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Two dozen MPs since 2016 have been paid for second jobs through personal service companies they have set up, a Sky News investigation has found.

It means these MPs can exploit the fact that tax rates on companies differ from those on employment, enabling them to reduce their tax bills on second jobs.

This practice is legal and common in certain industries, but some MPs appear to have taken further steps to reduce their taxes on non-parliamentary earnings.

Lib Dem leader Sir Ed Davey is one of 12 MPs to have received earnings from second jobs via companies owned partly or solely by their spouse, an arrangement accounting experts have said is often used to reduce taxes.

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Sir Ed and his wife also appear to have taken advantage of a loophole that allows reduced tax rates to be paid on money taken out of a company when it’s closed. More than £100,000 was sitting on the balance sheet of the company through which Sir Ed received payment for five second jobs held between 2017 and 2022, before the company was liquidated earlier this year.

Ex-cabinet minister Ranil Jayawardena, another to receive earnings from second jobs via a company owned with his wife, claims to have been doing two separate roles with the same company at the same time between 2017 and 2020 – an arrangement that may have afforded him further tax benefits.

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Sky News spoke to more than half a dozen tax and accounting experts who confirmed that, while all payments are likely lawful, MPs can use these methods to reduce taxes on their earnings from second jobs.

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Use of personal service companies enables taxes to be minimised

By setting up companies through which they offer their consultancy services – known as personal service companies – MPs pay corporation tax and dividend taxes on their non-parliamentary work, rather than income taxes, as they do on their MP salary.

In receiving money this way, some MPs can reduce their tax rate by around 5% on their additional jobs, depending on how much they’re earning.

But using these companies enables additional ways through which taxes can be minimised.

Giving spouses or other family members a salary or shares in the MP’s business can further reduce tax bills. If the family member is a basic rate taxpayer, they would pay tax rates almost four times lower on dividends received from the company than an MP, who are higher rate taxpayers.

Of the 24 MPs using these companies, 12 list a family member as a shareholder or director.

But perhaps the biggest tax benefit when using a personal service company comes when earnings from second jobs are built up in the company before it is closed down and liquidated.

Under these circumstances, tax rates on additional earnings for MPs – who pay 40% tax on the upper end of their £84,144 MP salary – can be as low as the 10% capital gains tax rate paid on assets when a company is closed.

Three MPs have liquidated companies through which they were receiving their second earnings and two of these – Sir Ed Davey and Robert Butler – had significant amounts of cash on the balance sheet when the companies were closed.

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Energy Destinations Ltd, the company Sir Ed’s earnings were paid into, was closed in June this year with £103,717 of assets distributed upon its liquidation. The company was previously transferred from Mr Davey to his wife in 2017, but he continued to receive more than £350,000 in payments from second jobs into the company until earlier this year.

‘It’s perfectly legal, but is it fair?’

HMRC introduced rules in 2016 to stop the practice of opening and closing companies as a means of obtaining relief.

The tax break can still be used however as long as the business owner doesn’t open a new company within two years doing similar work.

Ian Dickinson, tax director of UHY Hacker Young, said of people taking active steps in this way to reduce taxes on their work:

“It’s within that parameter of tax avoidance, which is perfectly legal, but is it fair?

“If you’ve got people exploiting the rules trying to pay as little as possible, using convoluted structures, that are well known but beyond the remit of the normal person, it just doesn’t sit right.”

Experts have criticised the wider system that encourages these arrangements. Judith Freedman, emeritus professor of taxation law and policy at the University of Oxford said: “We have a poorly designed tax system. We should be taxing people operating through different legal forms in far more similar ways.

“There’s the fact that you can convert your labour income into capital. That’s a problem. There’s the fact that you can income split. That’s a problem. And there’s the fact that you don’t pay any national insurance on dividends. That’s a problem”.

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‘The next big scandal’ – Informal groups of MPs given £20m from external organisations since 2019

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Could all-party parliamentary groups represent ‘next big scandal’?

MPs run the risk of breaking the rules

A spokesperson for Sir Ed said: “All of Ed’s business was entirely in keeping with the rules, and he has been fully transparent about it.

