Alan Sugar blames accountants for £186m tax billby
Tax avoidance has turned out to be less than sweet for Lord Sugar, who has been caught attempting to avoid a hefty tax bill by relocating to Australia.
When it comes to making money, Alan Sugar is so good that he was honoured with a seat in the House of Lords.
However, alleged attempts to avoid paying taxes on his hard-earned wealth, like his American counterpart Donald Trump, (if accurately reported) make Lord Sugar look rather more of an apprentice.
Unfortunately, when you’re in the public eye there is always a risk that a lucrative tax-saving scheme might pique the interest of newshounds and that is exactly what has happened. Lord Sugar’s alleged plans have been exposed and ripped apart by the combined resources of The Bureau of Investigative Journalism and The Sunday Times.
That is bad enough but as well as reports about the failed scheme in the mainstream press, it has even been ridiculed by the technical tax team at Gransnet, one member of which delivers the damning verdict: “What a grasping fool he is.”
Tax case law can be dull, sometimes sleep-inducing. One frequent exception comes in cases where individuals have attempted to escape their UK tax responsibilities by leaving the country.
In the not-too-distant past, this was relatively easily achieved provided that those involved took high-quality advice and were willing to follow it to the letter.
But all too often schemes failed when individuals were tempted to try to outwit the system by spending longer in the UK than the law permitted, coming a cropper when a diligent inspector of taxes checked credit-card statements, mobile phone bills or withdrawals from cash machines.
Other cases have featured mugs who put millions at risk to watch their football team playing a crucial cup tie.
More recently, with the introduction of the statutory residence test, leaving the UK successfully for tax purposes is even more of a minefield.
Given the history and his own high profile, Lord Sugar had the good sense to seek professional guidance before attempting to escape a reported £186m of tax on a £390m dividend paid by Amshold in 2021 by relocating to Australia.
Typically, convoluted plans of this type go wrong either where the individual takes a flyer in the hope that he or she will not be found out or fails to follow advice to the letter, assuming that the small print is of little consequence.
In this instance, the plan to avoid UK tax foundered for a different reason.
There is no question that non-residents are not liable to pay UK tax on dividends. Therefore, by taking care to establish residence in Australia and ceasing to be tax resident in this country, Lord Sugar would be £186m richer at the expense of the UK Exchequer.
It appears from work carried out by the investigative journalists that the advice given was relatively standard, noting the need to abide by law stating that “those who spend 183 or more days of the year in the UK are automatically considered tax residents, while those who work abroad full-time and spend fewer than 91 days in the country are non-residents.” The likelihood is that he would then have been obliged to maintain a similar regime for at least five tax years.
The ironic sting in the tail is that under the terms of Part 4 of the Constitutional Reform and Governance Act 2010, reputedly introduced in response to the activities of former Conservative Party Deputy Chair Lord Ashcroft, there is a specific (reverse) exemption from the standard residence rules for members of either House of Parliament.
They are automatically deemed to be UK resident and UK domiciled for the purposes of income tax, inheritance tax and capital gains tax.
This means that, even though he apparently took a formal leave of absence from the House of Lords, Lord Sugar was indisputably UK tax resident when the dividend was paid and, as such, liable to pay the £186m to HMRC.
Reports suggest that his Lordship is considering taking legal action against his professional advisers on the basis that they provided incorrect advice.
While the advisers might hope that their liability would be restricted to professional fees charged for the ineffective advice, rather than the theoretical loss of taxes as well, this may not be the case.
Lord Sugar allegedly asserts that he would have been willing to give up his membership of the House of Lords had he known this would save the tax. This process appears to be relatively simple following Paragraph 1 of Chapter 24 of the House of Lords Reform Act 2014 but cannot be rescinded.
Doing so would have followed the precedent set in 2010 (the year after Alan Sugar was elevated). Press reports at the time confirm that Lords Foster, Bagri, McAlpine and Laidlaw along with Lady Dunn all resigned as soon as the new act was implemented to avoid becoming UK tax residents.
Should Lord Sugar sue, the case could be long and hard-fought, since it is likely to be based on a court’s view as to whether the retrospective resignation threat was genuine.