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Cameron backs anti-avoidance rule

5th Jan 2012
Contributing Editor accountingWEB
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AIA

Prime minister David Cameron today set the government on course to introduce an anti-avoidance tax rule for big business and wealthy individuals. 

“One of the things we're going to be looking at this year is whether there should be a more general anti-avoidance power that HMRC can use, particularly on wealthy individuals and on the bigger companies, to make sure that they pay their fair share,” Cameron told small business owners at a PM Direct event at Intuit's headquarters in Maidenhead this morning. 

Earlier, on BBC Radio 4’s Today programme, deputy prime minister Nick Clegg also pledged to tackle tax avoidance: “Millions of people who play by the rules, who pay their taxes, who work hard ... are angered when they feel there is a wealthy elite or large businesses who can pay an army of tax accountants to get out of paying their fair share of tax. They treat paying tax as an optional extra in which they can pick and choose the taxes they pay.”

Both leaders’ promises to get tough with corporate taxpayers contrasted with sentiments in an internal memo Treasury minister Daivd Gauke sent to HMRC staff in December following the Public Accounts Committee (PAC) report into the department’s controversial large business settlements.

The party leader also announced at today's event at Intuit's headquarters changes to a number of health and safety rules, following chancellor George Osborne’s pledge during the Autumn Statement that employment law and health and safety reforms would be tackled in the next phase of the Red Tape Challenge.

The prime minister announced the government will extend the current scheme that caps the amount that lawyers can earn from small value personal injury claims up to £25,000 in order to address the fear from small businesses of being sued.

Ministers will also investigate the demands made by insurance companies on businesses and to change the health and safety law on strict liability for civil claims.

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By johnjenkins
06th Jan 2012 09:28

As Ken Frost

points out Tax avoidance IS LEGAL. For any body to try and manipulate that would have disasterous consequences. Have the distructive ways of Gordon Brown been forgotton already.

How many of us said the NI scheme was a no hoper.

Until DC and NC start taking us seriously then more of the same crap will be the order of the year.

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By silicondale
06th Jan 2012 10:29

SME's will still be hit harder

Of course, any anti-avoidance rule will STILL affect the SMEs harder than globalised big business, because we are sitting targets. Our simple attempts legally to reduce our tax liabiities (dividends instead of salary, and income-splitting between spouses, as two simple examples) could be attacked - while the corporate giants will continue to get away with blue murder.

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By memyself-eye
06th Jan 2012 10:56

I thought Brown & co were bad

But the ill timed and hastily withdrawal of the feed in tarrif makes this governments business credentials appear like the withdrawal of the 10p rate - poorly thought through. Watch big multinationals relocate abroad, after all HSBC does not mean Harlow and Swindon Banking Corporation.....

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John Stokdyk, AccountingWEB head of insight
By John Stokdyk
06th Jan 2012 11:38

Dead cert for the Budget

Graham Aaronson QC, author of the report that proposed a "limited" GAAR, popped up on the  Today programme this morning to explain the thinking behind the measure.

He repositioned the GAAR as an "anti-abuse" rule, which suggests the profession's complaints about avoidance/evasion have been getting through and said it would provide a means to stop lawyers from doing "excessive" things to exploit loopholes in tax law.

When pressed by presenter Evan Davis that such a rule might give too much power to HMRC, Aaronson replied that the limits, including an independent oversight panel, proposed in his December report would prevent the tax department from applying the GAAR unfairly. 

I'm pretty certain all this PR activity means we'll see a mention of the GAAR in the Budget paperwork on 21 March. However, the Aaronson report was a "study" and did not include any formal invitation to consultation. If the government follows its own tax policy-making guidelines, I think we'll see a consultation document based on the Aaronson proposals, and perhaps draft clauses by December for inclusion in the 2013 Finance Bill.

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By johnjenkins
06th Jan 2012 15:00

What does

seem worrying is DC's comments when he said we need a general Anti-avoidance rule particularly for the wealthy - not just for the wealthy - so we all know what will happen. This government seems just as short sighted as the last one.

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By dstickl
08th Jan 2012 17:19

Could Mr Tony Blair - & his brand - be targeted for IR35?

