Town halls face top salary tax probe as Government closes loophole

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COUNCILS have been ordered to reveal whether any top bosses may be avoiding tax on their earnings amid deepening concern over pay deals for senior Whitehall posts.

David Bott, a top boss at the Technology Strategy Board, is the latest mandarin to be told he will now have his tax deducted “at source” after it emerged that he was receiving £235,000 a year through a limited company, a route that can lead to tax savings.

With the Treasury ordering a cross-Whitehall review of similar deals, Local Government Secretary Eric Pickles wants to ensure the arrangements have not spread to town halls as well.

New guidance ordering councils to reveal such arrangements also spells out a requirement for councillors to vote on pay deals worth more than £100,000 and publicly justify big bonuses or pay rises.

Mr Pickles said: “Opening up the pay deals of top Town Hall jobs to public scrutiny will mean taxpayers know with certainty their interests are being protected.

“Local people have a right to know whether any Town Halls allow tax arrangements that could short change the public purse; whether bumper bonuses are being awarded to poorly performing workers; or whether pay is being hiked up for execs who’ve boomeranged from post to post.”

Concerns about Whitehall deals were first raised last month when it emerged a salary deal had been agreed for Ed Lester, the chief executive of the Student Loans Company, which allowed him to be paid through a limited company, a method allowing tax bills to be reduced.

Earlier this week it emerged salaries totalling more than £4m for 25 Whitehall “contractors” were paid through limited companies, and yesterday the Department for Business, Innovation and Skills said Mr Bott would now have National Insurance and income tax deducted from his earnings at source after it was revealed he had been paid more than £1m by the quango since he started working for it in 2007.

The department said Mr Bott had been offered the role as a contractor, and the current contract expires in July.