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Before I continue let me make it clear that the above is not
an accusation but a genuine question, and one which I think needs to be
answered urgently.
By now there can be few people who have not heard that Sir Paul Stephenson, the Commissioner of London’s Metropolitan Police force, resigned last night. In his resignation statement Sir Paul said that it was just co-incidence that the man he employed as his £1,000 a day PR advisor (“spin doctor”) was also PR advisor to Champneys, the luxury chain of health spa’s where Sir Paul and Lady Stephenson enjoyed a free five week stay whilst Sir Paul was recovering from major surgery.
Everyone seems to be concentrating on the fact that the said spin doctor (why did Sir Paul even need one?) was one Neil Wallis, former Deputy Editor of the News of the World under Andy Coulson. Wallis was arrested by the Police on Friday as part of the new enquiry into the illegal practices, including phone hacking and blagging, which now appear to have been endemic at the News of the World, and possibly elsewhere.
But there are other questions which so far seem to have been overlooked.
In his resignation statement Sir Paul insisted there had been “no impropriety” about his stay while he recovered from having a benign tumour removed from his leg. I understand that he did record the matter in the Metropolitan Police’s Gift and Hospitality Register. But is that enough? Did he pay tax on the “gift”, indeed should he have paid tax on the £12,000 it is reported was the value of the stay (part of the costs, we are told, was paid for by the Metropolitan Police medical insurance) – did he even consider that he might need to do so?
Of course a lot will depend on how this gift was accounted for by Champneys. Unless the £12,000 was paid to Champneys by Stephen Purdew “a personal friend of Sir Paul” then the gift will have come from the company which owns Champneys. Now Stephen Purdew is referred to as “the owner of Champneys” but there are other shareholders who may not take kindly to their Managing Director, the said Stephen Purdew, giving away their money to the Commissioner of the Metropolitan Police.
Even if Mr Purdew was the 100% owner of Champneys the fact is that the company and its assets, including cash in the bank, are not his to give away at will. This is something that most accountants with clients who own all or most of a company spend time trying to explain. You might own the company but you don’t own its assets. For example, you cannot treat the company bank account as if it were your own. Neither can you use or allow others to use company property or services without proper approval by the board or, in some cases shareholders, and without accounting for this in your accounts and tax returns.
It was his failure to follow these rules which resulted in Conrad Black being sent to jail. He was accused of using company assets for his own personal use.
So unless Stephen Purdew paid the £12,000 to Champneys out of his own taxed income he will need to have accounted for the “gift” somewhere in the company accounts. Such a gift would not be allowed as a proper business expense and so in effect it would be taxable both for Corporation Tax and Value Added Tax (between them adding something like another £5,000 cost to Champneys).
Mind you this pales to insignificance when you consider the past history of Champneys. What is true is that Purdew and his mother control, but don’t totally own, a complex and opaque group of companies most of which appear to be loss making. A few years ago there was a major row when Purdew told the holders of preference shares that there was no money to pay them a dividend. Many of these shareholders were well known celebrities who probably could afford to forego dividends but it begs the question of how, when Champneys claims to be loss making, Purdew appears on the Sunday Times Rich List and Champneys have a multi million pound balance sheet. Presumably somewhere in the group there is a profit being made but perhaps not in the subsidiaries which have external shareholders.
If Purdew hasn’t accounted for this “gift” correctly then there could be charges of tax avoidance and money laundering. Even if Sir Paul Stephenson doesn’t know where the money came from he should be aware that the requirements of UK anti-money laundering legislation – not to mention the Bribery Act which came into effect on the first of this month and which has long been heralded – make it clear that he should make himself aware of such matters.
It isn’t enough to just list the gift in the relevant register and think that’s the end of it. Actually Sir Paul seems to have forgotten that the whole purpose of having these registers is to ensure that proper investigation into gifts and expense claims can be carried out and that the public can take a view as to whether they approve. Listing a gift – even if it “within the rules” – doesn’t mean that it is approved of. This was the point that seems to have eluded Members of Parliament who bleated “we didn’t break any rules” when their expense claims were published. If senior officers at the Metropolitan Police don’t see that then it isn’t surprising the investigation into MPs expenses resulted in very few – mainly those who forged receipts – being charged.
