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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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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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Babies born with DNA from three people in the UK – to prevent ‘devastating’ illness with no cure

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Babies born with DNA from three people in the UK - to prevent 'devastating' illness with no cure

Eight babies have been born in the UK with DNA from three people following a procedure to eliminate an incurable inherited disease.

It is a major advance for the technique, called mitochondrial donation therapy, designed to prevent a life-limiting, often fatal illness caused by genetic mutations in the structures that generate energy in all our cells.

It is also a test of the UK’s permissive but highly regulated stance on human embryo research that allowed a technique once criticised for creating “three-parent babies” to proceed.

Screen grab taken from handout video of a diagram showing the embryo replacement procedure.
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This image shows the embryo replacement procedure. Pic: PA

The babies, four girls and four boys – two of them identical twins – were all born in the last five years and are healthy, according to research published in the New England Journal of Medicine.

“It’s a great success for these families,” said Sir Doug Turnbull, emeritus professor at the University of Newcastle who helped pioneer the treatment.

“This is a devastating disease with no cure and without this technique, they would not feel that their families were free of mitochondrial disease. This gives them that opportunity.”

Mitochondrial disease affects around one in 5,000 babies born in the UK.

Depending on the number and type of mutations in their mitochondria, the severity and type of disease can vary, but includes neurological, metabolic and developmental disorders.

Only women at high risk of passing on severe disease qualify for the procedure, provided though a specialist facility at Newcastle upon Tyne Hospitals NHS Foundation Trust.

The identities of the seven families and their babies are being withheld, but a mother of one of the baby boys speaking anonymously said: “The emotional burden of mitochondrial disease has been lifted, and in its place is hope, joy, and deep gratitude.”

A diagram showing an embryo o created by mitochondrial donation. Pic: PA
Image:
Pic: PA

How does the technique work?

The procedure involves removing the genetic information from an affected mother’s fertilised embryo before inserting it into one from a healthy female donor, from which the genetic information has been removed.

Crucially, the hundreds of thousands of diseased mitochondria are left behind, leaving the new embryo with healthy ones present in the donor embryo.

Mitochondria contain a tiny amount of their own unique genetic code, so the resulting babies carry DNA from three different people.

But because it represents just 0.02% of our total DNA and has no bearing on genetic traits we inherit from our parents, researchers behind the technique, have never liked the “three-parent” moniker.

However, the technique – whatever you choose to call it – isn’t perfect.

A total of 22 women underwent the procedure but only seven became pregnant, resulting in eight births – a 36% success rate.

Five of the eight babies were born with no trace of disease.

But tests on the other three revealed a small percentage of mutated mitochondria had been carried over during the procedure.

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While they are at levels too low to cause mitochondrial disease, the babies will require careful follow-ups to ensure they continue to develop normally.

“We have designed a study specifically for that purpose,” said Professor Bobby McFarland, who leads the service in Newcastle.

“That’s what is unique about us offering this in Newcastle because there isn’t anywhere else in the world that’s doing this in a regulated way.”

While there’s good reason to expect the children will develop normally, the procedure does take medicine into new territory.

Because mitochondria contain their own genetic code, girls born via the technique – carrying those from the healthy donor – will pass that on to any children they may have in future.

Changing the “germ-line” in such a way has raised ethical concerns.

But for seven new families, and more to follow, the procedure promises to cure a disease that has affected their families for generations.

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Acid attacks rise in UK – with 25% of them in an area that’s home to just 2% of the population

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Acid attacks rise in UK - with 25% of them in an area that's home to just 2% of the population

The number of acid attacks has risen 10% in a year, according to a Freedom of Information request to UK police forces.

Acid Survivors Trust International (ASTI) said its analysis shows 498 physical attacks involving corrosive substances were recorded in 2024 – compared with 454 in the previous year.

According to the charity, the real figure is likely to be even higher because of under-reporting by victims.

In 2023, both Northumbria Police and the Metropolitan Police recorded the highest number of physical attacks – 18% and 16% respectively.

But figures in 2024 showed a significant fall in attacks in London, dropping by 78%, while cases in Northumbria rose substantially.

ASTI executive director Jaf Shah told Sky News that attacks in Northumbria account for almost 25% of the nationwide total – despite making up just 2% of the population.

He explained: “Historically, London has always seen the highest number attacks, which is unsurprising because of the population. But what we’ve seen in the 2024 data is a massive drop in the number of attacks in London to just 16.

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“Whereas in Northumbria we’ve seen a 49% increase to 121 attacks, so there’s a massive disparity in terms of numbers, especially relative to population figures for each of those corresponding areas. So this is obviously a very worrying trend.”

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In July 2024, four men were handed life sentences for ammonia murders

Mr Shah added there was supporting evidence about the type of attacks taking place in the Northumbria force area.

“Professor Francisco Figueiredo, who is head of ophthalmology at Newcastle University … certainly picked up on an increase of young men receiving treatment with corrosive injuries in the eye.

