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Wednesday, 14 March 2018 11:00

Tax Avoidance by Some Academy Leaders

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I suspect that school teachers, who are employees of schools or Academy Trusts aren’t usually in the business of tax avoidance. As a result the following, relating to one of the highest paid leaders of a Kent Academy Trust in the county, caught my eye.

The leader in question has arranged his contributions to the Teachers’ Pension Scheme to be paid in blocks of five months in the scheme, then withdraw for five months, then renew, the pattern to be replicated indefinitely. I am not privy to the rationale for this, but the tax consultant who advised senior leaders of the trust, at cost to the Trust itself, clearly considers this advantageous.

Whilst he is assured this is legal, as to the moral use of the Teachers’ Pension Scheme in a way it is clearly not intended, I leave it to others to judge.

I also wonder how the teachers in the Trust view his actions. Teachers in state schools in England have been subject to a cap on annual pay increases, initially of 0% and then 1%, which has been in place since 2010. There are no tax reduction arrangements for those on the front line, as the gap between their salaries and those of their leaders gets ever wider year on year, as my previous article shows. This manipulation of tax schemes not available to the classroom teacher,  increases the gap even more.

Of course we have the unsavoury parallel of University Vice-Chancellors on exorbitant pay scales featured highly in the media, but in these cases they are absorbing a far lower proportion of the institution budgets. My previous article about school leaders on high salaries identifies a number of individuals taking large sums of money from their Academy Trusts.

In this case, the Trust approached a Wealth & Pensions Adviser and paid him a considerable fee out of Trust funds. They then wrote to senior staff early in 2016 as follows:

'Given the changes to pension legislation that are coming into force in April this year and which are targeted at higher earners, the Trust has commissioned an independent specialist in Teachers' Pensions to review the position of a number of its senior staff including yourself'.

Subsequently the leader in question wrote to his finance staff as follows:

'I need to come out of the Teacher Pension Scheme on 1st November 2016 and re enter on April 1st 2017 and continue on that basis indefinitely going forward.

I understand that xxx is content for the Trust's employers contribution to be passported to me minus any on costs that the Trust incurs via NI contributions'.

I understand that this procedure is now in place.

I know that new Teacher Pension schemes are designed to stop the highest paid staff walking away with exorbitant pensions, by means of a ‘LifeTime Allowance’ cap, but in any case the Trust concerned has a further scheme to avoid the highest paid staff incurring financial difficulties, adopting a policy as follows:

‘If an individual decides to withdraw from Teachers' Pensions due to the adverse consequences of the reduced annual and lifetime allowances, the Trust will offer the individual alternative compensation in the form of a retirement allowance. This allowance is made in lieu of the Trust's contribution to Teachers' Pensions and would therefore be withdrawn if the individual decided to rejoin the Scheme in future. This allowance would only be available to the Chief Executive, Executive Headteachers and Head Teachers’.

I have been retired as a headteacher some time, still remembering how, at a meeting of heads in the late 1980s, we had a discussion on whether we as the highest paid members of staff, should diminish the school budget by charging travel expenses. The consensus was no. Clearly, I come from a different age, and now some Trust leaders appear to be happy to milk the system for all they can get out of it, with exorbitant salaries, personalised pension schemes, tax avoidance arrangements and lavish perks.

I also wonder how many other academy leaders also benefit from such schemes.

If, as a browser, you think my analysis or conclusions from of the above information, please let me know.

Read 2162 times Last modified on Wednesday, 14 March 2018 20:47


  • Comment Link Sunday, 18 March 2018 11:23 posted by Stephen Carter

    Do you mean they are doing something dishonest? If so I can’t see how. On £150k with employee and employer contributions you would probably exceed the £10k mark in three months and then have a very hefty tax charge. I certainly wouldn’t pay into a registered scheme if it was me. I see what is happening here as the effect of sensible action on the part of HMRC to curb high earners pouring money into registered schemes and avoiding tax on income. PETER: I have made it clear I do not have a view on whether this is dishonest. What is also clear is that there is considerable unhappiness amongst the foot soldiers of education on their 1% salary cap that some leaders who ought to share the pressures they are under, appear simply to be in it for all they can get. It is difficult to describe the damage that such selfishness is causing to school morale.