“Money that his wife earned also went into the company. All capital gains tax due on the proceeds will be paid.”

People close to Sir Ed were also keen to point out that the Liberal Democrat leader’s earnings helped fund care for his disabled son.

While the use of personal service companies to manage second-job earnings is legal, there is one area where tax experts have told Sky News that some MPs could be running the risk of breaking rules.

It relates to whether MPs’ second jobs are considered consultancy roles or whether they are deemed employment by a company. If the latter, additional taxes are likely due when receiving earnings through their own companies.

Three MPs – Mark Pritchard, Ranil Jayawardena, and Ed Davey – have taken on jobs that HMRC considers employment – non-executive directorships – while still receiving fees for these jobs through their companies.

It is possible to make a voluntary declaration to HMRC to ensure the correct taxes are paid on these jobs, but experts said that people typically rarely do so when receiving fees via a company. In these circumstances the company is an “unnecessary structure”, according to employment status expert Rebecca Seeley-Harris, although there is no evidence to suggest these three MPs have not made the required voluntary declaration.

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‘Ban MPs from working second jobs’

‘A dangerous operation’

Former environment secretary Mr Jayawardena had a particularly unusual arrangement, where he appears to have done two different jobs for the same company at the same time between 2017 and 2020.

His personal service company received share options valued at £20,000 per year from pharmaceutical company PepTCell Ltd in return for providing “a non-executive director for approximately four days a year”, according to his entry in the register of members’ financial interests. Companies House filings confirm Mr Jayawardena was a director of PepTCell.

But Mr Jayawardena also declared a second role as a strategic consultant with PepTCell at the same time, with his own company again receiving share options valued at £20,000 in return for four days work per year.

Ms Seeley-Harris noted that an arrangement like this would need to have clear delineations to ensure there weren’t tax issues, but that the nature of the two roles made this difficult.

“If you’re both a consultant and a non-executive director (NED), the consultant work has to be an entirely different piece of work. So you can’t give strategic advice to a company that you’re a non-executive director of, where your job as an NED is to give strategic advice.

“I’m surprised in this day and age that the accountants aren’t advising them that they can’t do that, it’s such a dangerous operation.”

Mr Jayawardena didn’t respond when asked for comment by Sky News.

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Storm Bert: Father rescues son from sinking car as floods wreak havoc

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Storm Bert: Father rescues son from sinking car as floods wreak havoc

Tragedy almost struck a family in West Yorkshire after a father had to suddenly rescue his 11-month-old son from their flooded car.

Andre Randles, 22, was driving with baby Luca from Hebden Bridge to his father’s home in Todmorden to watch a football match on Saturday afternoon.

He was diverted away from his main route when he hit a dip and went “straight into a puddle of water”.

Speaking to Sky’s Shingi Mararike, Mr Randles said he thought it was a shallow puddle that he could drive through but soon his car began to float.

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Paige and Andre
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Andre Randles’ partner Paige Newsome said the incident was ‘really scary’

He called emergency services but soon “water started seeping in”.

“I thought I’m going to have to get out, I’m going to have to smash a window,” Mr Randles said.

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He wound down his and his son’s windows, and climbed out before rescuing his son.

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‘Devastating’ flooding in Wales

“The water was chest high, I held him up as high as I could to keep him out of the water.”

“It wasn’t raining so heavily, I’ve driven in much worse rain,” he added.

Mr Randles, a self-employed roofer who relies on the car for work, said he remained calm during the ordeal and was helped by the fact that Luca was asleep during the rescue.

Mr Randles’ partner Paige Newsome – who was not in the car at the time – said the incident was “really scary”.

“To think I could have actually lost them both – I don’t know how I would’ve lived,” she said.

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Resident feels ‘abandoned’ in floods

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The road has been flooding for at least two decades, the couple said.

“What is it going to take for the council to sort it out? Does a fatal incident have to happen? It’s been going on for years,” Ms Newsome said.

The couple are worried about affording another car as well as Christmas celebrations.

But Mr Randles said: “I’m grateful that we got out safely and that we can spend his first birthday and Christmas as a family.”

Storm Bert has brought more than 80% of November’s average monthly rainfall in less than 48 hours to some parts, the Met Office said.

