18 February 2012

Is Tory Hammersmith & Fulham Council engaged in tax dodging? The three questions they must answer.

Today’s papers (see below) carry the shocking news that Hammersmith & Fulham's Conservative-controlled council may be breaching Inland Revenue tax rules in the way it employs consultants.

The Tory council has apparently engaged two sets of accountants from Deloitte and PwC to undertake two separate investigations into whether or not the council is operating within tax laws.

Hammersmith Tories claim to run Britain's most transparent council. So they should have no problem with these three questions:

  1. Will they publish the terms of reference given to Deloitte and PwC so that local residents can assure themselves that the accountants were asked to look at the right things?
  2. Will they publish the Deloitte and PwC reports in full (with names redacted if necessary to ensure confidentiality)? 
  3. If it is shown that the council did break tax rules, will any Tory councillors' heads roll?

Today's Guardian says:
At Hammersmith and Fulham, in west London, council leaders have brought in Deloittes and PWC to see if it has breached Inland Revenue rules by employing consultants.
Deloittes said its audit of "personal service companies identified serious weaknesses in both the use and sourcing of consultants by the council".
It is alleged that many "consultants" at the high end of earnings are former local government employees who have "retired".

Today's Financial Times adds:
A London council has hired investigators to examine whether 30 self-employed consultants have broken tax rules…
A Hammersmith official told the Financial Times that it had hired Deloitte to examine “mid to low-income” staff rather than directors. The move last week follows a separate investigation last year which found “significant problems” in relation to self-employed contractors at the council.” 

This follows further coverage in the most recent Private Eye of the shocking tale of Nick Johnson, which this blog has covered ad nauseum. The Eye's website carries only the headline HAMMERSMITH & FULHAM: How paying top staff as consultants rather than employees could attract the attention of the tax man but The Bureau of Investigative Journalism gives a detailed report of the Eye's piece:

Private Eye provides further examples of tax avoidance ‘in the upper echelons of local government’....
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.

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