“A lot of the injuries he’s treated are related to the use of ammonia … that’s quite different to some of the attacks we’ve seen in other parts of the UK where sulphuric acid is commonly used.”

West Midlands Police also recorded a significant increase in attacks – rising 82% between 2023 and 2024 – and making up 12% of the UK total.

ASTI states the FOI data reveals acid attacks in the UK are historically associated with male-on-male violence and often linked to gang activity.

Of the 224 physical attacks where gender data was recorded, a third of victims were female, reflecting the increasing use of acid as a weapon of violence against women and girls.

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How Clapham chemical attack in January 2024 unfolded

ASTI also commissioned research, conducted by Frontier Economics, which concluded that the financial impact of all acid attacks in 2024 was more than £31m.

The study estimated that a single attack costs £63,000, consisting of the medical and psychological support victims require and paying for the criminal justice system to deal with perpetrators.

ASTI also told Sky News it was recommending reforms to tackle the “lack of robust checks on sales of corrosives”, especially via online retailers.

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Acid attack ‘devastates lives’

Commander Stephen Clayman, National Police Chiefs’ Council lead for corrosive substances, said an attack “devastates lives and causes physical and psychological damage to victims that can last a lifetime” and officers were committed “to tackle this appalling crime”.

In a statement, he added: “Many corrosive substances are available over the counter at supermarkets and DIY stores.

“It is important that law enforcement and government work closely with retailers themselves, to enhance our intelligence picture, and determine the best ways to keep these products from falling into the hands of people who intend to use them to cause harm.

“Serious crimes such as this should not go unreported and we want victims to feel able to come forward and report these matters to us.”

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Red House: 62 people now say they experienced abuse at children’s home run by a ‘cult’

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Red House: 62 people now say they experienced abuse at children's home run by a 'cult'

“It was like hell on Earth.”

Warning: This article includes references to sexual abuse and suicide that some readers may find distressing.

Colin (not his real name) is one of 19 alleged abuse victims who has come forward following a Sky News investigation into a closed children’s home in Norfolk.

The total number is now 62.

Red House

Numerous people have told us that they experienced physical, emotional and sexual abuse at The Small School at Red House run by a Danish organisation called Tvind, which has been described as a cult.

Colin was taken into care after being a victim of sexual exploitation, but when he arrived at The Red House at 15, his personal, painful history was used against him.

“A couple of the lads grabbed hold of me,” he said. “They’d been told that I was a rent boy before I got there, they wanted to knock me into shape. I contemplated killing myself. I’d never experienced that humiliation.”

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Children were sent to The Red House from all over the country. Some have told Sky News that violent staff broke their fingers, threw them down the stairs and even locked them in rooms with Alsatians.

Red House

Sadly for Colin, his experience of sexual exploitation continued at the home.

“They put these three lads in my room, they squeezed me round my neck and I passed out,” he said. “When I came round they were sexually abusing me. I was screaming and screaming. The next day I ran and I never went back there.”

The home was run by the Tvind School Cooperative of Denmark. A controversial group founded in the late 1960s, they opened around 30 radical schools in Denmark, mostly for disadvantaged children, and two in England. Many have since closed.

Tvind

Inspections by regulatory bodies reveal growing concerns about The Red House. In 1990, the Social Services Inspectorate wrote to directors of local authorities warning them against sending children to the home.

An inspection report made by Norfolk County Council in 1994 shows they were aware of alleged “sexual abuse” and “physical abuse” involving 20 children.

Yet the home continued to operate and three years after that inspection report, Norfolk County Council sent a teenage boy to the Red House.

Red House

“Red House was this black hole where they could just dump people and not worry about them,” he says.

“Whilst I was there I can’t even think of one instance when my social worker turned up to come and check on me.”

He is one of the many alleged victims in the process of suing Norfolk County Council and the local authorities which sent children to the home.

Read more:
The Red House: The children’s home run like a cult
The Danish group behind a children’s home run like a cult

Sky's Alice Porter with Colin

Daniel Lemberger Cooper is representing victims on behalf of Imran Khan and Partners.

“[We] urge Norfolk Council, who are the centre of this and whose geographic area Red House was based, to tell the truth. They were aware very early on … about abuse and allegations of abuse and they failed to act.”

Victims are also being supported by the Shirley Oaks Survivors Association who are urging any more people to come forward.

The home was shut down in 1998. Norfolk Police have done two investigations into allegations of abuse but no one has been charged.

The Red House in Norfolk

Those still working for Tvind in Denmark say they are not associated with the former cooperative.

Norfolk County Council says: “We continue to investigate and respond to those private claims through the appropriate legal channels.

“Our thoughts are with all survivors of abuse but, as there is an ongoing legal claim relating to Red House, we cannot comment further at this time.”

People can contact the Shirley Oaks Survivors Association by visiting: www.smallschoolredhouse.co.uk.

Anyone feeling emotionally distressed or suicidal can call Samaritans for help on 116 123 or email jo@samaritans.org in the UK. In the US, call the Samaritans branch in your area or 1 (800) 273-TALK.

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