Around 300 flood warnings and alerts are in place in England, with another 100 in Wales and nine in Scotland, as heavy rain and thawing snow bring more disruption across the UK.

A major incident was declared by Rhondda Cynon Taf County Borough Council in South Wales after homes and cars were submerged in water.

‘It is devastating’

Gareth Davies, who owns a garage in Pontypridd, a town in Rhondda Cynon Taf, told Sky’s Dan Whitehead that flooding has put his small business “back to square one”.

As the River Taff burst its banks, the majority of the vehicles in Mr Davis’s garage were so damaged he says they will have to be written off.

Garage in wales destroyed by Storm Bert
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Mr Davies speaking to Sky’s Dan Whitehead in his flooded garage

Garage in wales destroyed by Storm Bert

“I am gutted,” he said, standing in his flooded garage, most of which is also covered in oil after a drum tipped over.

“How long is it going to take to sort out? I am going to lose money either way. I can’t work on people’s cars when I am trying to sort all of this out.

“It is devastating.”

Mr Davies said he has never had an issue with water coming into his garage until now.

Garage in wales destroyed by Storm Bert

Pointing to one car that had been hoisted into the air before water reached it, he said: “Lucky enough, I did come in this morning just to get that car up in the air.

“I don’t know what to say, I have been working flat out for two years to build this up and something like this happens, and it just squashes it all.

“This has put me back to square one.”

At least two to three hundred properties in South Wales have been affected by flooding, Councillor Andrew Morgan, leader of Rhondda Cynon Taf Borough Council, said on Sunday.

He said the affected buildings are a mixture of residential and commercial properties, after the weather turned out to be worse than what was forecast.

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MP behind assisted dying bill says she has ‘no doubts’ – as she rejects minister’s ‘slippery slope’ claim

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MP behind assisted dying bill says she has 'no doubts' - as she rejects minister's 'slippery slope' claim

The Labour MP behind the assisted dying bill said she has “no doubts” about its safeguards after a minister warned it would lead to a “slippery slope” of “death on demand”.

Kim Leadbeater told Sky’s Sunday Morning With Trevor Phillips that she has “huge respect” for Justice Secretary Shabana Mahmood, but that she doesn’t agree with her opinion.

In a strongly worded intervention ahead of Friday’s House of Commons vote, Ms Mahmood said the state should “never offer death as a service”.

She said she was “profoundly concerned” by the legislation, not just for religious reasons, which she has previously expressed, but because it could create a “slippery slope towards death on demand”.

Asked about the criticism, Ms Leadbeater said: “I have got a huge amount of respect for Shabana. She’s a very good colleague and a good friend.

“In terms of the concept of a slippery slope, the title of the bill is very, very clear.

“It is called the Terminally Ill Adults (End of Life) Bill. It cannot include anybody other than people who are terminally ill, with a number of months of their life left to live. It very clearly states that the bill will not cover anybody else other than people in that category.”

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Ms Leadbeater’s bill proposes legalising assisted dying for people with six months left to live, on the approval of two doctors and a High Court judge.

She wants people who are in immense pain to be given a choice to end their lives, and has included a provision in the legislation to make coercion a criminal offence.

The matter will be debated for the first time in almost 10 years on Friday, with MPs given a free vote, meaning they can side with their conscience and not party lines.

As a result, the government is meant to remain neutral, so the intervention of cabinet ministers has provoked some criticism from within party ranks.

Labour peer Charlie Falconer told Sky News Ms Mahmood’s remarks were “completely wrong” and suggested she was seeking to impose her religious beliefs on other people.

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Kevin Hollinrake says he will be in favour of the assisted dying bill

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Why is assisted dying so controversial and where is it legal?

Asked about his comments, Ms Leadbeater said it was important to remain “respectful and compassionate throughout the debate” and “for the main part, that has been the case”.

She added: “The point about religion does come into this debate, we have to be honest about that. There are people who would never support a change in the law because of their religious beliefs.”

Ms Leadbeater went on to say she had “no doubts whatsoever” about the bill, which has also been objected by the likes of Health Secretary Wes Streeting and former Labour prime minister Gordon Brown.

