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koala | accountingweb | Alan Sugar blames accountants for £186m tax bill
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Alan Sugar blames accountants for £186m tax bill

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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.

14th Sep 2023
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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.”

Escaping responsibility

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.

Convoluted plans

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.

Peer pressure

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. 

Ineffective 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.

Replies (57)

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By Justin Bryant
14th Sep 2023 15:20

It didn't make much sense to me. See also: https://www.bkl.co.uk/insights/alan-sugar-residence-domicile-2023/

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Replying to Justin Bryant:
By JCresswellTax
15th Sep 2023 09:44

Phil wrote:

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.

This is very clever Phil :)

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Replying to JCresswellTax:
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By Dr Fauci
15th Sep 2023 10:51

TDS - Trump Derangement Syndrome

Donald Trump really does live rent-free inside so many people's heads.

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Replying to Justin Bryant:
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By Justin Bryant
15th Sep 2023 09:45

In fact, I think his tax adviser will have a 100% defence here (except re their fee), in that they will simply say that their tax avoidance advice was so bad, it wouldn't have worked even if they had spotted that obvious HL error.

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By JustAnotherUser
14th Sep 2023 15:36

A billionaire who can afford to spend millions on the best legal advice from dozens of companies didn't do his due diligence or get the right advice to save 100 million+ on a tax bill that would only leave him with another 100 mill +, absolute boo-hoo to him.

They shouldn't be able to leave if they want to be a Lord, your a part of this great country or you're not, a peer of the realm.... no changing your mind as you see fit just to dodge some tax.

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Replying to JustAnotherUser:
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By Viciuno
15th Sep 2023 09:11

To be fair, if I was spending millions on "the best legal advice" I wouldn't be spending my evenings looking up the minutiae of the rules that govern the advice I was given - that is after all what I'd be paying for.

Wholeheartedly agree with the rest of your post though!

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Replying to JustAnotherUser:
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By rememberscarborough
15th Sep 2023 10:17

Agreed - surely he should have resigned as a lord before the tax year in which the dividend relates to? You shouldn't be able resign on the last day of the tax year since the profits available to pay the dividends were being earned during the whole of the year concerned.

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Replying to rememberscarborough:
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By Ian McTernan CTA
15th Sep 2023 15:48

The profits were earned over a number of years (many), if you look at the company accounts.

The company clearly didn't need the funds.

Having said that, pretty basic error by the advisers- considering the sums involved and as a member of HoL I'd be running it past at least one tax barrister.

I wonder if they charged a 1% fee...

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By Postingcomments
14th Sep 2023 20:29

Philip writing up secondhand information for his own gain. If you want to make money from writing articles, perhaps do your own research rather than just rewriting someone elses. I realise that won't happen as it is more work for the same money, but I can at least point out that this is lazy and somewhat shameful.

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Replying to Postingcomments:
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By lme
15th Sep 2023 09:41

Well I found it useful! I had not seen this elsewhere and probably would not have done. So, thanks Philip. I found it a valuable read.

Postingcomments wrote:

Philip writing up secondhand information for his own gain. If you want to make money from writing articles, perhaps do your own research rather than just rewriting someone elses. I realise that won't happen as it is more work for the same money, but I can at least point out that this is lazy and somewhat shameful.

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Replying to Postingcomments:
By JCresswellTax
15th Sep 2023 09:45

Can you post link to original article please?

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Replying to JCresswellTax:
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By Justin Bryant
15th Sep 2023 09:58

Just Google "Alan Sugar tax".

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Replying to Justin Bryant:
By Duggimon
15th Sep 2023 12:00

I think she meant specifically the one the writer is being accused of plagiarising. If there isn't one and the original commenter's point wasn't re: plagiarism and was in fact just a complaint that this tax news has appeared on other news sources in other forms then I suppose they should go and comment the same thing across virtually all stories on all media websites.

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Replying to JCresswellTax:
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By Open all hours
15th Sep 2023 14:17

Think it was in The Times. Behind a paywall? Surely won’t have been exclusive to them though?

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Replying to JCresswellTax:
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By Open all hours
15th Sep 2023 14:20

Think it was in The Times. Behind a paywall? Surely won’t have been exclusive to them though?

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Replying to JCresswellTax:
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By Open all hours
15th Sep 2023 14:27

Behind The Times paywall.

(If this posts three times it ain’t necessarily my fault). Two replies have gone into the ether.

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Replying to JCresswellTax:
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By Open all hours
15th Sep 2023 14:28

Behind The Times paywall.

(If this posts three times it ain’t necessarily my fault). Two replies have gone into the ether.

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Replying to JCresswellTax:
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By Open all hours
15th Sep 2023 14:28

Behind The Times paywall.

(If this posts three times it ain’t necessarily my fault). Two replies have gone into the ether.

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Replying to Postingcomments:
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By AndrewV12
19th Sep 2023 09:37

I think I would quote others, it could end up a legal minefield.

