MPs should not use personal companies to avoid tax, says Starmer

Keir Starmer has indicated he would bar MPs from using personal companies to reduce the tax they pay on second jobs, saying he would stop any Labour MPs from doing so straight away.

Peter Walker 

Starmer’s comments came after it emerged that at least 10 MPs, one of them Labour, had channelled income from additional work through their own companies, which is legal but reduces the amount of tax they need to pay.

An investigation by the Times found the MPs were paid in total about £1m via such arrangements. Sir Alastair Graham, former chairman of the committee on standards in public life, told the paper this “should be stopped as soon as possible”.

“MPs should not be avoiding paying the taxes they’ve decided that the rest of the population should pay,” Graham said.

Asked on Monday if any Labour MPs found to have put any outside earnings through a personal company should stop doing so, Keir Starmer said they should.

“The answer to the question is very easy: yes,” he said during a media Q&A following a speech by the Labour leader to the CBI annual conference in Birmingham.

“The whole point of the registration and declaration scheme is that anybody can see transparently what is happening in relation to any income or donations.”

Instead of paying income tax at a rate of up to 45%, the personal company will pay corporation tax at 19%. Further tax is then due when owners draw money out of the company, either via income tax or a tax on dividends, the higher rate of which is 32.5%.

Starmer has already said that in power Labour would prevent MPs from carrying out any outside work, beyond a few exceptions for public interest reasons, such as MPs who are police or army reservists, or medical staff.

The Labour leader, who was director of public prosecutions before entering parliament, has in the past given paid legal advice while an MP. Allies of Jeremy Corbyn have said Starmer was instructed in 2017 to not take a second job with law firm Mishcon de Reya. Starmer’s spokesman insisted Starmer turned it down himself.

The investigation over tax minimisation comes less than a week after the Commons backed a plan to limit MPs’ scope to take on second jobs. While the plans are yet to be worked out, the focus is likely to be on political consulting, and on jobs which take up too much of an MP’s time.

The vote, which saw the government amend a Labour motion, followed days of outcry after ministers decided to change the system by which MPs are disciplined to protect then-Tory backbencher Owen Paterson from punishment for what an official investigation said was a serious breach of lobbying rules.

The government U-turned the next day, and Paterson resigned from parliament.