Asked if she has ever worried about people who don’t want to die taking their own lives because of the legislation, Ms Leadbeater said: “No, I don’t have any doubts whatsoever. I wouldn’t have put the bill forward if I did.

“The safeguards in this bill will be the most robust in the world, and the layers and layers of safeguarding within the bill will make coercion a criminal offence.”

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Mum diagnosed with cancer tells of the day her life changed ahead of assisted dying vote

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Mum diagnosed with cancer tells of the day her life changed ahead of assisted dying vote

There is a lot at stake this week for Sophie Blake, a 52-year-old mother to a young adult, who was diagnosed with stage four cancer in May 2023.

As MPs vote on whether to change the law to allow assisted dying, Sophie tells Sky News of the day her life changed.

“One night I woke up and as I turned I felt a sensation of something in my breast actually move, and it was deep,” she says, speaking from her home in Brighton.

“Something fluidy, a very odd sensation. I woke up and made a doctor’s appointment.”

Sophie underwent an ultrasound followed by a biopsy before she was taken to a room in the clinic and offered water.

“They said, ‘a hundred percent, we believe you have breast cancer’.”

But it was the phone call with her mother that made it feel real.

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“My mum had been waiting at home. She phoned me and said ‘How is it darling?’ and I said ‘I’ve got breast cancer,’ and it was just that moment of having to say it out loud for the first time and that’s when that part of my life suddenly changed.”

Sophie says terminal cancers can leave patients dreading the thought of suffering at the end of their lives.

“What I don’t want to be is in pain,” she says. “If I am facing an earlier death than I wanted then I want to be able to take control at the end.”

Assisted dying, she believes, gives her control: “It’s an insurance policy to have that there.”

Read more:
Why is assisted dying so controversial and where is it legal?
UK on ‘slippery slope’ Justice Minister says ahead of vote

On Friday, the government is set to debate the issue before voting on it. Sophie hopes they’ll back the proposal.

“It should be my choice to be able to have a compassionate death,” she says.

There has been much debate about the bill since details about how it would work were published earlier this month.

On Friday, former prime minister Gordon Brown became the latest senior political figure to share his opinion on the matter, coming out as against the legalisation of assisted dying, based on his experience of his own daughter’s death.

Disability rights advocate Lucy Webster warns that for people like Sophie to have that choice, others could face pressure to die.

Lucy Webster, disability rights advocate
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Lucy Webster

“All around the world, if you look at places where the bill has been introduced, they’ve been broadened and broadened and broadened,” she tells Sky News.

Lucy is referring to countries like Canada and Netherlands, where eligibility for assisted deaths have widened since laws allowing it were first passed.

Lucy, who is a wheelchair user and requires a lot of care, says society still sees disabled people as burdens which places them at particular risk.

“I don’t know a single disabled person who has not at some point had a stranger come up to us and say, ‘if I were you, I’d kill myself’,” she says.

The assisted dying bill, she says, reinforces the view that disabled lives aren’t worth living.

“I’ve definitely had doctors and healthcare professionals assume that my quality of life is inherently worse than other people’s. That’s a horrible assumption to be faced with when [for example] you’ve just gone to get antibiotics for a chest infection. There are some really deep-seated medical views on disability that are wrong.”

Under the plans, a person would need to be terminally ill and in the final six months of their life, and would have to take the fatal drugs themselves.

Among the safeguards are that two independent doctors must confirm a patient is eligible for assisted dying and that a High Court judge must give their approval. But the bill does not make clear if that is a rubber-stamping exercise or if judges will have to investigate cases including risks of coercion.

Julian Hughes, honorary professor at Bristol Medical School, says there’s a very big question about whether courts have the room to take on such a task.

Julian Hughes, honorary professor at Bristol Medical School
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Julian Hughes

“At the moment in the family division I understand there are 19 judges and they supply 19,000 hours of court hearing in a year, but you’d have to have an extra 34,000,” he explains.

“We shouldn’t fool ourselves and think that there wouldn’t be some families who would be interested in getting the inheritance rather than spending the inheritance on care for their elderly family members. We could quickly become a society in which suicide becomes normalised.”

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