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By Postingcomments
14th Sep 2023 20:36

"More recently, with the introduction of the statutory residence test, leaving the UK successfully for tax purposes is even more of a minefield."

Well, the SRT is hardly recent and one might say it provided a level of clarity that was lacking before. Also, it can be very easy to become non-res under the SRT. As you say, you can just be absent for 183 days per year. So not that much of a minefield in such circumstances.

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Replying to Postingcomments:
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By Justin Bryant
15th Sep 2023 08:53

True. HMRC have made it much, much easier and more straightforward to avoid income tax and CGT with the SRT (for the well-advised at least!).

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Replying to Justin Bryant:
JD Portrait
By John Downes
15th Sep 2023 09:44

Not to mention Inheritance Tax.

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Replying to John Downes:
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By Justin Bryant
15th Sep 2023 09:51

But that's always been pretty easy for non-doms (only an idiot non-dom would pay a lot of IHT).

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Replying to Postingcomments:
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By J Hawkes
15th Sep 2023 11:03

Postingcomments wrote:

"More recently, with the introduction of the statutory residence test, leaving the UK successfully for tax purposes is even more of a minefield."

Well, the SRT is hardly recent and one might say it provided a level of clarity that was lacking before. Also, it can be very easy to become non-res under the SRT. As you say, you can just be absent for 183 days per year. So not that much of a minefield in such circumstances.

Plain wrong - read the legislation

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Replying to Postingcomments:
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By wamstax
15th Sep 2023 12:10

It is if you have ties in the UK and/or income and do not qualify under the "automatic overseas test".

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Replying to Postingcomments:
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By AndyC555
15th Sep 2023 13:53

"it can be very easy to become non-res under the SRT. As you say, you can just be absent for 183 days per year."

I do hope you are not giving clients advice on the SRT. It's possible to be considered tax resident in the UK having spent as few as 16 days in the UK during a tax year (albeit that would require some unusual circumstances).

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Replying to AndyC555:
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By Postingcomments
15th Sep 2023 15:55

Oh sorry, you expected a full report on becoming non-res in an internet comment?

I was just giving ONE straightforward example of how a person could become non-res. Of course I know that the SRT has more in it than that.

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By Tom 7000
15th Sep 2023 09:39

Imagine knowing the SRT rules backwards and sideways and you have done it 1000 times and theres a rule you dont know that apply to a handfull of people and you dont know it and your firm now owes 186m to a client

I mean he will never spend it all and he has to be out of the uk for 5 years and give it away or he will pay IHT on it one day, but.....

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Replying to Tom 7000:
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By Mr_awol
15th Sep 2023 11:42

Tom 7000 wrote:

I mean he will never spend it all and he has to be out of the uk for 5 years and give it away or he will pay IHT on it one day, but.....

Not necessarily.

I have a client who, due to the combination of their (current) residence and domicile, is currently not liable to IHT anywhere. This position will continue to evolve as they spend more years in their current country of residence, but currently they would have no liability at all. So it is possible - not for most of us perhaps but for people like Lord Sugar and my client, it is.

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By Self-Employed and Happy
15th Sep 2023 09:43

Its criminal that there are even loopholes like this to even contemplate being exploited, for as long as trough dwelling MPs and business run the country we will never progress as a nation.

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By Kevin KashGone
15th Sep 2023 09:43

I don’t know what we have these domicile / non domicile laws. UK citizens should all pay their taxes to the UK after offsetting local taxes wherever they live. I expect Mr Sugar is going to be taking advantage of the Australian zero inheritance tax next. Lol.

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Replying to Kevin KashGone:
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By Postingcomments
15th Sep 2023 10:02

Agree. Domicile rules tax people based on where they were born and/or where their parents were born. These are factors that the taxpayer had no control over.

It also sounds a little discriminatory. I am sure plenty would be up in arms about it if it penalised immigrants rather than people whose family have lived in the UK for generations.

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Replying to Kevin KashGone:
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By wamstax
15th Sep 2023 12:13

The domicile and non-domicile laws were introduced by the government many years ago to attract wealthy individuals into the UK - and potentially increase the UK economy.
However domicile has nothing to do with what Lord Sugar was attempting.

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By Duggimon
15th Sep 2023 09:57

"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. "

Seems reason enough to get him out of the HoL right now, tax or no tax. Indeed boot anyone out of government who puts personal wealth before the country. That seems blindingly obvious to me, capitalism is an economic system not an ingrained way of life to be bowed and scraped to at all times and to the expense of all else.

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Replying to Duggimon:
Stuart Walker Yellow Tomato Copy
By winton50
15th Sep 2023 10:14

Totally.

these big mouths that shout about loving the country are only too happy to ditch it when it comes to making money.

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By Ammie
15th Sep 2023 10:00

These are the scenarios that need to be clamped down on for the benefit of the exchequer.

