Connect with us

Published

on

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.

Search for your MP using the Westminster Accounts tool

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.

More on Westminster Accounts

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.

Please use Chrome browser for a more accessible video player

SNP questions PM on Westminster Accounts

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.

Click to subscribe to the Sky News Daily wherever you get your podcasts

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”.

Read more:
SNP demands ‘root-and-branch’ reform of MPs’ outside earnings
‘The next big scandal’ – Informal groups of MPs given £20m from external organisations since 2019

Please use Chrome browser for a more accessible video player

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.

Please use Chrome browser for a more accessible video player

‘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.

Continue Reading

World

What a Trump presidency would mean for global wars and European security

Published

on

By

What a Trump presidency would mean for global wars and European security

Donald Trump says he would end Russia’s war in Ukraine should he return to the White House – but any rushed deal will likely leave Kyiv much weaker and European security in even greater peril.

Another major flashpoint a Trump presidency would immediately seek to influence is the escalating conflict between Iran and Israel.

Mr Trump came close to direct war with Tehran during his first term in office and prior restraint could well give way to direct confrontation this time around.

US election latest: Harris and Trump make final pitches

Then there is the overwhelming longer-term challenge posed by China, with North Korea another growing headache especially after Mr Trump tried but failed to woo the leader of the hermit state during his first stint as commander-in-chief.

President Donald Trump meets North Korean leader Kim Jong Un, Wednesday, Feb. 27, 2019, in Hanoi. (AP Photo/ Evan Vucci)
Image:
Mr Trump meets North Korean leader Kim Jong Un in 2019. Pic: AP

With the US election on a knife edge, hostile and friendly capitals around the world have been gaming what a second Trump White House might mean for their respective national interests and for the most pressing global security threats.

Mr Trump’s track record of unpredictability is a challenge for traditional foes – but also for Washington’s closest allies, in particular fellow members of the NATO alliance.

The Republican nominee has made no secret of his frustration at how the US has for decades bankrolled the security blanket that protects Europe.

During his first term as president, Mr Trump threatened to withdraw the US from the alliance – a move that would almost certainly sound its death knell. His rhetoric did help to spur allies to dig deeper into their pockets and spend more on their militaries, though.

But the damage of years of underinvestment is deep and the pace of recovery is too slow for European NATO allies and Canada to credibly stand on their own as a potent military force any time soon.

Republican presidential nominee and former U.S. President Donald Trump and Ukraine's President Volodymyr Zelenskiy meet at Trump Tower in New York City, U.S., September 27, 2024. REUTERS/Shannon Stapleton REFILE - QUALITY REPEAT
Image:
Meeting Volodymyr Zelenskyy in New York in September – but what would a Trump presidency mean for Ukraine’s war with Russia? Pic: Reuters

In terms of immediacy when it comes to global crises, the impact of a Trump victory on 5 November would be felt most acutely by Ukraine and also by Iran.

The presidential candidate has repeatedly claimed that he would quickly end the Ukraine war, though without explaining how or what peace would look like.

In an indication of where his priorities lie, however, he has accused Ukrainian President Volodymyr Zelenskyy of being the “greatest salesman on earth” for securing tens of billions of dollars in weapons and other assistance that Washington has given to Kyiv.

Russia's President Vladimir Putin and U.S. President Donald Trump are seen during the G20 summit in Buenos Aires, Argentina November 30, 2018. REUTERS/Marcos Brindicci
Image:
Pic: Reuters

Yet – coupled with Ukraine’s willingness to fight – that military aid is the biggest reason why Ukraine has managed to withstand almost 1,000 days of Vladimir Putin’s war.

Stop the flow of American weapons, and Ukrainian troops – despite their own ingenuity and the support of other allies – will simply lack the firepower to keep resisting the onslaught.

Democratic presidential nominee and U.S. Vice President Kamala Harris meets with Ukraine's President Volodymyr Zelenskiy, in the Eisenhower Executive Office Building on the White House campus in Washington, U.S., September 26, 2024. Ukrainian Presidential Press Service/Handout via REUTERS ATTENTION EDITORS - THIS IMAGE HAS BEEN SUPPLIED BY A THIRD PARTY.
Image:
Kamala Harris believes US support for Mr Zelenskyy and Ukraine is vital. Pic: Reuters

By contrast, US vice president Kamala Harris, who is vying for the top job, has made clear that she views continued support to Ukraine as being as vital to US and Western interests as it is to Kyiv’s – a far more familiar stance that echoes the view of her NATO partners.

