Britain's most senior civil servants are having part of their tax bills paid using public money in an arrangement that leaves them tens of thousands of pounds better off every year.
Sir Jeremy, who is paid £185,000, enjoys the use of a chauffeur-driven Toyota Prius as Britain’s most senior civil servant. Photo: STEVE BACK/REX FEATURES
Whitehall departments are picking up the tax bills for perks such as official
cars, first-class rail travel and rent-free accommodation.
The arrangements, which were described by tax advisers as “highly unusual”,
were made between government departments and the taxman as part of a deal
agreed more than a decade ago.
The effect of the deal is to increase the value of officials’ pay packages by
up to £30,000 a year at the expense of taxpayers.
Those who benefited from the scheme include Sir Jeremy Heywood, the Cabinet
Secretary; Sir David Nicholson, the head of NHS England; and Phillippa
Williamson, the former head of the Serious Fraud Office.
Richard Bacon, a Conservative member of the public accounts committee, said he
was “concerned” that officials are being given tax-free benefits while
members of the public have to pay the taxman for theirs.
In the private sector, the cost of tax on benefits is usually met by the
employee, not the employer.
Mr Bacon said: “Most taxpayers would be surprised to find that this sort of thing is tax-free. These are out of line with what one would expect from the way people in the private sector are treated.
“Taxpayers are already paying a lot for these people, I don’t think they would be expecting to dig into their pocket to pay for the tax on the benefit as well.”
Chas Roy-Chowdhury, head of taxation at the Association of Chartered Certified Accountants, described such arrangements as “very rare”.
“Sometimes private sector employers will pay the tax for senior staff working in hostile environments where they need protection,” he said. “Some companies also do this for their chief executives, but this is certainly not common.” Sir Jeremy, who is paid £185,000, enjoys the use of a chauffeur-driven Toyota Prius as Britain’s most senior civil servant.
He uses the car to travel between Westminster and his town house in Clapham, south London, and for official business.
According to Cabinet Office accounts, the vehicle, including chauffeur, has cost taxpayers £172,100 in the past two years. The figure includes the tax bill for the benefit, which would be an estimated £49,243.
Sir Jeremy has had a leading role in the austerity programme sweeping through Westminster and Whitehall, which has led to hundreds of thousands of public sector workers losing their jobs. Last month he warned that Britain faced at least another four years of austerity.
A spokesman for the Cabinet Office declined to say how frequently Sir Jeremy made use of the car, but said that he shared it with Sir Bob Kerslake, the head of the Civil Service and other officials.
She added: “We are following established HMRC procedure which has been in place for many years.”
Sir David, who is paid £215,000 a year, is another beneficiary of the scheme. Over the past six years he has received £320,303 in benefits, which have included the cost of a rented flat in London, the use of a chauffeured car and first-class train journeys. The figure includes an estimated almost £110,000 in tax paid for by his department.
Sir David’s expenses came under scrutiny earlier this year after it emerged that he had claimed for 41 first-class trips to Birmingham, where his wife and baby daughter live.
Asked by MPs if he was using taxpayer-funded expenses to travel home at the weekend, Sir David said he “agreed with my department in 2010 I would have three working bases — Birmingham, London and Leeds — and my travel to all those places would be paid for to enable me to do all the three jobs”. Sir David is retiring next year after criticism over his role in the Mid Staffordshire hospital scandal and will have a pension pot of more than £2 million.
A Department of Health spokesman said: “Benefits in kind payments are paid to recognise [senior officials’] need to travel to carry out their roles. These payments are in line with HMRC guidance.”
The Ministry of Defence also pays the tax on benefits received by senior staff. Bernard Gray, the chief of defence materiel, receives a £190,000 basic salary plus £31,200 in benefits to cover the cost of a flat in London and work-related travel.
The MoD’s accounts state that it “pays the tax bill that would normally be paid by the individual”, an estimated £9,000 a year. Gen Sir David Richards, the former chief of defence staff, received benefits worth almost £100,000 relating to the cost of his official residence and travel, including an estimated £28,572 tax bill.
A spokesman said that its decision to pay the tax has been “fully endorsed by HMRC”, adding: “There can be no accusations that MoD board members are not paying or avoiding paying the correct amount of tax.”