Even if everything was done correctly, approval sought and tax accounted for, there remains the question of whether it was acceptable or not for the Commissioner of the Metropolitan Police to accept such a gift no matter who it came from. The fact that he and his employers thought there was “no impropriety” in him accepting it does not mean that the public would agree. Sir Paul is not poorly paid and the Metropolitan Police insurance, whilst not running to Champneys, would have provided him with more than acceptable rehabilitation.
I have always found it strange that people who hold positions like Sir Paul, as well as MPs and the like, seem to think that there is one law for them and one for the rest of us.
For example, until recently MPs were allowed to charge expenses without producing receipts. Try doing that on your own expense claim and see how far it gets you. OK, there are a few things you can claim without receipts, such as parking meter costs but you aren’t going to make a bundle on that even if you claim to have parked in central London all day. But the fact is that “no receipt – no payment” is the situation unless you are one of the “ruling class” to whom normal rules seem not to apply.
This laissez faire attitude doesn’t permeate the whole of government or the civil service. When I was a local authority councillor a few years ago I had to account for every penny I claimed in expenses. I once made a claim for travel to a meeting which was 2 miles longer than the “approved route”. This was picked up and I pointed out that there was a diversion because of road works and my claim was paid including the extra 80 pence for the diversion. I wonder what it cost in time, phone calls and salary, for the council bean counter to query my claim.
One nice summer evening a friend and I drove out to a country pub. As I walked into the bar I spotted two mid-ranking council officers. I said hello and whilst ordering my drinks asked them if they wanted something – as you do. They said that council policy said they couldn’t accept gifts, even including a friendly pint, as doing so could be construed as a bribe. Ah well, saved me the price of a couple of pints.
The reason for the council policy was simply to ensure than even if there was no impropriety there could be no impression or question of impropriety. That is the point that Sir Paul Stephenson and others like him seem to have ignored.
Before I continue let me make it clear that the above is not
an accusation but a genuine question, and one which I think needs to be
answered urgently.By now there can be few people who have not heard that Sir Paul Stephenson, the Commissioner of London’s Metropolitan Police force, resigned last night. In his resignation statement Sir Paul said that it was just co-incidence that the man he employed as his £1,000 a day PR advisor (“spin doctor”) was also PR advisor to Champneys, the luxury chain of health spa’s where Sir Paul and Lady Stephenson enjoyed a free five week stay whilst Sir Paul was recovering from major surgery.
Everyone seems to be concentrating on the fact that the said spin doctor (why did Sir Paul even need one?) was one Neil Wallis, former Deputy Editor of the News of the World under Andy Coulson. Wallis was arrested by the Police on Friday as part of the new enquiry into the illegal practices, including phone hacking and blagging, which now appear to have been endemic at the News of the World, and possibly elsewhere.
But there are other questions which so far seem to have been overlooked.
In his resignation statement Sir Paul insisted there had been “no impropriety” about his stay while he recovered from having a benign tumour removed from his leg. I understand that he did record the matter in the Metropolitan Police’s Gift and Hospitality Register. But is that enough? Did he pay tax on the “gift”, indeed should he have paid tax on the £12,000 it is reported was the value of the stay (part of the costs, we are told, was paid for by the Metropolitan Police medical insurance) – did he even consider that he might need to do so?
Of course a lot will depend on how this gift was accounted for by Champneys. Unless the £12,000 was paid to Champneys by Stephen Purdew “a personal friend of Sir Paul” then the gift will have come from the company which owns Champneys. Now Stephen Purdew is referred to as “the owner of Champneys” but there are other shareholders who may not take kindly to their Managing Director, the said Stephen Purdew, giving away their money to the Commissioner of the Metropolitan Police.