While US support for Ukraine would undoubtedly change under a Trump administration, that is not the same as facilitating a complete surrender.

The former president – who portrays himself as the ultimate dealmaker and has adopted a new election slogan – “Trump will fix it” – will not want to be held responsible for the total absorption of Ukraine into Mr Putin’s orbit.

Please use Chrome browser for a more accessible video player

How does the US election work?

Putin and Iran

His relationship with the Russian president is a particularly interesting dynamic.

When president, he infamously said he trusted Mr Putin’s denials over his own intelligence agencies when it came to claims about Russian interference in the 2016 US election.

But with the right advice, might a future President Trump be able to use his connection with Mr Putin to the West’s advantage?

At the very least, it adds a new level of unpredictability – which is perhaps the most important element when it comes to assessing the potential impact on the world of a second Trump term.

Donald Trump said 'as long as I'm President of the United States, Iran will never be allowed to have a nuclear weapon'
Image:
Donald Trump said in 2020 ‘as long as I’m president of the United States, Iran will never be allowed to have a nuclear weapon’. Pic: Reuters

On Iran, in stark contrast to his approach to Russia’s war in Ukraine, a future President Trump may well back much greater US military support for Israel’s conflict against Tehran and its proxies – perhaps even direct involvement by US forces in strikes on Iran.

Mr Trump has an even tougher stance towards Tehran and its nuclear ambitions than Joe Biden’s administration.

His decision to rip up a major nuclear deal with Iran was one of his most significant foreign policy acts during his four years as president.

It is also personal, with Iran accused of hacking the Trump campaign in recent months – an attack that would surely only heighten tensions with Iran during any second Trump term.

On election night, Sky News will have access to the most comprehensive exit poll and vote-counting results from every state, county and demographic across America through its US-partner network NBC.

You can find out more about Sky News’ coverage here.

Continue Reading

World

‘Extreme danger’ red alert for Barcelona warns of more rain on the way – with Spain still reeling from deadly floods

Published

on

By

'Extreme danger' red alert for Barcelona warns of more rain on the way - with Spain still reeling from deadly floods

A red alert warning of “extreme danger” because of torrential rain has been issued for Barcelona, as elsewhere in Spain search teams continue to scour flooded areas for bodies.

At least 217 people have died after heavy rain in eastern Spain caused flash floods that swept away almost everything in their path.

People were trapped in cars, homes and businesses as the waters surged through the disaster zone last week.

Six days later, the search and rescue operation continues for the unknown number of missing people, with thousands of soldiers brought in to help.

And as communities continue to reel from the catastrophic floods – and mourn their losses – more rain is forecast for parts of the country.

Severe flooding has hit Barcelona's El Prat airport, forcing dozens of flights to be cancelled
Image:
Severe flooding has hit Barcelona’s El Prat airport, forcing dozens of flights to be cancelled

Spain weather warning. Pic: Meteoalarm
Image:
Pic: Meteoalarm

Today, the local government in Catalonia has warned of “continuous and torrential” rain in two regions, saying people should avoid travel and stay away from streams and ravines.

A red alert “extreme danger” warning has been issued for Barcelona.

“Do not travel unless strictly necessary,” the alert told people nearby.

Mud covers the area in the aftermath of last Tuesday and early Wednesday storm that left hundreds dead or missing in the region, in Paiporta, outskirts of Valencia, Spain, Saturday, Nov. 2, 2024.(AP Photo/Angel Garcia)
Image:
Mud covers the area in Paiporta, Valencia. Pic: AP

Footage on social media shows heavy rainfall overwhelming stairwells and leaving streets strewn with water.

Dozens of flights have been cancelled at El Prat airport after the terminal building was flooded.

Members of the Spanish military prepare to help residents, in the aftermath of floods caused by heavy rains, in Massanassa, near Valencia, Spain, November 3, 2024. REUTERS/Susana Vera
Image:
Soldiers help residents in Massanassa, near Valencia. Pic: Reuters

Image:
Rescuers at the Bonaire shopping centre

Elsewhere in eastern Spain, much attention has been paid to an underground car park in Aldaia, where emergency services have been trying to drain the floodwater to gain access.

There had been fears that dozens of bodies could be found inside the car park after people died trapped by the rising waters at the Bonaire shopping centre.

However firefighters on the ground have downplayed the situation, Spanish media report.

“Since yesterday afternoon we were able to get in with canoes, boats, drones and on foot,” one of the firefighters told El Pais.

