Westminster Accounts: Lib Dem leader and ex-cabinet minister among MPs ‘avoiding taxes’ on second jobs
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.
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.
World
Russian forces creep through disused gas pipeline in attempt to launch surprise attack on Ukrainian soldiers
Russian special forces crept through a disused gas pipeline for several miles to launch a surprise attack on Ukrainian soldiers in the Kursk region, Ukraine’s military and pro-Moscow war bloggers have said.
Footage circulating on the Telegram app claims to show the elite soldiers crouching as they make their way through the darkness of the pipe to the town of Sudzha.
Some can be heard cursing in Russian and complaining about the commanders who sent them on the mission.
One of the soldiers is heard saying: “F*****g hell, where the f*** are we, boys?”
Another says: “Where does the pipe go? To Sudzha, for f**** sake, that’s f***ing crazy.”
Later in the clip a soldier is heard saying: “We’ll get there of course, but indignantly, because we’re f*****g sick of the f*****g command.”
He later adds: “They took our f*****g assault rifles too.”
Two of the soldiers are seen smoking cigarettes while a separate image shared on Telegram shows an operative wearing a gas mask.
The footage shows soldiers creeping through the pipeline
Soldiers are seen smoking cigarettes
The special forces soldiers walked around nine miles (15km) through the pipeline which Moscow had until recently used to send gas to Europe, according to Telegram posts by Ukrainian-born pro-Kremlin blogger Yuri Podolyaka.
In the footage, the soldiers suggest the mission requires them to walk seven miles through the pipe.
Mr Podolyaka says some of them spent several days in the pipeline before striking Ukrainian units from the rear near Sudzha.
The operation formed part of efforts by Russia to recapture areas of Kursk which were seized by thousands of Ukrainian soldiers in a shock offensive in August last year.
Another pro-Russian war blogger, who uses the alias Two Majors, said a major battle is under way in Sudzha after Moscow’s special forces crept through the pipe.
Meanwhile, Ukraine’s general staff confirmed on Saturday that Russian soldiers had used the pipeline in an attempt to gain a foothold, but airborne assault forces promptly detected them, and they responded with rocket, artillery and drone attacks that destroyed Moscow’s units.
“The enemy’s losses in Sudzha are very high,” the general staff reported.
Read more:
US pausing military aid is ‘betrayal’, Ukrainian soldier tells Sky News
Russia ‘appears to have ignored Trump warning’ after deadly strike
A close-up image of one of the soldiers in the pipeline
The soldiers crept through the tunnel for several miles
It comes as Ukraine’s Air Assault Forces shared a video on Telegram on Saturday which it claims shows Kyiv’s forces repelling Russian forces in Kursk with airstrikes.
Sky News has not independently verified the footage.
Months after Kyiv’s forces seized parts of Kursk, Ukrainian soldiers are weary and bloodied by relentless assaults of more than 50,000 Russian troops, including some from Moscow’s ally North Korea.
Tens of thousands of Ukrainian soldiers run the risk of being encircled, open-source maps of the battlefield showed on Friday.
Meanwhile, Russia’s defence ministry said this morning that it had captured a settlement in Kursk and another in Ukraine’s Sumy region.
Russia also launched heavy aerial attacks overnight on Ukraine into Saturday – with at least 22 people killed, including 11 in the frontline town of Dobropilla in Ukraine’s embattled eastern Donetsk region.
Ukrainian president Voldymyr Zelenskyy described the attacks as a “vile and inhumane intimidation tactic” by Russia.
The attacks come after the US paused military aid and the sharing of intelligence with Ukraine this month after a meeting between US President Donald Trump and Mr Zelenskyy descended into a confrontation in front of the world’s media.
The Trump administration’s stance on Ukraine and apparent favouring of Moscow has sparked concern among European leaders.
Latvian President Edgars Rinkevics told Sky News on Sunday that European countries should “absolutely” introduce conscription as he conceded the continent was “quite weak” militarily in the face of the Russia threat.
Meanwhile, Russian officials have been criticised after presenting mothers of soldiers killed in Ukraine with gifts of meat grinders on International Women’s Day.
Russia is often accused of throwing its troops into a “meat grinder” with little regard for their lives.
The local branch of government in the northwestern Russian town of Polyarniye Zori defended itself against the backlash, saying critics were making “callous and provocative interpretations” of the gifts.
