Hospitals and councils in Norfolk and Suffolk pay top-earners through schemes criticised for generating ‘suspicions of complicity in tax avoidance’

Monday, January 7, 2013
3.00 PM

Top-earning public sector chiefs in Norfolk and Suffolk are being paid through schemes which generate “suspicions of complicity in tax avoidance”.

An EDP investigation shows 79 people earning more than £220 a day – the equivalent of £57,000 a year – were paid off-payroll by hospitals and councils in the two counties in the last two years.

This practice was criticised by the Public Accounts Committee in relation to the BBC for generating “suspicions of complicity in tax avoidance’’.

But months after NHS trusts were warned to stop the practice, managers continue to be paid off the books.

Under the scheme, the individuals are engaged as self-employed contractors. Tax is not taken from the contractors’ fees when they are paid. Instead the contractor is responsible for declaring their tax later on. And they are able to pay themselves through dividends to reduce their own tax bill.

Hospitals were told in August by Sir David Nicholson, NHS chief executive in England, to stop paying managers off the books.

He said board members and senior officials contracted for more than six months should be paid in the normal way.

But the EDP’s investigation, made using the Freedom of Information Act, shows that despite the warning, highly paid individuals are still being paid through the arrangements, and in some cases no reassurances are being sought by the organisations that they are paying tax.

At West Suffolk Hospital Trust where 35 people have been paid off-payroll in two years, 21 had not declared to the hospital that they were responsible for their own tax arrangements. And 12 were still being paid off the books months after Sir David Nicholson’s warning.

And at Norfolk and Suffolk Foundation Trust three people contracted since 2010, are still being paid off-payroll.

Health minister and North Norfolk MP Norman Lamb said: “Sir David Nicholson sent out a very clear message back in the summer and trusts need to take that very seriously and act upon it. There are occasions when it makes sense to bring somebody in on a short term basis, but the impression one gets is of an ongoing arrangement in too many cases where the appropriate relationship should be one of employer and employee paying tax in the same way as anybody else.”

At Waveney Council one highly-paid worker was paid off-payroll from April 2009 to June last year, while at Suffolk County Council a director was also paid this way for more than two years.

One person at West Suffolk Hospital Trust has been paid off the books for 10 years with no declaration sought that they were responsible for their own tax. Jan Bloomfield, executive director of workforce and communications, said: “There are occasions when we may need to bring in people outside of our normal payroll. We are currently looking at ways in which our processes for seeking assurances regarding tax and National Insurance payments could be improved.”

The JPH is also reviewing how it seeks assurances.

At the Norfolk and Suffolk Foundation Trust eight individuals were paid off books, but the trust said it was confident they paid the right amount of tax.

NHS Suffolk said it had not checked whether their 11 contractors paid off payroll were paying tax, but said they had requested copies of their professional indemnity insurance which they said “implied” they considered themselves to be self-employed.

South Norfolk Council paid 14 people off payroll, but said it was the responsibility of the contractors to make sure the right tax was paid.

Suffolk County Council said it was not responsible for the tax affairs of the interim director. But Waveney Council, where eight people have been paid off the books in the last two years, said it did seek assurances that the right amount of tax was being paid.

There is no suggestion that any of these individuals did not pay the correct amount of tax.