Even if Mr Purdew was the 100% owner of Champneys the fact is that the company and its assets, including cash in the bank, are not his to give away at will. This is something that most accountants with clients who own all or most of a company spend time trying to explain. You might own the company but you don’t own its assets. For example, you cannot treat the company bank account as if it were your own. Neither can you use or allow others to use company property or services without proper approval by the board or, in some cases shareholders, and without accounting for this in your accounts and tax returns.
It was his failure to follow these rules which resulted in Conrad Black being sent to jail. He was accused of using company assets for his own personal use.
So unless Stephen Purdew paid the £12,000 to Champneys out of his own taxed income he will need to have accounted for the “gift” somewhere in the company accounts. Such a gift would not be allowed as a proper business expense and so in effect it would be taxable both for Corporation Tax and Value Added Tax (between them adding something like another £5,000 cost to Champneys).
Mind you this pales to insignificance when you consider the past history of Champneys. What is true is that Purdew and his mother control, but don’t totally own, a complex and opaque group of companies most of which appear to be loss making. A few years ago there was a major row when Purdew told the holders of preference shares that there was no money to pay them a dividend. Many of these shareholders were well known celebrities who probably could afford to forego dividends but it begs the question of how, when Champneys claims to be loss making, Purdew appears on the Sunday Times Rich List and Champneys have a multi million pound balance sheet. Presumably somewhere in the group there is a profit being made but perhaps not in the subsidiaries which have external shareholders.
If Purdew hasn’t accounted for this “gift” correctly then there could be charges of tax avoidance and money laundering. Even if Sir Paul Stephenson doesn’t know where the money came from he should be aware that the requirements of UK anti-money laundering legislation – not to mention the Bribery Act which came into effect on the first of this month and which has long been heralded – make it clear that he should make himself aware of such matters.
It isn’t enough to just list the gift in the relevant register and think that’s the end of it. Actually Sir Paul seems to have forgotten that the whole purpose of having these registers is to ensure that proper investigation into gifts and expense claims can be carried out and that the public can take a view as to whether they approve. Listing a gift – even if it “within the rules” – doesn’t mean that it is approved of. This was the point that seems to have eluded Members of Parliament who bleated “we didn’t break any rules” when their expense claims were published. If senior officers at the Metropolitan Police don’t see that then it isn’t surprising the investigation into MPs expenses resulted in very few – mainly those who forged receipts – being charged.
Even if everything was done correctly, approval sought and tax accounted for, there remains the question of whether it was acceptable or not for the Commissioner of the Metropolitan Police to accept such a gift no matter who it came from. The fact that he and his employers thought there was “no impropriety” in him accepting it does not mean that the public would agree. Sir Paul is not poorly paid and the Metropolitan Police insurance, whilst not running to Champneys, would have provided him with more than acceptable rehabilitation.
I have always found it strange that people who hold positions like Sir Paul, as well as MPs and the like, seem to think that there is one law for them and one for the rest of us.
For example, until recently MPs were allowed to charge expenses without producing receipts. Try doing that on your own expense claim and see how far it gets you. OK, there are a few things you can claim without receipts, such as parking meter costs but you aren’t going to make a bundle on that even if you claim to have parked in central London all day. But the fact is that “no receipt – no payment” is the situation unless you are one of the “ruling class” to whom normal rules seem not to apply.
This laissez faire attitude doesn’t permeate the whole of government or the civil service. When I was a local authority councillor a few years ago I had to account for every penny I claimed in expenses. I once made a claim for travel to a meeting which was 2 miles longer than the “approved route”. This was picked up and I pointed out that there was a diversion because of road works and my claim was paid including the extra 80 pence for the diversion. I wonder what it cost in time, phone calls and salary, for the council bean counter to query my claim.
One nice summer evening a friend and I drove out to a country pub. As I walked into the bar I spotted two mid-ranking council officers. I said hello and whilst ordering my drinks asked them if they wanted something – as you do. They said that council policy said they couldn’t accept gifts, even including a friendly pint, as doing so could be construed as a bribe. Ah well, saved me the price of a couple of pints.
The reason for the council policy was simply to ensure than even if there was no impropriety there could be no impression or question of impropriety. That is the point that Sir Paul Stephenson and others like him seem to have ignored.
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