Canada is set for a new prime minister as the ruling Liberal Party prepares to announce Justin Trudeau’s replacement as leader.
Mr Trudeau, who has been prime minister since 2015, announced he was stepping down in January after facing calls to quit from a chorus of his own MPs.
The 53-year-old’s popularity had declined as food and house prices rose.
The Liberal Party will announce its new leader tonight following a vote by around 140,000 members.
A former Bank of England governor has emerged as the frontrunner as the country deals with the impacts of tariffs imposed by US President Donald Trump.
The next prime minister will also have to decide when to call a general election – which must be held on or before 20 October.
As the Liberal Party prepares to choose its new leader, we take a look at the candidates.
Mark Carney
Mark Carney addresses supporters in Alberta in March. Pic: AP
The 59-year-old will be a familiar face to many in the UK as he served as governor of the Bank of England between 2013 and 2020.
He was formerly the head of Canada’s central bank and was praised after the country recovered from the 2008 financial crisis faster than many other countries.
Mr Carney has picked up one endorsement after another from cabinet ministers and MPs since he declared his candidacy in January.
He did not serve in Mr Trudeau’s government but was named as the chair of a government task force on economic growth last September.
Daniel Beland, a political science professor at McGill University in Montreal, said Mr Carney’s calm demeanour and outstanding resume make him a reassuring figure to many Canadians at a time when Mr Trump is “going after their country’s economy and sovereignty”.
Read more:
Trudeau steps down with his popularity in shreds
Canadian PM criticises Trump over tariffs
Chrystia Freeland
Chrystia Freeland speaks during the Liberal leadership debate in Montreal in February. Pic: AP
Ms Freeland, a former deputy prime minister and finance minister of Canada, was leading in the polls to replace Mr Trudeau shortly after he announced his resignation.
However, her long association with the outgoing prime minister and the threat of Mr Trump’s tariffs have since tipped things in Mr Carney’s favour.
The 56-year-old was born in the west Canadian province of Alberta to a Ukrainian mother.
Before entering politics in 2013, Ms Freeland worked as a journalist covering Russia and Ukraine for several years.
Mr Trudeau told Ms Freeland that he no longer wanted her as finance minister in December but that she could remain deputy prime minister and the point person for US-Canada relations.
She stepped down shortly after and released a scathing letter about the government which increased pressure on Mr Trudeau ahead of his resignation.
Karina Gould
Karina Gould speaks during the Liberal Party leadership debate in Montreal in February. Pic: AP
Ms Gould is the youngest woman to serve as a minister in Canada and has advocated for a tough stance on Mr Trump.
The 37-year-old, who has served as minister of democratic institutions and minister of international development, has previously branded herself as part of a “generational shift” and said the Liberal Party “needs to embrace this shift too”.
Ms Gould has reportedly proposed an increase in corporate taxes on large companies earning more than CAN$500m (£270m) a year to encourage them to reinvest in business and productivity.
She was serving as house leader until January 2025 when she left the cabinet to run for party leader.
Frank Baylis
Frank Baylis during the Liberal Leadership debate in Montreal in February. Pic: AP
Mr Baylis, a businessman from Montreal, served as a Liberal Party politician between 2015 and 2019.
The 62-year-old has reportedly proposed creating two pipelines that would transport natural gas to international markets in Europe and Asia to reduce dependence on America.
Mr Baylis criticised Mr Trudeau for travelling to meet Mr Trump at his Mar-a-Lago resort in November.
He said: “Anybody’s that ever dealt with a bully successfully know you don’t give an inch.”
What’s next for Canada?
Please use Chrome browser for a more accessible video player
‘You can’t take our country or our game’
The new leader of the Liberal Party is expected to call a general election shortly after they take up the role.
After decades of bilateral stability, Canada’s next election is expected to focus on who is best equipped to deal with the United States.
Mr Trump’s trade war and his talk of making the country the 51st state have infuriated Canadians, who are booing the American anthem at NHL and NBA games.
Some are cancelling trips south and many are avoiding buying American goods when they can.
Pierre Poilievre, the leader of the main opposition Conservative Party, has embraced a populist approach not unlike Mr Trump’s.
He attacks the mainstream media and has vowed to put “Canada First”.
Before Mr Trump’s inauguration, the Conservatives were widely expected to win the country’s next election.
However, the US president’s threats against Canada have led to a surge in popularity for the Liberal Party in the polls.
