An academy trust boss has stepped down after a government investigation found payments totalling £145,006 were made to a company he owned without tax or national insurance deductions.
An Education and Skills Funding Agency report published today found Education for the 21st Century trust had not deducted tax or national insurance from the off-payroll payments made to a company owned by its CEO Paul Murphy.
The payments ran from 2014 and were for Murphy’s duties as chief executive – on top of his salary as headteacher . However the transactions were not declared in the trust’s 2015-16 accounts.
The ESFA also said there was “no record of the specific tasks being undertaken to attract this additional pay”.
The government has recommended an independent referral is made to HMRC and called on the trust to report the outcome of discussions with its accountants over future tax year payments.
A spokesperson for the trust said they “accept some of our processes and systems centrally have not kept pace with our growth” and are “are working closely with the Regional Schools Commissioner’s office and the Education and Skills Funding Agency to strengthen these areas as quickly as possible”.
They added Murphy has stepped down, with a new CEO appointed and new trustees set to join.
The ESFA investigated the Education for the 21st Century, which runs eight schools, in May this year, after receiving allegations in March that off-payroll payments were being made to the CEO’s personal service company.
Senior staff should only be paid off payroll in exceptional temporary circumstances, funding rules states.
Also, as of April last year, trusts have to deduct tax and national insurance from such off-roll payments. Previously it would have been down to Murphy to manage the tax affairs of his company, the ESFA report stated.
A financial notice to improve was also issued to Education for the 21st Century, warning of concerns around weak financial controls and the governance and oversight of financial management by the board.
The trust had “failed to declare related party transactions, meet employee tax liabilities and seek prior approval from the ESFA of a novel, contentious and repercussive transaction,” it said.
The notice requested that Education for the 21st Century complied with a series of recommendations, including providing the ESFA with full minutes and notes of all board meetings from 2017-18 by end of November, commissioning an independent review of current governance arrangements, and preparing an action plan.
It must also arrange an independent review of financial management and internal controls in November, arrange for a Schools Resource Management Advisor to visit the trust to help with financial planning in January 2019 and increase the regularity of all board and sub-committee meetings to twice a term.
The trust was also asked to put immediate arrangements in place to secure a formal written repayment agreement for money paid to HMRC on behalf of the former CEO.
Source: School News
Trust failed to deduct tax from £145k payments to CEO’s company