Did DC prompt the following in today's front page of The Sunday Telegraph col 7 bylined Robert Mendick Chief Reporter reads QUOTE

Blair and the £8 million tax 'mystery'

TONY BLAIR channelled millions of pounds through a complicated web of companies and paid just a fraction in tax, The Sunday Telegraph can disclose.

Official accounts show that a company [Windrush Ventures Limited apparently] set up by Mr Blair to manage his business affairs paid just £315,000 in tax last year on an income of more than £12 million. In that time, he employed 26 staff and paid them total wages of almost £2.3 million. However, a further £8 million in "administrative expenditure" remains unexplained.

...

One City accountant, who did not wish to be named, said: "It is very difficult to see what these administrative costs could be. It is very large for a business like this. I am certain it is legitimate but it is certainly surprising. The tax bill of £315,000 is explained by the large administrative costs that are being treated as tax allowable."

Richard Murphy, a chartered accountant who runs Tax Research LLP and has studied Mr Blair's company accounts, said: "There is about £8 million which we don't know here it goes. There is no indication at all why the administration costs are so high. What has happened to about £8 million which is being offset against tax?"

There is no suggestion that Mr Blair's tax affairs are anything other than legitimate. His accounts are audited by KPMG, one of the world's biggest accountancy firms, 

Mr Blair presides over as many as 12 different legal entities, handling the millions of pounds  he has received since leaving office, Another set of companies, which are run parallel to Windrush Ventures, are called Firerush Ventures and appear to operate in the same oblique way.

The money paid into Windrush Ventures Ltd largely comes from Windrush Ventures No 3 Limited Partnership, which appears to be where money is deposited before being spread around other companies, ultimately in Mr Blair's ownership. The limited partnership does not have to disclose publicly any accounts.

Mr Murphy said: "It is in the limited partnership where things really happen. But that is the one Mr Blair keeps secret. We don't know how much money is in the LP. The question is why is Tony Blair running such a completely secretive organisation?"

...

The spokesman [for Mr Blair last night] chose not to explain what happened to about £8 million of administrative expenses ENDQUOTE

 

Also today's page 8 of The Sunday Telegraph bylined Robert Mendick Chief Reporter reads in part QUOTE

Inside the secret web of Tony Blair Inc

Tony Blair is a burgeoning brand. He is an adviser, sometimes paid, sometimes unpaid, to foreign governments ...

The structures are seemingly complex, consisting of a number of limited companies, limited liability partnerships (LLPs) and limited partnerships (LPs).

Windrush Ventures Limited is the management company that runs the Windrush Ventures Group. It is described in emails sent by Mr Blair's staff as the "trading name" of The Office of Tony Blair.

Within the group there is - besides Windrush Ventures Limited - a Windrush Ventures No. 1 Ltd, Windrush Ventures No. 2 LLP and Windrush Ventures No. 3 LP.

The LP - because it is a limited partnership rather than a limited company - does not have any legal obligation to publish accounts.

...

Mr Blair is tight-lipped about the corporate structure - even going so far as to refusing to say why the companies are so named. ENDQUOTE

 

So here are some questions that DC - as "First Lord of the Treasury" as marked on the letter box of 10 "Downton" Street - might arrange to ask HMRC to perhaps ask of ex-PM [Q: Do I hear shouts of "Fat Chance"?] Mr Tony Blair:

Q: Was Mr Blair an employment lawyer before entering becoming PM?

Q: Was Mr Blair as PM involved in discussions with HMRC etc about IR35?

Q: Was Mr Blair as PM and after involved in discussions with HMRC etc about how to defeat the application of IR35, with seemingly complex structures, consisting of a number of limited companies, limited liability partnerships (LLPs) and limited partnerships (LPs)?

Q: As "Tony Blair is a burgeoning brand" isn't it fair to say that he's been offering personal services - without substitution of Tony Blair in some cases?

Q: As "Tony Blair is a burgeoning brand" isn't it fair to say that he's subject to IR35?

Q: If "Tony Blair is a burgeoning brand" and possibly subject to IR35, could come of the so-called £8m "expenses" be the NI due for IR35? If YES, why have they apparently been misdescribed, and why has KPMG apparently given a greenlight?

