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Ed Lester to resign as head of Student Loans Company

SLC chief executive steps down following furore over working ‘off payroll’

We were alarmed at reports that [HMRC] had advised that the use of… companies to avoid tax could ever be appropriate for full-time employees of public bodies

Margaret Hodge, chairwoman, House of Commons public accounts committee

Ed Lester is to stand down as chief executive of the Student Loans Company, Exaro can reveal. It follows the furore over how the senior public official was paid through his personal-service company – with no tax deducted at source.

A spokeswoman for the Student Loans Company (SLC) confirmed that Lester has decided to leave when his contract runs out next January.

The SLC is advertising for a new chief executive on what it describes as an “attractive salary”. The spokeswoman said: “It will be at the same salary as it is now.” Lester is paid £182,000 a year, plus expenses.

The UK government-owned body has already drawn up an advertisement for the position, saying: “The SLC is seeking a visionary and experienced leader as its next chief executive. Politically adept, and an outstanding manager and communicator, this person will bring a successful track-record of leadership in a complex customer-facing environment.”

The spokeswoman said that Lester did not want to comment on his decision to leave the SLC. According to the SLC, Lester’s decision is unrelated to his tax affairs.

On Wednesday, the chief secretary to the Treasury, Danny Alexander, thanked Exaro in Parliament for exposing the scandal of civil servants being paid ‘off payroll’.

He was announcing to MPs the results of a review by the UK Treasury into the practice, showing that 2,400 senior civil servants were avoiding millions of pounds in tax by working in this way. More than 20 senior public officials have worked ‘off payroll’ and avoided paying tax at source for more than ten years.

Alexander ordered the review immediately after an investigation by Exaro, together with BBC2’s Newsnight, revealed in February that the SLC was paying Lester without deducting tax or employee’s national insurance under concessions granted by HM Revenue & Customs, described in Whitehall memo as a “tax efficient” arrangement.

The arrangement allowed Lester to choose how much income he would draw from his personal-service company, and so how much tax he would pay. The SLC also avoided paying employer’s national insurance.

Civil servants can save themselves tens of thousands of pounds a year in tax by routing their pay through personal-service companies. One tax specialist calculated that Lester was able to save more than £26,000 a year in tax.

The SLC hastily hired Lester in May 2010 following the fiasco the previous autumn that led to 241,000 students not receiving their loan payments on time.

He was appointed as interim chief executive until January 2011, when he was confirmed in “permanent” post with a further two-year contract.

But Lester was forced to go on the SLC payroll, dated back to the day when Exaro broke the story. He later closed down his personal-service company.

In addition, two senior officials at the Office for Nuclear Regulation who were paid ‘off payroll’, Paul Brown and Jon Seddon, had their contracts terminated.

Lester’s departure comes as Margaret Hodge, chairwoman of the House of Commons public accounts committee, criticised how HM Revenue & Customs (HMRC) allowed people with personal-service companies to hold full-time jobs in government.

She said: “We were alarmed at reports that [HMRC] had advised that the use of [personal-service] companies to avoid tax could ever be appropriate for full-time employees of public bodies.” It “must have a clear and consistent approach to providing advice on such matters.”

She warned: “We expect to return to this issue once the review is concluded.”

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