World
Zelenskyy condemns ‘vile and inhumane’ Russian attacks after one of year’s deadliest days for Ukrainian civilians
Volodymyr Zelenskyy has thanked Ukraine’s allies for condemning Russian strikes after one of the deadliest days for civilians in his country so far this year.
Ukraine’s president described the attacks as a “vile and inhumane intimidation tactic” by Russia.
While a warning by Donald Trump to Vladimir Putin to stop “pounding” Ukraine or else, appears to have fallen on deaf ears.
Russia launched heavy aerial attacks overnight into Saturday after the White House administration suspended intelligence sharing with Ukraine.
The US has been piling pressure on President Zelenskyy’s government to cooperate in convening peace talks with Russia.
American aerospace company Maxar Technologies said on Friday it had disabled access to its satellite imagery for Kyiv. Its ability to strike inside Russia and defend itself from bombardment is very much diminished without such images.
At least 22 people were killed in multiple Russian attacks, including 11 in the frontline town of Dobropilla in Ukraine’s embattled eastern Donetsk region.
Please use Chrome browser for a more accessible video player
Russian strike kills at least 11 in Ukraine
Russia fired two ballistic missiles into the town centre, then launched a strike targeting rescuers who responded, according to Mr Zelenskyy. Forty-seven people, including seven children, were injured in the attack.
“It is a vile and inhumane intimidation tactic to which the Russians often resort,” he said.
The president added: “It was one of the most brutal strikes, a combined one. The strike was deliberately calculated to cause maximum damage. Missiles, along with a Shahed drone, targeted the central part of the town.
“Nine residential buildings were hit. Also, the shopping centre and stores were struck.”
Read more:
Russia ‘appears to have ignored Trump warning’
US pausing military aid is ‘betrayal’ to Ukraine, soldier says
People stand at the site of an apartment building hit by a Russian missile strike in Dobropillia. Pic: Reuters
Another seven people were killed in four towns close to the frontline where Russian troops have been making steady advances, said regional governor Vadym Filashkin.
Three others died when a Russian drone hit a civilian workshop in the northeastern Kharkiv region, emergency services reported. And one man was killed by shelling in the region.
The UN Human Rights Monitoring Mission in Ukraine said it was one of 2025’s deadliest attacks for Ukrainian civilians.
Pic: Reuters
Some 24 hours earlier, Russia struck Ukrainian energy facilities using dozens of missiles and drones.
The attacks hampered Ukraine’s ability to supply power to its citizens and run weapons factories vital to its defences.
When asked on Friday if Russian President Vladimir Putin was taking advantage of the US pause on intelligence-sharing to attack Ukraine, Mr Trump responded: “I think he’s doing what anybody else would.”
Mr Zelenskyy did not mention intelligence-sharing on Saturday, but said he welcomed Mr Trump’s proposal to bring in banking sanctions and tariffs on Russia until a ceasefire and final peace settlement is reached.
Read more from Sky News:
South Korea’s impeached president released from prison
Would the world be more peaceful if women were in charge?
Mr Zelenskyy also said: “I am grateful to all the leaders, all those diplomats of our partner countries, all public figures who support Ukraine, who have condemned these Russian strikes and who call all things by their proper names.
“And it is essential that we continue coordinating all our efforts with our partners to ensure that our defence works effectively and that we do everything to bring peace closer.”
Mr Zelenskyy has said he and other senior Ukrainian officials will go to Saudi Arabia next week to discuss proposals aimed at ending the war.
In a post on X, he wrote he was set to meet Saudi Arabia’s Crown Prince Mohammed bin Salman on Monday, and his team would remain in the country to have talks with US officials.
-
Sports2 years ago‘Storybook stuff’: Inside the night Bryce Harper sent the Phillies to the World Series
-
Sports11 months agoStory injured on diving stop, exits Red Sox game
-
Sports1 year agoGame 1 of WS least-watched in recorded history
-
Sports2 years agoMLB Rank 2023: Ranking baseball’s top 100 players
-
Sports3 years ago
Team Europe easily wins 4th straight Laver Cup
-
Environment2 years agoJapan and South Korea have a lot at stake in a free and open South China Sea
-
Environment2 years agoGame-changing Lectric XPedition launched as affordable electric cargo bike
-
Business2 years agoBank of England’s extraordinary response to government policy is almost unthinkable | Ed Conway