and head of the civil service appears to be oblivious of what he is sanctioning. What does this say of the ability of people at the top or are they so used to paying out such big fees (taxpayers money) that they don’t notice?

I have tried to contact Lord O’Donnell for an explanation but he has not returned my calls. And the Cabinet Office is now sheltering around the fact that Danny Alexander has ordered a review to stop answering questions – even though some of the points I have raised have nothing to do with the review. Senior civil servants seem rather good at covering their tracks – it is probably a key part of their training.

Update: Whitehall tax avoidance – more evidence on the way

Since this blog  revealing the Exaro News (http://www.exaronews.com) and BBC Newsnight investigation into the tax arrangement ministers approved for  Ed Lester, chief executive of the Student Loans Company, I have received a number of calls and e-mails suggesting this practice is more widespread than  just Whitehall. Danny Alexander, chief secretary to the Treasury, has rightly ordered a Whitehall wide review to find out the scale of the arrangements, which he appears to have unwittingly endorsed. It looks like Mr Lester  will have to pay tax in the way everybody does when they hold down a full-time equivalent job – through PAYE.

Some 2500 people has so far viewed this blog on top of millions who would have seen it on TV, on the radio  and read it  in newspapers from the The Guardian to the Daily Telegraph and Daily Mail.

 I am now gathering more information to continue this investigation and would like to thank a number of people who have already contacted me. However if you know of a similar practice where you work  you can contact me direct on my e-mail david.hencke@gmail.com. All information will be treated in confidence and all sources – like the original tip-off – that led to the exposure – will be protected under the journalist’s code of practice.

Also if you know of consultancy firms  who make big charges for supplying these people  to the government and the public sector and then help them arrange how to avoid paying their full tax, let me know. Their fees are coming out of your taxes.

 Help stamp out people ripping you off by using your taxes from your hard-earned cash – by avoiding pay their fair share of tax – and stop HM Revenue and Customs having one rule for the workers and kid glove treatment for those with the money to exploit every loophole possible.