At the SFO, Miss Williamson claimed £98,946 to commute to London from the Lake District between 2009 and 2012.
The figure included her stay in a hotel and train travel, and was last year criticised by MPs as “astounding”. It includes almost £40,000 in tax.
HMRC claimed that the arrangements were “common practice”, but admitted that only 20,000 of 3.6 million benefit in kind claims were paid for by employers. A spokesman said: “Employers may choose to pay the tax due on the benefit. If so, any such payment will constitute an additional benefit which will also be taxable on the employee.”
Mr Bacon said: “Most taxpayers would be surprised to find that this sort of thing is tax-free. These are out of line with what one would expect from the way people in the private sector are treated.
“Taxpayers are already paying a lot for these people, I don’t think they would be expecting to dig into their pocket to pay for the tax on the benefit as well.”
Chas Roy-Chowdhury, head of taxation at the Association of Chartered Certified Accountants, described such arrangements as “very rare”.
“Sometimes private sector employers will pay the tax for senior staff working in hostile environments where they need protection,” he said. “Some companies also do this for their chief executives, but this is certainly not common.” Sir Jeremy, who is paid £185,000, enjoys the use of a chauffeur-driven Toyota Prius as Britain’s most senior civil servant.
He uses the car to travel between Westminster and his town house in Clapham, south London, and for official business.
According to Cabinet Office accounts, the vehicle, including chauffeur, has cost taxpayers £172,100 in the past two years. The figure includes the tax bill for the benefit, which would be an estimated £49,243.
Sir Jeremy has had a leading role in the austerity programme sweeping through Westminster and Whitehall, which has led to hundreds of thousands of public sector workers losing their jobs. Last month he warned that Britain faced at least another four years of austerity.
A spokesman for the Cabinet Office declined to say how frequently Sir Jeremy made use of the car, but said that he shared it with Sir Bob Kerslake, the head of the Civil Service and other officials.
She added: “We are following established HMRC procedure which has been in place for many years.”
Sir David, who is paid £215,000 a year, is another beneficiary of the scheme. Over the past six years he has received £320,303 in benefits, which have included the cost of a rented flat in London, the use of a chauffeured car and first-class train journeys. The figure includes an estimated almost £110,000 in tax paid for by his department.
Sir David’s expenses came under scrutiny earlier this year after it emerged that he had claimed for 41 first-class trips to Birmingham, where his wife and baby daughter live.
Asked by MPs if he was using taxpayer-funded expenses to travel home at the weekend, Sir David said he “agreed with my department in 2010 I would have three working bases — Birmingham, London and Leeds — and my travel to all those places would be paid for to enable me to do all the three jobs”. Sir David is retiring next year after criticism over his role in the Mid Staffordshire hospital scandal and will have a pension pot of more than £2 million.
A Department of Health spokesman said: “Benefits in kind payments are paid to recognise [senior officials’] need to travel to carry out their roles. These payments are in line with HMRC guidance.”
The Ministry of Defence also pays the tax on benefits received by senior staff. Bernard Gray, the chief of defence materiel, receives a £190,000 basic salary plus £31,200 in benefits to cover the cost of a flat in London and work-related travel.
The MoD’s accounts state that it “pays the tax bill that would normally be paid by the individual”, an estimated £9,000 a year. Gen Sir David Richards, the former chief of defence staff, received benefits worth almost £100,000 relating to the cost of his official residence and travel, including an estimated £28,572 tax bill.
A spokesman said that its decision to pay the tax has been “fully endorsed by HMRC”, adding: “There can be no accusations that MoD board members are not paying or avoiding paying the correct amount of tax.”
At the SFO, Miss Williamson claimed £98,946 to commute to London from the Lake District between 2009 and 2012.
The figure included her stay in a hotel and train travel, and was last year criticised by MPs as “astounding”. It includes almost £40,000 in tax.
HMRC claimed that the arrangements were “common practice”, but admitted that only 20,000 of 3.6 million benefit in kind claims were paid for by employers. A spokesman said: “Employers may choose to pay the tax due on the benefit. If so, any such payment will constitute an additional benefit which will also be taxable on the employee.”
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