Leeds City Council staff have been paid through private service companies in a move which would allow them to reduce their income tax burden, claims a councillor.
Coun Alan Lamb (Con, Wetherby) is now demanding action to end the practice, which he claims involves a number of high-ranking council officers that were employed on a temporary basis that continued in some cases for years.
He has tabled a resolution to tomorrow’s (Nnov 14) full council meeting so that the issue can be publicly debated.
It says: “This council notes with strong concern recent examples of senior Leeds City Council staff being paid via private service companies and commits to bringing this practice to an immediate end.”
A personal service company is usually made up of only one employee – the company owner or director – who could draw a salary as little as the minimum wage, which would fall into the lowest income tax band.
The remaining firm profits could then be paid as corporation tax at a lower rate than the income tax band that would have applied had they been paid directly to the director.
Coun Lamb told the YEP: “It is not illegal but in my view it is immoral.”
He added: “One reason for deciding to go for such an arrangement would be to reduce the amount of tax they would have to pay. This would be a two way street, with the council also making savings through reduced national insurance contributions. Of course it is not illegal but all staff should pay their fair share of tax.”
He said that in some cases officers are avoiding high rates of tax while being paid up around £100,000 a year, with one officer in particular being paid this way while earning around £75,000 for three years.
Coun Keith Wakefield, council leader, said: “I agree this practice is not acceptable within our organisation, which is why we took positive action to reduce the number of people being paid this way. By the end of November the number of people being paid this way will have been reduced from five to zero.”
He said at a national level 2,400 people are being paid ‘off payroll’ in the civil service.