  • Comment Link Sunday, 18 March 2018 09:54 posted by Stephen Carter

    I think there are two issues here. Firstly is the salary for these people correct and secondly are they doing something dishonest with their tax arrangements. Tax and pensions are a minefield. However if you are earning over £150k per year you are only allowed to put £10k per year into a registered pension scheme. Beneath that income point the level is set at £40k. These rules came into force in 2016 and might explain these arrangements. PETER: They are. Thank you for this.

  • Comment Link Saturday, 17 March 2018 19:18 posted by Richard Jenkins

    Wouldn't it be great if these overpaid pseudo businessmen (mainly men) gave up their priority to extract as much of the Trust's income for themselves as possible and focused on the job in hand. Presumably none were at the current Association of School and College Leaders Conference, which is highly focused on funding problems. If you work in one of these academies, remember that the excessive money going to leaders has to come from someone else! If you were there and the cap fits, hold your heads in shame.

  • Comment Link Friday, 16 March 2018 20:11 posted by Front Line Teacher

    Unbelievable. These actions should clearly offend the vast majority of teachers on their 0%, 1% pay rises over the past eight years when compared with the greed at the top of the pile. Exorbitant pay up to £200,000 p.a; 10% annual pay rises; tax manipulation; perks including the infamous BMWs.

  • Comment Link Thursday, 15 March 2018 16:36 posted by Deputy Principal, Kent MAT

    You don't say which academy Trust it is, so are you are damning us all. Why? Myself and colleagues in another large Trust are appalled at this behaviour. We believe we are paid a fair whack (We don't feature in your list of high payers)and have never considered such actions, although we have been approached several; times by a tax reduction adviser specialising in headteachers' salaries. We consider his proposals are on the wrong side of tax avoidance. PETER: The fact that there are such specialists suggests the practice may be widespread. Why don't you identify your Trust and remove you from doubt?

  • Comment Link Thursday, 15 March 2018 11:47 posted by Gina Millar

    Peter I am surprised to see John Fassenfelt writing on this site with respect to this matter. It would appear from Companies House records that John Fassenfelt was the Chair of Directors of a large Kent Trust during the time that these records relate. I presume that if this is the Trust in question that John Fassenfelt would have approved both the pension arrangements and the salary of senior leaders. Either there are two John Fassenfelt's or these are the comments of a bitter and vengeful man who happily negates his responsibility for his actions at the time. Whether the pension arrangements or salary level are right is a matter that everyone is entitled to express a view - however blatant hypocrisy is not appropriate. Perhaps if John Fassenfelt is the source of this article the Trust in question should take the necessary steps to curb this potential breech of trust and defamation. PETER: I am not sure what your obsession as an accountant is with this issue. It certainly reads as if you may be connected with the Trust you suspect. This may explain your approach. There is no rank hypocrisy in the actions of my source, who has sent genuine documents, being seriously concerned about a number of actions of the Trust, and is prepared to go public if necessary, with more details, to explain the actions. Every other comment for publication received so far, and several private emails reflect those concerns, so having given you even more space on a website primarily concerned with education issues, I am afraid I shall not publish any more such contributions. To clarify, this article is merely an extension of my previous one on exorbitant Trust leaders salaries, which so enraged my source, amongst many others.

  • Comment Link Thursday, 15 March 2018 09:55 posted by John Fassenfelt

    What an immoral fiddle. In that position and earning £150,000 + other benefits you would think they would be satisfied and concentrate on keeping their workforce happy. I hope this goes viral and staff realise just what is going on at the top of their Trust.