“Yesterday we went through the entire car park and luckily we haven’t found any bodies.”

They said that could change as the car park empties, but that at the moment the cars are all empty.

Read more:
Flood-hit Spanish towns desperate for leadership
Spain mounts biggest peacetime disaster recovery

Please use Chrome browser for a more accessible video player

Search for bodies in flooded car park

There has been anger at the response from authorities and a group of survivors hurled mud and insults at Spain’s King Felipe when the monarch visited one of the worst-affected towns.

By the time authorities sent alerts to mobile phones warning of the seriousness of the flooding and asking people to stay at home, many were already on the road or in places like underground garages that became death traps.

Please use Chrome browser for a more accessible video player

Protesters throw mud at King of Spain

Valencia’s MotoGP race, which had been scheduled for later this month, has been cancelled after floods wrought destruction on the track.

Thousands of volunteers have been helping to clear away thick layers of mud from streets and homes.

Continue Reading

World

Spanish authorities search flooded underground car park – fearing how many bodies they will find

Published

on

By

Spanish authorities search flooded underground car park - fearing how many bodies they will find

The story of these floods has been full of grim, unsettling images.

Now there is another one – the Bonaire shopping centre in Aldaia.

Today, it was an awful place. Not because of the immense damage wrought by the floods, but because of the horror that may lie ahead.

The emergency services are pumping out the underground car park that lies beneath this retail complex, one of the biggest in the country, and they don’t know what they will find.

There will be bodies – that seems sure. The question is how many. And the fear is that it could be dozens.

You can see the ramps that run down to the car park, and you can also see the water level glistening, not far down the ramp.

Pumping out this entire car park will be a marathon job. Searching it will take patience, specialist equipment and stoicism. There will surely be grim discoveries down there.

Scuba diving teams have been sent in, but we were told that they have been unable to go into the water so far. It is full of debris, oil, diesel, and goodness knows what else.

Today we saw an array of equipment being delivered – boats, pumps, a military ambulance, kayaks and lifting machinery.

Emergency services personnel close to the entrance of the car park. Pic: AP
Image:
Emergency services personnel close to the entrance of the car park. Pic: AP

A pump to remove water from the car park is seen at the site. Pic: AP
Image:
A pump to remove water from the car park is seen at the site. Pic: AP

An enormous amount of resource is being thrown at this, at a time when so many towns are complaining that they feel forgotten.

Cristina Vano, a judicial expert, is working here as a volunteer, checking the cars strewn around in the ground-level car parks.

Her job is to peer inside and see if she can see a body. If she can’t, she puts an X on the side using coloured tape; if she can, she calls the police.

Read more:
Flood survivors hurl mud and insults at King of Spain
Anger at response to Spain floods grows
‘Living with corpses at home’: Spain reels from flash floods

An emergency works on removing water from one of the exits of the car park. Pic: Reuters
Image:
An emergency responder works to remove water the car park. Pic: Reuters

She is waiting for the first vehicles to be pulled from the Bonaire underground car park, and she is steeled for it to be a horrible experience.

“There is space for 1,700 cars in there,” she says.

“We were told it wasn’t full, but there were certainly many cars in there. The problem is that a lot of people took refuge there, so we don’t know what to expect.

“The police in Aldaia were talking about us finding maybe 80 people – I hope it will be less. It’s really sad, but we are expecting a lot.”

Cristina Vano is volunteering at the site
Image:
Cristina Vano is volunteering at the site

We speak to the police, who tell us that searching the car park will be a long and complicated process.

They don’t want to make any estimates about the number of cars involved, nor the number of people. But someone involved in the operation speaks to us after coming out.

“A lot more than a hundred cars are in there,” the person says. “Maybe hundreds.”

Please use Chrome browser for a more accessible video player

Protesters throw mud at King of Spain during visit to Paiporta

Follow Sky News on WhatsApp
Follow Sky News on WhatsApp

Keep up with all the latest news from the UK and around the world by following Sky News

Tap here

There is an army officer, from special services, who tells me that his unit of Green Berets are ready to do anything that is needed. They have been helping to clear out the shopping centre for days now, and will continue. But he knows this is not a quick job.

On the far side, we see a group of firefighters walking slowly away from that cursed ramp that leads down to the car park. Their faces are drawn, an expression that we see a lot during a day observing this recovery mission.

Everyone involved in this knows that there is no chance of finding a survivor in this flooded car park. All they can do is hope that it’s not as bad as they fear.

Continue Reading

Trending