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.
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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.
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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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.
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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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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.
Ukraine’s justice and energy ministers have resigned amid a major embezzlement and kickbacks scandal involving the state nuclear power company.
Volodymyr Zelenskyy called for the removal of Justice Minister Herman Halushchenko and Energy Minister Svitlana Grynchuk on Wednesday, with the pair later submitting their resignations.
The damaging scandal – fast becoming one of the most significant government crises since Moscow launched its full-scale invasion – has put top officials under scrutiny.
It could not come at a worse time for Ukraine, as Russia’s renewed attacks on energy infrastructure cause rolling blackouts and Kyiv’s outnumbered forces retreat under relentless assaults.
Svitlana Grynchuk file image. Pic: Reuters
Site of a Russian drone strike in Kharkiv, Ukraine, on 12 November, 2025. Pic: Reuters
At the centre of the scandal, Mr Halushchenko and other well-known ministers and officials are alleged to have gained payments from constructing fortifications against Moscow’s assaults on energy infrastructure. Former Deputy Prime Minister Oleksiy Chernyshov is also alleged to have been involved.
Mr Halushchenko said he would defend himself legally, while Mr Grynchuk posted on social media: “Within the scope of my professional activities there were no violations of the law.”
The findings of a 15-month investigation, including 1,000 hours of wiretaps, were revealed by the same anti-corruption watchdogs Mr Zelenskyy sought to weaken earlier this year.
Herman Halushchenko – file image. Pic: Reuters
Blackout in Ukraine. Pic: Reuters
These resulted in the detention of five people, and another seven linked to about $100m (£76m) in alleged kickbacks in the energy sector.
Ukrainian officials are scrambling for European funds to manage mounting energy shortages as Moscow targets critical infrastructure and natural gas production in an attempt to damage public morale.
The nation has been plagued by corruption since gaining independence, and Mr Zelenskyy was elected on a mandate to eliminate graft.
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Military procurement scandals also led to the ousting of Defence Minister Oleksii Reznikov in 2023.
Oleksandr Merezhko, a lawmaker with Zelenskyy’s party, said the scandal looks “really bad in the eyes of our European and American partners”.
He said: “Internally this scandal will be used to undermine unity and stability within the country. Externally, our enemies will use it as an argument to stop aid to Ukraine.
Volodymyr Zelenskyy, Galushchenko and former Energoatom CEO Petro Kotin. Pic: Reuters
“While Russians destroy our power grid and people have to endure blackouts, someone at the top was stealing money during the war.”
But questions remain over how high the alleged corruption goes.
The National Anti-Corruption Bureau, known as NABU, refrained from identifying the suspects.
But it said they included a businessman, a former adviser to the energy minister, an executive who oversaw physical protection at state energy company Energoatem, and others responsible for money laundering. It dubbed the scheme “Midas”.
The agency also accused eight people of abuse of office, bribery, and possession of disproportionate assets.
The investigation, which NABU said conducted over 70 raids, was welcomed by the Ukrainian president, who urged officials to cooperate with it. Energoatom said the inquiry didn’t disrupt its operations.
Situation on the battlefield
NABU released excerpts of tapes in which the network, using code names and secretive language, discussed blackmail and pressuring Energoatom contractors to extract 10% to 15% in bribes and kickbacks in exchange for them to do business without facing internal blocks.
The network took advantage of a regulation enforced during martial law prohibiting contractors from claiming debts in court from companies providing essential services, such as Energoatom, which has annual revenues of around $4.7 billion (£3.6 billion). Four others worked to launder the money at a Kyiv office.
The tapes, which have not been independently verified, say about $1.2 million was handed to a former deputy prime minister, whom the plotters called “Che Guevara,” after the Argentinian revolutionary leader.
Ms Svyrydenko also said the cabinet submitted proposals to apply sanctions against Timur Mindich, a close associate of Zelenskyy, and businessman Alexander Tsukerman.
World
Police in Germany arrest suspected Hamas member who ‘acquired Glock pistols to attack Jewish institutions’
Police in Germany have arrested a suspected Hamas member who allegedly obtained guns and ammunition to attack Jewish targets.
Lebanese-born Borhan El-K was picked up on the motorway after crossing into Germany from the Czech Republic on Tuesday night.
In a statement, the German federal prosecutor’s office alleged in August he had procured an automatic rifle, eight Glock pistols and more than 600 pieces of ammunition in Germany.
It’s claimed the weapons were then handed to Wael FM, another suspected member of the Palestinian armed group Hamas, in Berlin.
Wael FM was arrested with the items on 1 October along with two other men named as Adeb Al G and Ahmad I.
Police officer – file image. Pic: iStock
The men, whose full names have not been released due to German privacy laws, were charged with preparing a serious act of violence endangering the German state and being members of a foreign terrorist organisation.
Authorities believe that the group had been gathering supplies since the summer.
“The weapons were intended for use by Hamas in assassination attacks on Israeli or Jewish institutions in Germany,” the federal prosecutor’s office said in a statement at the time.
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A source suggested that the first three men were detained when they met for the weapons handover.
The arrests came a day before Yom Kippur, the holiest day of the Jewish calendar.
Hamas – which is considered a terrorist organisation by the EU – previously denied any connection to the men and said the allegations against it were “baseless”.
Another alleged member of the group, Mohammed A, was arrested on 3 November in London at the request of German police.
He’s accused of taking five handguns and ammunition from Abed Al G and transporting them to Vienna where they were stored.
This morning Danish Police searched premises linked to Borhan El-K and another suspect in and around Copenhagen following Mr El-K’s arrest on Tuesday.
He was due to appear before a judge today.
In February, four suspected Hamas members went on trial in Berlin accused of plotting attacks on Jewish sites in Europe.
Hackers working for the Chinese military and government have been probing Australia’s key infrastructure and telecoms network, warns spy chief.
Mike Burgess, director-general of security for the Australian Security Intelligence Organisation, warned Australians could have their water and electricity supplies cut off as well as extensive banking trouble if hackers managed to cause widespread telecoms disruption.
“Foreign governments have elite teams investigating these possibilities right now,” Mr Burgess insisted.
However, China‘s foreign ministry accused Burgess’s statement of spreading false narratives.
Pic: Reuters
The warning demonstrates the difficulty faced by Australian prime minister Anthony Albanese in trying to keep China close economically while trying to mitigate security concerns.
Burgess said espionage was estimated to have cost the country A$12.5bn (£6.2bn) last year, including billions in trade secrets and intellectual property.
In particular, he highlighted the activities of the Chinese hacking groups Salt Typhoon and Volt Typhoon.
He highlighted how Salt Typhoon had previously penetrated US telecoms systems intending to disrupt operations and pre-position for potential sabotage.
Burgess also warned that Australian companies could be crippled as trade competitors or that elections could be affected.
Chinese officials made complaints to the Australian government and private sector about ASIO whenever he spoke
publicly about China, Burgess said during a speech last week. “It won’t stop my resolve,” he said.
Not the first time alarms have been raised
Concerns were raised in Canberra in February after Chinese warships conducted live-fire drills with minimal warning in the Tasman Sea.
Australian authorities only heard about the drills when a commercial pilot for Virgin Australia notified Airservices Australia.
Chinese frigate Hengyang, one of three vessels involved in the circumnavigation of Australia. Pic: Australian Defense Force /AP
The drills resulted in 49 flights having to change their path.
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