Westminster Accounts: Lib Dem leader and ex-cabinet minister among MPs ‘avoiding taxes’ on second jobs

Published

3 years ago

January 12, 2023

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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.

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.

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”.

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.

‘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

At least 12 killed after suicide bombing in Pakistan

Published

12 hours ago

November 11, 2025

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At least 12 killed after suicide bombing in Pakistan

At least 12 people have been killed in a suicide bombing outside the gates of a court in Pakistan’s capital of Islamabad, the country’s interior minister has said.

At least 27 other people were also wounded after the bomber detonated his explosives next to a police car.

Interior minister Mohsin Naqvi said the attacker tried to “enter the court premises but, failing to do so, targeted a police vehicle”.

Mr Naqvi added that authorities are “looking into all aspects” of the attack.

No group immediately claimed responsibility for the explosion, but authorities have recently struggled with a resurgent Pakistani Taliban.

The explosion, which was heard from miles away, occurred at a busy time of day when the area outside the court is typically crowded with hundreds of visitors attending hearings.

More than a dozen badly wounded people were screaming for help as ambulances rushed to the scene.

“People started running in all directions,” said Mohammad Afzal, who claimed he was at the court when he heard the blast.

Pakistani security forces earlier said they foiled an attempt by militants to take cadets hostage at an army-run college overnight, when a suicide car bomber and five other attackers targeted the facility in a northwestern province.

The authorities blamed the Pakistani Taliban, which is separate from but allied with Afghanistan’s Taliban, but the group denied involvement in that attack on Monday evening.

The assault began when a bomber attempted to storm the cadet college in Wana, a city in Khyber Pakhtunkhwa province near the Afghan border.

The area had, until recent years, served as a base for the Pakistani Taliban, al Qaeda and other foreign militants.

According to local police chief Alamgir Mahsud, two of the militants were quickly killed by troops while three others managed to enter the compound before being cornered in an administrative block.

The army’s commandos were among the forces conducting a clearance operation, and an intermittent exchange of fire went on into Tuesday, Mr Mahsud said.

Pakistani Prime Minister Shehbaz Sharif denounced both attacks and said those responsible must be brought to justice swiftly.

“We will ensure the perpetrators are apprehended and held accountable,” he said.

Mr Sharif described attacks on unarmed civilians as “reprehensible”, adding: “We will not allow the blood of innocent Pakistanis to go to waste.”

World

At least eight people killed in car explosion in New Delhi, police say

Published

1 day ago

November 10, 2025

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At least eight people killed in car explosion in New Delhi, police say

At least eight people have been killed and at least 19 others injured after a car exploded in New Delhi, say Indian police.

The blast, which triggered a fire that damaged several vehicles parked nearby, happened at the gates of the metro station at the Red Fort, a former Mughal palace and a busy tourist spot.

New Delhi’s international airport, metro stations and government buildings were put on a high security alert after the explosion, the government said. The cause of the explosion is being investigated.

The city’s police commissioner, Satish Golcha, said it happened a few minutes before 7pm.

“A slow-moving vehicle stopped at a red light. An explosion happened in that vehicle, and due to the explosion,
nearby vehicles were also damaged,” he told reporters.

One resident, who did not give a name, told NDTV: “We heard a big sound, our windows shook.”

Sanjay Tyagi, a Delhi police spokesman, said they were still investigating the cause, while the fire service reported that at least six vehicles and three autorickshaws had caught fire.

Images show the burnt-out remnants of several cars and forensic officers at the scene.

Home minister Amit Shah told local media that a Hyundai i20 car exploded near a traffic signal close to the Red Fort. He said CCTV footage from cameras in the area will form part of the investigation.

“We are exploring all possibilities and will conduct a thorough investigation, taking all possibilities into account,” Shah said. “All options will be investigated immediately, and we will present the results to the public.”

The investigation is being conducted by the National Investigation Agency, India’s federal terror investigating agency, and other agencies.

India’s Prime Minister Narendra Modi offered his condolences to those who have lost their loved ones in the blast.

He posted on X: “May the injured recover at the earliest. Those affected are being assisted by authorities.

“Reviewed the situation with Home Minister Amit Shah Ji and other officials.”

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World

Madagascar’s new president Michael Randrianirina denies coup after taking office following Gen Z uprising

Published

2 days ago

November 10, 2025

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Madagascar's new president Michael Randrianirina denies coup after taking office following Gen Z uprising

A Gen Z uprising has pushed Madagascar’s former leader Andry Rajoelina, not only out of office but out of the country.

