Is tax avoidance rife in the Civil Service?

Accountants in London can’t have failed to notice that there’s been a certain furore recently about tax avoidance in the Civil Service.

The problem arose when it was discovered that the Chief Executive Officer of the Student Loans Company was receiving payments through his limited company. People started to accuse Ed Lester of avoiding National Insurance, tax and IR35 and claimed the Government was aware of the situation.

Danny Alexander, the chief secretary to the Treasury, had to endure an hour of questioning in Parliament and he has now launched a review. The results of which he promises to reveal in the House of Commons. Furthermore, new arrangements have been made with Mr Lester to ensure his remuneration is not the subject of further controversy.

When questioned in the House, Mr Alexander explained that the Government would not tolerate tax avoidance amongst civil servants. He has now asked the Treasury to look into the rules that have allowed senior civil servants to be paid through limited companies.

He also confirmed that Mr Lester would have tax and NI deducted from his salary at source for the remainder of his contract.

Tax avoidance is not illegal although the Government has been taking action to close loopholes and removing the schemes people utilise to minimise their tax liabilities. Tax evasion, on the other hand, is illegal. During the recent debate in parliament it was revealed that the rules governing payments to senior civil servants state that the public sector should avoid tax avoidance schemes as any savings made through them adversely affect other taxpayers.

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