Liz Truss’s chief of staff is being paid through his lobbying company, the Cabinet Office confirmed on Sunday.
Mark Fullbrook insists he is not being paid through his firm for tax reasons and says he has obtained no tax benefit from the arrangement.
Following a day of confusion, the Cabinet Office put out a statement confirming that he was directing government strategy without actually being employed by the Government.
A spokesman said: “All government employees are subject to the necessary checks and vetting, and all special advisers declare their interests in line with Cabinet Office guidance.
“It is not unusual for a special adviser or civil servant to join the Government on secondment. Any government employee hired on secondment is subject to the usual special adviser or civil service codes.
“The Government will pay the salary of an employee on secondment, including costs such as Employers National Insurance contributions to the seconding company. This has been cleared by the Propriety and Ethics team in Cabinet Office.”
Previous holders of the role have been treated like other special advisers, appointed on a temporary civil service contract and paid a salary that is made public.
‘Not an unusual arrangement’
Mr Fullbrook is instead a contractor and will receive any payment through Fullbrook Strategies, a private lobbying company he set up in April, which he says has suspended commercial activities.
One Whitehall source told the Sunday Times that it was “unheard of” for a No 10 official of his seniority to be employed in this way, although Mr Fullbrook disputed this.
Between April and June, according to the Office of the Registrar of Consultant Lobbyists, Mr 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 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.
A former No 10 insider said some special advisers “topped up” salaries by receiving extra income from Conservative Party headquarters as they provided party political, as well as policy, advice.
A spokesman for Mr 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.”