In his place is Colonel Michael Randrianirina, who was sworn in as president of the island nation last month after his military unit joined the protesters.

Sky News’ Africa correspondent Yousra Elbagir sits down with the new leader.

The first question I ask Colonel Randrianirina, as he sits in an ornate mahogany chair in his military fatigues, is how it feels to be in the palace as president.

He sighs and sinks deeper into the chair. He looks humbled and struggles to find the words.

“How do I put it?” he says. “I am happy and it is also a great honour to have come to this palace to be able to help and support the Malagasy people in deep poverty.”

As commander of an elite non-combatant military unit, Corps d’Administration des Personnels et des Services de l’Armée de Terre (CAPSAT), the colonel rode a wave of Gen Z protests to the palace. On 11 October, he shared a video on social media instructing officers to disobey shoot-to-kill orders and support the movement.

At least 22 protesters have been killed and more than 100 injured after denouncing the power cuts and water shortages that have come to signify government corruption in the impoverished island nation.

Why did he share the pivotal video?

He says: “I am a military officer but I am also part of the people and I will return to the people. When you feel sorry for what the people are suffering from… they have been poor for so long and wealth has been looted – but you still shoot them and kill them. That was not why I entered the military of Madagascar, to kill people.”

Soon after his speech, soldiers allowed the young protesters rejecting then president Andry Rajoelina to occupy Place du 13 Mai Square on Independence Avenue in the heart of Antananarivo, the island nation’s capital.

Colonel Randrianirina paraded through a crowd and addressed them from the hatch of an armoured vehicle. “The president of the nation has to leave… If that does not happen,” he threatened, “we will see”.

After Mr Rajoelina fled Madagascar on 13 October, the National Assembly voted to impeach him for “desertion of duty”. Three days later, Colonel Randrianirina stood in fatigues in front of the palace. With officers by his side, he announced their seizure of power and the dissolution of the constitution and all government institutions outside of the National Assembly.

Shortly after, the African Union suspended Madagascar‘s membership on account of the military takeover.

In the palace as president, he insists that this is not a military coup.

“It is support for the people and the country and for us to not be prone to civil war – between the people – between the military officers and your needs, so you adjust helping to support the people to avoid this.

“We were not conducting any coup at all, it was the president [Rajoelina] himself who decided to leave the country.”

United Nations secretary-general Antonio Guterres condemned “the unconstitutional change of government in Madagascar” and called for “the return to constitutional order and the rule of law,” when reports of a military takeover first circulated on 16 October. The day we met the new president, he had just been congratulated by France’s President Emmanuel Macron.

Colonel Randrianirina is promising elections in 18 to 24 months, after what he calls a “refoundation and recovery” of the country – a process he admits might take a long time.

Observers are concerned that elections will be postponed and the new president will become another strongman, but Gen Z organisers are holding on to faith that this hard-earned outcome is worth it.

‘We were living under a dictatorship’

I asked a group of five young organisers if they have concerns that the president will become another dictator, just like previous Malagasy rulers who ascended to power off the back of a popular uprising. Ousted president Mr Rajoelina came into power after protests in 2009 that also ended in a CAPSAT-supported coup.

University student Ratsirarisoa Nomena told us: “The new president is not a dictator… he is listening to the people and he is validated by the people.

“We as students also validated him – he is not a dictator because the motivation of the army is from the people for the people.

“We were living under dictatorship. There was no freedom of expression and it was very hard to fight for that in Madagascar. We had to face being injured and losing our lives and the lives of our fellow students. Malagasy citizens who fought with us lost their lives too. This is what we went through – to me, we are halfway to victory.”

Their president is aware of their support and does not credit Gen Z alone for his place in the palace.

“Generation Z are part of the reason [I am here] but the full Malagasy people really wanted change at the time we are speaking,” Mr Randrianirina told me. “The Malagasy people have been suffering for so long and deprived of fundamental rights – no access to water supply and electricity, facing insecurity.

“Malagasy people, including the Gen Z, government officials and trade unions really wanted change so it is the whole Malagasy people that supported me to this point.”

Across Africa, young people are showing their disapproval of the old guard.

Gen Z protesters have made their mark in Tanzania, Kenya, Cameroon, Morocco, Mozambique and Nigeria in 2025 alone – denouncing disputed elections and the corruption impacting their futures.

Is the Gen Z coup of Madagascar a warning for old leaders on a young continent?

“I don’t know what to say about the other countries, but I know my own country,” Mr Randrianirina says.

“If tomorrow the people of Madagascar hate me, then I will leave this palace.”