The ‘consultancy tax avoidance wheeze’

Hammersmith and Fulham council – choosing taxis over taxes?

Private Eye provides further examples of tax avoidance ‘in the upper echelons of local government’, following last week’s revelations that Ed Lester, chief executive of the Student Loans Company, saved approximately £40,000 in tax liability by his government-approved engagement as a ‘consultant’, rather than employee.

High on the list is Nick Johnson, of Hammersmith and Fulham council, says the Eye. In November 2007, Johnson retired from his position as chief executive of Bexley council due to ill health, following which he began receiving a local government pension (totalling £50,000 per year, according to the Daily Mail).

Just four months later, in April 2008, Johnson was taken on by Hammersmith and Fulham council, on a salary of more than £1,000 per day. Ordinarily, Johnson would have had to relinquish his lucrative pension. However, says the Eye, because Johnson was employed through his company – ‘Davies Johnson Ltd’ – he was able to ‘get round the letter, if not the spirit of such regulations’.

After an internal review concluded that, in paying Johnson this way, the council had been operating outside UK tax laws, ‘Johnson cannily took out insurance to indemnify himself against any action from HMRC’, alleges the Eye.

Meanwhile, says the Eye, seemingly undeterred by the internal review, Hammersmith and Fulham have also recently instructed Johnson’s company to ‘supply’ him as a consultant on a plan to demolish housing estates in Earl’s Court. ‘“Davies Johnson Ltd” will be paid £71,710 for 101 days’ work,’ the Eye reveals.

Hammersmith and Fulham is not the only council under the spotlight. The Eye also reveals that Isle of Wight ‘director of resources’ Dave Burbage is paid £155,000 per year through his company, protecting the majority of Burbage’s £80,000 a year pension relating to his previous position at Newham Council.

The full story is featured in the February 10 – February 23 issue of Private Eye.