Student loans chief in tax row
The Treasury is to review the tax affairs of top civil servants after it emerged the head of the Student Loans Company (SLC) is paid via a company without tax being deducted.
SLC chief executive Ed Lester has his £182,000 salary paid gross to his private service company, potentially saving him tens of thousands of pounds in tax.
The arrangement, entered into in 2010, was disclosed in a HM Revenue and Customs (HMRC) letter obtained under the Freedom of Information Act by Exaro News and BBC Newsnight.
It is embarrassing for the coalition Government, which is committed to tackling tax avoidance.
Chief Secretary to the Treasury Danny Alexander was said to be unaware of the arrangement although he was required to sign off Mr Lester's pay deal in common with all public sector salaries of more than £142,500.
He said: "I have asked Treasury officials to urgently review the appropriateness of allowing public sector appointees to be paid through an agency by a personal service company.
"I have also written to my cabinet colleagues asking them to carry out an urgent internal audit to ensure that all senior consultancy appointments provide value for money.
"As I have said before, I believe everybody should pay the right tax at the right time and that is why I've taken this action."
A source said Mr Alexander, one of the most senior Liberal Democrats in the Government, instinctively felt this kind of arrangement was not appropriate in the public sector and strongly believed that tax avoidance was "wrong".
Tory backbencher Richard Bacon, a member of the Commons Public Accounts Committee, said he was "concerned" that HMRC had approved the arrangement.