Downing Street has defended Liz Truss’s chief of staff Mark Fullbrook after it emerged he is being paid through his lobbying company instead of directly as a Government employee.

The Cabinet Office said it is “not unusual” for a special adviser to join Government “on secondment” and that his salary is paid to a “seconding company”.

But the arrangement drew accusations of renewed “Tory sleaze” from opposition parties.

No 10 did not deny that Liz Truss’s top aide receives payments through Fullbrook Strategies, a private lobbying firm he set up in April, as The Sunday Times reported.

A spokesperson for Mr Fullbrook denied speculation that the arrangement allows him to pay less tax.

The spokesperson 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 Cabinet Office spokesperson 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 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.”

The Sunday Times reported that Mr Fullbrook’s company, which he says has now suspended commercial activities, contacted the Government on behalf of clients including the Libyan House of Representatives, an energy provider and a PPE firm.

Mr Fullbrook has already been in the headlines since starting his role as the most senior political appointee in government two weeks ago.

It emerged last week he was questioned as a witness as part of a Federal Bureau of Investigation (FBI) inquiry into alleged bribery in Puerto Rico.

Labour’s deputy leader Angela Rayner said the revelation that Mr Fullbrook is “on loan” from a lobbying firm “raises serious questions about the new Prime Minister’s judgment.

“The fact that this bombshell comes days after alarming reports that Mr Fullbrook is also embroiled in a foreign bribery probe involving the FBI will only add to public concern.

“While Liz Truss shows all the signs of allowing another wave of Tory sleaze to fester, a Labour government would create an Independent Ethics and Integrity Commission to clean up public life and restore the basic standards we expect.”

Liberal Democrat deputy leader Daisy Cooper said: “Liz Truss’s administration is proving to be nothing more than the same as Boris Johnson’s, miring itself in sleaze, not even a month into the job.

“Her top advisers must not appear to be above the rules and laws of the land. We need to see an urgent independent investigation into any conflicts of interest – anything less than this risks looking like an admittance of wrongdoing”.

Chancellor Kwasi Kwarteng denied having any knowledge of Mr Fullbrook’s salary arrangements.

“I think he’s a great professional,” he told the BBC’s Sunday With Laura Kuenssberg programme.

“But I don’t know anything about his remuneration and how that’s organised.”

The FBI probe relates to allegations that financier and Tory donor Julio Herrera Velutini promised to help the former governor of Puerto Rico get re-elected if she dismissed an official investigating a bank he owned there.

He has denied the charges against him.

Mr Velutini is alleged to have paid CT Group, a political consultancy firm in which Mr Fullbrook was a senior figure, 300,000 US dollars (almost £263,000) for work intended to help Wanda Vazquez Garced’s ultimately unsuccessful re-election campaign in 2020.

A Downing Street spokesperson said Ms Truss stood 100% behind Mr Fullbrook and “he has her full support”.