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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 2514 times Last modified on Wednesday, 14 March 2018 20:47

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