Q: However, if Tony Blair has wriggled out of IR35 payments through his corporate structure, is this EITHER because there is something practicable in Ltd 1/LLP 2/LP3, OR because there has been (in my opinion) alleged "joint enterprise" or otherwise of "misconduct in public office" at HMRC etc, as described in the CPS guidance note available on its website?  

 

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Replying to Ruddles:
John Stokdyk, AccountingWEB head of insight
By John Stokdyk
09th Jan 2012 10:24

Interesting post

Thanks for brining the Tony Blair tax avoidance issue to our attention, I heard some stuff about his earnings over the weekend, but not the full context.

We'll give Mr Murphy a call and see if he can enlighten us.

As a minor aside, however, could I point out that it's not good practice to cut and paste coverage from one website to another. The Daily Telegraph material is their copyright and, more seriously, if the former prime minister were to decide it was defamatory, he could sue both AccountingWEB and you for repeating it.

If you want to draw attention to an article elsewhere, it's OK to post a link, and to quote a small portion of the text, for example to say "A company set up by Tony Blair to manage his business affairs paid just £315,000 in tax last year on an income of more than £12 million," The Daily Telegraph reports.

To make the link look like this, you highlight the relevant text and click the funny globe/chain icon in the data entry box, which will then give you a dialogue into which you paste the URL. Or you can just paste the link straigh on to the site and it will look like this:

http://www.telegraph.co.uk/news/politics/tony-blair/8999890/Tony-Blair-and-the-8million-tax-mystery.html

In the meantime, please keep your insigths coming - we really apprecaite all the extra information that members share with us.

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By dstickl
10th Jan 2012 04:37

Sorry John! Q: Wasn't Mr Blair PM when CA 2006 went thru P'ment?

Sorry John! I didn't cut & paste yesterday, I just typed out excerpts from the paper because I was so concerned; please feel free to edit/delete the typed excerpts in any way you wish to ...

 

NEW Qs:

Q: Wasn't Mr Blair PM when Companies Act 2006 went through Parliament?

Q: Did he influence the - in my opinion - alleged apparent non-central-registration of LPs and/or their Reports and Accounts?

Q: Does this explain some expertise on Mr Blair's part in the field of Ltds/LLPs?LPs?

Q: Was Mr Blair aware of any implications of any such structures in perhaps negating any application of IR35 in relation to Mr Tony Blair's "brand" and his personal services?

Q: How do such alleged above behaviours - if any - tie in with Mr Ed Miliband's views on "good businesses" and "bad businesses"?

 

SUM UP: Given the need for transparency as being the essence of "successful markets", I think we should be told ...

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By dbowleracca
10th Jan 2012 19:22

What's a fair share??
DC has said everyone should pay Thor fair share of taxes and be responsible, which I agree with.

But, when you are successful and are rewarded with a high salary (say £250,000 a year) then why should you pay 50% of that to the government? No wonder people try and avoid paying it!!

I think we should have a single tax rate, say 25%, and a higher personal allowance and that any GAAR should state that you must pay tax at this rate, subject to certain clauses (I.e. Loss relief etc). For companies, a corporate tax rate of 20% across the board with the same anti avoidance provisions.

Next the government should stop giving away so many benefits, which would allow all us hard workers to pay lower taxes, and then they should manage the country's finances better by making the public sector more efficient.

Job done, economy sorted :)

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By dstickl
10th Jan 2012 23:23

Why 50% marginal tax on froth? For a more cohesive society ...

Sorry dbowleracca, but you apparently don't seem to me to fully understand the tedious details of current UK income tax rates, for 2011/12: this is because the 50% rate is a marginal rate that only applies to the marginal income - or "froth" - over a £150,000 threshold; so the 50% rate would apply to a maximum of £100,000, i.e. yielding only £50,000 for that £100,000 part of salary less than £250,000. The good news is that for the other part of earnings less than £150,000, the various income tax rats are all <50%; so you should not pay 50% of a £250,000 salary to the government!

The basic problem with your suggestion of a single rate is that the UK's democratically elected government - which represents other people as well as you - has not yet been persuaded that your suggestion is in line with the government's objectives, which include a desire for a more cohesive society.

Of course, if you don't like the tax policies of this overcrowded country, you always have the choice of being able to go to another country! May I point out that the freedom to leave the UK is not duplicated in some other countries that could require you to have an exit permit!

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