  • Comment Link Wednesday, 14 March 2018 21:34 posted by Another Kent Head

    I'm with A Kent HT (below). I run a large non-selective secondary school in a rundown area of the county, on a salary of £80,000. The school has difficult finances just one reason why I would not seek to make more out of it. I came into teaching to educate and care for children, and hopefully will never lose that idealism.I work all the hours God provides, and would never think of calling in an accountant to manipulate the TPS. I am close to cancelling my (free) subscription to kentadvice, precisely because you do such a great job exposing the greedy parasites, and its too depressing. These are out for all they can milk from the system and to hell with the consequences

  • Comment Link Wednesday, 14 March 2018 20:46 posted by Teacher off at Easter; I have had enough

    Interesting comments from an accountant below. Has she any idea what the greed of school leaders is doing to the rapidly shrinking cohesion of too many Academy Trusts. If not, I suggest she does some reading, or even talks with 'ordinary' teachers. There is real anger out there from those not too tired with the incessant demands from on high. However, they won't provide her with any income, so no need.

  • Comment Link Wednesday, 14 March 2018 20:45 posted by A Kent HT

    As a Headteacher, I object to the plural in your title. My reading of the article suggests this is one individual who needs to answer for their own actions.

    Many of us never claim expenses and do additional work on top of our duties to bring extra funds into our schools.

    Please don't think all Headteachers are like this. I am amazed this person has the time to consider their pension /tax affairs in such detail - I certainly don't ! PETER: An unqualified and sincere apology. Title changed! I do not know how I could have done it as I have great respect for the large majority of heads in the county. My remarks apply to a small proportion of academy leaders, perhaps identified in my previous article. The documents I have quoted relate to a number of individuals in one Trust; but elsewhere suggest this may be more common, as pointed out by the comment from the accountant below.

  • Comment Link Wednesday, 14 March 2018 20:38 posted by Ashamed to be Swale Teachers

    We are teachers in a Swale Academy school and are very grateful that someone recognises the gravy train being ridden at such Trusts at the expense of staff and students. Will you also investigate the high rate of turnover of head teachers. Most recently the Swale HT who wrote to parents last month saying he was going in two days time. His enthusiasm about the Trust that dropped him mid term suggests yet another healthy pay off. PETER: Please note: this is a resubmitted comment with the correctly chosen name of the contributors

  • Comment Link Wednesday, 14 March 2018 20:09 posted by Gina Millar

    Peter. I think you've missed my point. You claim that this is tax avoidance which it clearly isn't. If it was inappropriate then I'm sure that TPS would ban the practice. If individuals want to maximise the benefit of their contributions whilst still paying full tax at their marginal rate then I fail to see the problem. The changes to the scheme in 2015 make the value of pensions to head teachers significantly worse in real terms than for head teachers who retired prior to that point. Incidentally as an accountant I see this practice being used by doctors and even senior policemen. I think it might be more common than you think. PETER: I think you need to look at it from the position of the ordinary teacher who has had their pay capped for seven years, whilst some school leaders have seen theirs go up by over 10% a year i that time. They see these highly paid officials, in a profession where government is clearly trying and failing to peg salaries to £150,000, avoiding paying tax by means not available to them, and using the . Schools used to be communities, not perhaps a term familiar to accountants, with a sense of all serving the same cause. This unhappiness with the rapidly widening divisions in financial reward is surely another reason why an unprecedented number of teachers are leaving the profession. I am afraid we shall have to leave this correspondence here. You have made your point.

  • Comment Link Wednesday, 14 March 2018 18:52 posted by Gina Millar

    Peter I am not sure how this constitutes tax avoidance? Surely it is up to individuals to chose when they want to pay into a pension and when they do not wish to. If this is tax avoidance then so is paying into an ISA. I am sure that the individuals here are paying full tax at their marginal rate. PETER: I think my concern centres around what I consider mis-use of the TPS diving in and out of it at five month intervals, which surely it was never intended for. This must produce a considerable benefit to make it worthwhile. Surely, very different from an ISA!

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