Skip to main content

MAT failed to pay tax on CEO's pay

Trust didn't deduct tax and national insurance from £145,006 of extra payments made to chief executive's service company

Education for the 21st Century, EFSA, income tax, national insurance, financial notice to improve, related party transactions, investigation

Trust didn't deduct tax and national insurance from £145,006 of extra payments made to chief executive's service company

An academy trust could be referred to Her Majesty’s Revenue and Customs after an investigation found that it failed to pay tax and national insurance on payments to its chief executive.

The Education for the 21st Century trust runs eight schools in Kent and Bromley, including one free school, Eden Park High.

The Education and Skills Funding Agency visited the trust in May after receiving allegations about off-payroll payments.

Its investigation report, published today, says the trust did not deduct tax and national insurance from a total of £145,006 of additional payments made to Paul Murphy’s personal service company for his duties as CEO.

The investigation report describes these payments as “over and above his headteacher salary, for the additional work undertaken as the CEO”. The payments were invoiced over a four-year period, from September 2014 to August 2018.

Treasury rules say that most senior staff should be on payroll unless there are exceptional temporary circumstance, lasting less than six months.

The investigation also found that the academy trust failed to declare related-party transactions in its 2015-16 financial accounts.

The ESFA has recommended that the trust be referred to HMRC, because “tax and national insurance contributions have not been deducted from the additional payments”.

Trust hit by financial notice

The ESFA today published a financial notice to improve to Education for the 21st Century, stripping it of a series of financial powers.

It also requires the trust to “ensure that immediate arrangements are put in place to secure a formal written repayment agreement in respect of monies paid to HMRC on behalf of the former CEO”.

In a letter to the trust’s acting chair of trustees, Mike Pettifer, the ESFA’s director, Academies and Maintained Schools Directorate, says: “I recognise the cooperation and discussions that have taken place between the trust and officials. However, my concerns remain in relation to governance and financial oversight at the trust and we need a framework in place to monitor and secure further improvements.”

The notice demands a fully independent review of the trust’s governance arrangements, and an independent review of financial management and internal controls.

According to documents lodged with Companies House, Mr Murphy’s role as a director of the academy trust was terminated in June 2018.

A spokesperson for Education for the 21st Century said: “We are proud of the excellent education we deliver to over 6,000 pupils and students in our schools.

"All our schools have been inspected by Ofsted and have been rated 'good' or better.

“We accept that some of our processes and systems centrally have not kept pace with our growth and we are working closely with the regional schools commissioner’s office and the ESFA to strengthen these areas as quickly as possible.

"We have already appointed a new acting chief executive officer, and our actions will also include bringing in some new trustees to join the existing trustees, all who have excellent experience and expertise, so that our oversight and governance is as strong as the education we deliver every day.”

Log in or register for FREE to continue reading.

It only takes a moment and you'll get access to more news, plus courses, jobs and teaching resources tailored to you