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AIA

What about that Jimmy Carr, then?

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26th Jun 2012
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Simon Sweetman reflects on the recent headline stories involving the comedian, his K2 tax scheme and prime minister David Cameron.

At first sight this brouhaha suggests something new – someone who has crumbled under (not very much) pressure and admitted to being a sinner, but immediately repenting, rather in the manner of a footballer after a red card, instead of the usual “well it’s legal, innit?”. The claim that he is already out of the arrangement seems a little far fetched since something so complicated is going to take a while to unwind without disastrous fiscal consequences, but it does indicate the growing pressure in these hard times for fiscal righteousness. Tax avoidance is suddenly being seen as akin to MPs fiddling their expenses – no longer a victimless crime, because all the rest of us are victims.

Somebody suggested that sportsmen and entertainers seem particularly prone to this, but while (for instance) footballers are very good clients for the people who deal in tax avoidance, I suspect they are just more prominent and more likely to fall for a tabloid sting.

Meanwhile David Cameron seems to have opened Pandora’s box by having fingered one person he doesn’t like while ignoring the behaviour of (one presumes) most of his cabinet, and also for expressing moral repugnance for a legal activity without – frankly – appearing to mean it. But the new phrase is that tax avoidance is “morally repugnant”. This is applied pretty widely, with passing your earnings through a limited company now being seen as an example of such behaviour, at least if the end user is publicly funded. Is tax avoidance the new paedophilia?

As is its custom, the government talks loudly about what it might do, and then goes away and does nothing

And in the meantime, of course, we are not all in this together. A new IFS study shows that people have become poorer over the last year because average wages are falling. The Guardian’s study last week, too, shows that having enough to live on is a real issue for people in work, because wages are increasingly often not living wages and are topped up by tax credits. The government talks about welfare dependency

And now we have a list of suggestions including withdrawing housing benefit from anyone under 25. And who gets housing benefit under 25? People in work, that’s who, desperately trying to afford to work and live at the same time. And are those people going to be impressed by large scale tax avoiders?

We are all beginning to think differently in this pauperised state, and the consequences for the tax avoidance industry may be unexpected.

Replies (8)

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the sea otter
By memyself-eye
28th Jun 2012 14:50

Eeeh by 'eck we used t'lick coal clean w'tongue..

.....and pay pit owner for permission tut come t'work...... but that was befrore the good times under Gordon "I've put an end to boom and bust" Brown who promised a minmimum £12k a year for every family working or not. How arrogant that sounds now.

To unscramble that client state will take decades as the governor of the bank of England has recently pointed out. That's assuming it can be sorted.

The good times while they lasted meant that 'avoiders' a la Mr Carr were, like the pensions time bomb, tolerated or at least put on hold. After all,when wages are rising people don't address difficult issues- the proverbial roof doesn't get fixed.

Meanwhile a new cohort of (mostly) public sector fifty somethings are now retiring on handsome pensions- I know several- adding yet more costs to the welfare bill.

And the next election is nearly upon us!

 

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By Andy3T
02nd Jul 2012 12:01

his accountant should be shot

The Times report which kicked it all off explained that they'd identified Mr Carr from comments made by the accountant who sold him the scheme during an undercover sting, the accountant told the reporters that they'd sold the scheme to someone in the entertaining industry and the rough amounts involved, the reporters then looked through the LLP and company filings for LLPs and Companies set up by the accountant and asked the accountant if they'd been referring to Mr Carr in a second meeting.

That gripe aside, the wider point of the reputational cost of being involved in "a scheme" is clearly not something that can be ignored by potential buyers.  Whether we like it or not, tax is clearly a political issue now and the level of understanding between evasion, avoidance, or simply the mechanics of how the tax system works is clearly minimal for most people.

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By Ermintrude
02nd Jul 2012 13:34

Substance Over Form

I'm surprised that the K2 company and the tax avoidance strategy of it and its "employees" has a leg to stand on.  As the loan back to employees, rather than salary/divi route, is widely acknowledged as an artificial arrangement

I recalled the legal issue of Substance Over Form from a business law module somewhere in my studies.

Looking this up on (good ole) Wikipedia, this popped up for America (I presume):-

Substance over form

The doctrine of substance over form is essentially that, for Federal tax purposes, a taxpayer is bound by the economic substance of a transaction where the economic substance varies from its legal form.

Can't find anything re UK, and haven't time to research it, but would be interested in anyone else's opinion?

I'm clearly wrong in my over-simplification, but I don't know why as I'm no lawyer, and I would like the details of how I am wrong spelled out to me.

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By jeans&t
02nd Jul 2012 20:22

fiddling t"

"Tax avoidance is suddenly being seen as akin to MPs fiddling their expenses"

Isn't the "flipping" of main residence/2nd home(s) tax avoidance?

Isn't the claiming of fictitious expenses a form of tax evasion (amongst other things)?

Didn't MPs involved claim that they were doing nothing wrong, that what they were doing was

within the rules?

Is Mr Cameron saying that the House Of Lords & House of Commons are "morally repugnant"?

 

 

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By Chaztax
02nd Jul 2012 20:53

“Bread and butter” tax planning…

…can – of course – save clients large amounts of tax.

If all advisers are doing is telling people about reliefs and allowances (e.g. entrepreneurs’ relief, CGT annual exemption, etc, etc) which are specifically intended to save certain people tax under certain circumstances, it’s very difficult to see how that can REASONABLY be seen as unethical.

Tax advisers who make their living from this kind of straightforward planning should robustly defend what they do as not merely legal, but also ethical.

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By pauljohnston
03rd Jul 2012 08:29

@jeans&t

If it were you or me fiddling our expenses we would be kicked out of the business.  Strange though most MPs were not and the recent Baroness who seems to have overeclaimed was not even censured.

I suspect the Times made such a fuss is it tried to gets its bosses off the front page (Leverson Enquiry).

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By justsotax
03rd Jul 2012 22:10

@paul

trouble is the MP's wrote their own rules - so most were not actually fiddling but just claiming what they were entitled to (albeit some pushed the boundaries...and a few ended up being convicted) - still two wrongs don't make a right......unless of course there is a suggestion that 'fiddling' is open to all and should be seen as 'legal'....

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By Ermintrude
05th Jul 2012 10:02

@justsotax

Re MP's writing their own rules - yes indeed - the main one of their benefit being the residence flipping.  I wonder how much tax over the years that has actually involved?

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