The prime minister’s chief of staff is being paid through his lobbying company in a highly unusual arrangement that could allow him to pay less tax.
Mark Fullbrook insists he is not being paid through his company for tax reasons and has obtained no tax benefit from the arrangement. However, he is refusing to explain the agreement that lets him direct government strategy without being directly employed by the government.
Previous holders of the role have been treated like any other special adviser (Spad), appointed on a temporary civil service contract and paid a salary that is made public. Fullbrook is instead a contractor and will receive any payment through Fullbrook Strategies, a private lobbying company he created in April but which he says has suspended commercial activities.
One Whitehall source said it was “unheard of” for a No 10 official of his seniority to be employed in this way although Fullbrook disputed this. It is unclear what the implications of the arrangement are from a financial and transparency perspective.
Between April and June, according to the Office of the Registrar of Consultant Lobbyists, Fullbrook’s company contacted the government on behalf of clients including the Libyan House of Representatives, which is opposed by the West and the UN, an energy provider and a PPE firm linked to a fundamentalist Christian sect.
It announced it had “suspended” its commercial activities earlier this month after Fullbrook was appointed by Liz Truss to be her top aide.
However he is continuing to use it as a vehicle to receive his publicly funded salary. The equivalent post under Boris Johnson carried a salary of £140,000.
The arrangement will lead to questions days after No 10 scrapped the so-called IR35 reforms of previous Conservative governments that were designed to stop people paying themselves via a company to avoid tax.
In 2019, HM Revenue & Customs (HMRC) won a case against BBC presenters who were told to pay back hundreds of thousands of pounds in tax after working via personal service companies when they were employees in all but name.
In 2017 and 2021, the Treasury introduced measures that made employers responsible for determining the tax status of workers who provided their services through a company.
They were required to decide if a person was a freelance contractor, meaning they could pay corporation or dividend tax on any earnings, or whether they were effectively an employee and liable for income tax. Employers who got it wrong were required to pay tax, penalties and interest.
On Friday, Kwasi Kwarteng, the chancellor, said the burden would once again fall on employees to determine their own status, with critics saying the system would become vulnerable to abuse.
Dan Neidle, a tax expert and the founder of Tax Policy Associates, said he could not fathom any reason for Fullbrook’s arrangement. “I don’t understand why someone would do it,” he said. “Before yesterday, responsibility for applying IR35 [rules] — and liability for getting it wrong — would have fallen on the civil service. I’d expect them to take a very conservative view.
“The effect of the budget change is that Fullbrook gets to decide himself. Of course [it is] subject to later HMRC challenge, but it still gives him an ability to take a more aggressive view than the civil service would have permitted.”
Fullbrook is already facing questions after The Sunday Times revealed he had been interviewed by FBI agents in connection with an alleged criminal conspiracy to bribe a US politician and influence the outcome of an election in Puerto Rico.
He has since signed an agreement with US law enforcement and is co-operating as a witness. It is understood that he is not under investigation. He denies any knowledge of the bribe and in a statement says he is “confident” he behaved within the law at all times.
According to the Institute for Government, Spads are appointed as temporary civil servants. They are given contracts and their employment and salary band is published by the Cabinet Office annually. After leaving government they are required to inform the appointments watchdog of any private sector appointments.
A former No 10 insider said some Spads had in the past “topped up” their salaries by receiving extra income from Conservative Party Headquarters as they provided party political, as well as policy, advice.
Edward Lister, previously Johnson’s principal strategic adviser and now Baron Udny-Lister, continued to be paid for consultancy by a property developer while in Downing Street. But the ex-No 10 source also said there was no precedent for Spads being paid for their government work primarily through a consultancy company.
It is unclear whether Fullbrook’s salary will be reported as standard and whether being paid through his company could alter the usual terms of a Spad’s employment in any other way.
A spokesman for Fullbrook said: “This is not an unusual arrangement. It was not put in place for tax purposes and Mr Fullbrook derives no tax benefit from it.”
A government source said: “It is not unusual for a special adviser or civil servant to join government on secondment. Any government employee hired on secondment is subject to the usual special adviser or civil service codes.”