The Treasury has slapped a fine of £1,030,176 on the Land Registry for breaking Treasury rules about the use of off-payroll contracts in the public sector. This is the largest-ever amount imposed on any government body for a breach of these rules.
Since 2012 the Treasury has imposed rules requiring ‘board level officials and those with significant financial responsibility’ at public bodies to be on the payroll and taxed as employees.
This follows previous revelations that many such bodies were engaging staff on contracts so that they did not appear on the payroll. In this way staff could be paid well above regular public-sector salaries, and they could also avoid paying tax in the same way as regular employees.
It appears that the Registry had engaged Camilla Black as interim finance director on an off-payroll contract for longer than the six months permitted under the Treasury rules.
While it might be argued that there could be sanctions against public bodies engaging senior staff on such off-payroll contracts they should not adversely affect ordinary members of the public who have to use and pay for the services.
Will the Land Registry's Executive Board pay the fine personally?
So the question has to be raised as to who actually pays when fines are levied on such bodies. It is unlikely that the Registry's Chief executive or other members of its Executive Board will paying the fine personally.
So presumably the fine will have to come from the Registry's general income. Although a spokesperson for the Registry is quoted as saying that fee levels would not be affected by the fine it must be remembered that the Registry's income is derived from fees paid by ordinary home-buyers and other members of the public.
The Land Registry is a government agency responsible for maintaining the register of property titles and property ownership. All transfers must be registered at the Land Registry as well as mortgages and other transactions involving properties.
Land Registry funded by fees paid by home-buyers
The Registry is expected to be self-financing out of its income from the fees charged to property buyers and others who have to use its services.
Buyers must pay fees to the Registry for transfers to be registered. Fees are also charged for searches of the register to find out about property ownership and various other purposes.
Although the Registry receives some further income from selling property data to commercial companies this data is itself derived from information obtained when buyers register property transfers.
So the whole of the Registry's income is really paid by the property-buying public, whether private individuals or commercial organisations.
Fine will still come from fee income even if fees won't be affected
It has to be assumed that the £1m fine will be paid out of this income – so in other words it will be the property-buying public that ends up paying the fine.
If the Land Registry was a commercial company any such fine would have to be paid out of the company's profits. That would therefore reduce the money available for shareholders who would no doubt be critical of the board.
But the Registry is not a commercial organisation and has no shareholders who can vote directors off the board or vote on their remuneration packages.
Even if payment of the fine will not affect the level of fees currently charged by the Registry it is arguable that the money in question could have been used to reduce these fees or to provide a better service to customers. But it will now just end up in the coffers of the Treasury.
Ed Lester, the Registry's current chief executive, must appreciate the irony of the situation. Some years ago he was himself engaged as interim chief executive of the Student Loans Company – on an off-payroll contract!
The adverse publicity which arose when this fact emerged was partly responsible for the introduction of the current Treasury rules against the practice.