Welshpool Town Council set up two companies with public money to run its services which are “not legal” and may owe the government tax as a result.

The interim town clerk, Anne Wilson, said she had attended an “interesting” meeting with David Preston, who has also acted as clerk, and the internal auditors, to discuss the companies and why they were set up.

Ms Wilson explained that there are three limited companies: Welshpool Air Show, Welshpool Town Services and Welshpool Tourism. She said it was acceptable to set up the Air Show as a company as it was a one off event, but that Welshpool Town Services, which runs Street Scene, and Welshpool Tourism, which runs the Tourist Information Centre, are “not legal”. It’s understood that this is because the town council cannot run its own services through companies.

All three of the limited companies will be dissolved on March 31. The interim clerk is also contacting Inland Revenue about the possibility that the town council owes money for the two service companies.

Councillors expressed concern about whether the council owed VAT to the government. This is one of many reasons the council is yet to submit its budget, and why the council has frozen giving out any grants.

The former town clerk is listed as secretary for the companies, and current and former town councillors are listed as directors.

There are also two now dissolved companies that are registered at the town council offices: Welshpool Projects Ltd and Welshpool Care Ltd.