Hiding behind arrangements set up more as a facade than factual to avoid paying tax rightly due should be attacked. But then how many of our legislators enjoy similar arrangements and a cosy relationship with HMRC. Speaks volumes.

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Replying to Ammie:
Stuart Walker Yellow Tomato Copy
By winton50
15th Sep 2023 10:16

Ammie wrote:

These are the scenarios that need to be clamped down on for the benefit of the exchequer.

Hiding behind arrangements set up more as a facade than factual to avoid paying tax rightly due should be attacked. But then how many of our legislators enjoy similar arrangements and a cosy relationship with HMRC. Speaks volumes.


I think to a large extent the point of the case is that one very large loophole has been closed following Ashcroft in that members of either houses can't be non-doms.
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By AdShawBPR
15th Sep 2023 10:14

Thank you Philip. I had read this elsewhere but may not have and in this case I still enjoyed and valued your post. As one other commented, would seem to me that once you've accepted your seat in the House of Lords, you should be deemed to be UK resident for life not just while it's convenient.

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By mydoghasfleas
15th Sep 2023 10:39

Regardless of who wrote the original copy and other insults traded there are some matters worth noting.

1. Tax avoidance, be it using an ISA, pension contributions, spousal transfers, decamping to another jurisdiction, complicated schemes of arrangement is legal. I accept some of it is distasteful but it is not criminal.

2. If you give advice, make sure it is correct for the entity and not off the shelf. Know your client!

3. Hats off to the HMRC officer who knew the default for Members of either House was UK resident. It is relevant to about 0.0002% of the population. Might be a useful pub quiz team member.

4. it is not about being a Lord, it is about being a Member of either of the legislative Houses. If it were simply about titles such notables as (Lord) Viscount Rothermere would not be non-domiciled; the various Trusts holding investments Daily Mail and General Trust etc could be of considerably less use to his family.

5. Writing this brought back training days long ago, where suggesting a person took the domicile of their mother was an insult, as the default was automatic domicile of the father.

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Replying to mydoghasfleas:
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By wamstax
15th Sep 2023 12:05

Your points are noted BUT given his well publicised criticisms of tax avoiders it seems a bit disingenious to behind the scenes attempt to exploit the taxes rules. Suffice it to say that the facts may come out as to his well kent knowledge of UK tax rules and legislature.
Could have been a noice little earner if he had come to me in the first instance.

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By J Hawkes
15th Sep 2023 10:59

Couldn't have happened to a nicer human being. ROTFLMAO

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By SteveHa
15th Sep 2023 11:49

Of course, the obvious takeaway is that, as a member of the HoL, Sugar is one of the countries legislators, and so should avail himself with knowledge of the laws that he is part of the body with collective responsibility for making those laws.

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By Trethi Teg
15th Sep 2023 11:56

It is quite clear that "Lord" Sugar has no regard for the country that gave him this status.

Strip him of his "lordship" today.

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By wamstax
15th Sep 2023 11:59

Given the press releases and others giving up their titles you have to wonder at Lord Sugar's naivety or deliberately listening to what he wanted to hear without taking into account things that somehow he missed about titles and exemptions.
I understand that Title holders have to sign something advisingthat they are UK tax resident - but maybe he didn't sign suc a document or tell his advisers.

Given his well publicised criticisms of tax avoiders he looks less trustworthy than I previously thought and might even be as bad as some other politicians in bending the rules retrospectively - when he gets caught - or forgetting to recall material facts or knowledge.

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By listerramjet
15th Sep 2023 12:25

I don’t think that migrating is of itself tax avoidance. You could argue that migrating simply to avoid tax is avoidance but then establishing cause is always a minefield even if self-professed! Besides which I am sure the Australian exchequer might have taken an interest in the income! A more effective residence in this case might perhaps be in the Isle of Man. He might even have found elevation into Tynwald given his status!

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By Mike18
15th Sep 2023 12:30

The treatment of 'non doms' and the super rich continues to be so generous. Not only benefitting from lower rates of tax on capital gains, dividends and inheritance, compared to earned income, they can spend half the year in a country where they don't pay a remotely fair share of tax.

On the question of the professional adviser being sued, other than for fees, would it be right for the courts to facilitate non payment of tax on the basis of what the tax payer claims they would have done otherwise. A technicality perhaps, but lawful avoidance is unlawful evasion if it is not within the very arbitrary rules.

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Replying to Mike18:
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By AndyC555
15th Sep 2023 14:15

"a remotely fair share of tax."

Depends on your definition of "fair share". Is it:

"the most tax they could possibly pay by ignoring all legal avoidance"?
"the amount of tax that I think they should pay"?
"the amount of tax they would pay if all the laws I don't like were changed"?

I've always like the quote from (US) Judge Hand

"Over and over again courts have said that there is nothing sinister in so arranging one's affairs as to keep taxes as low as possible. Everybody does so, rich or poor; and all do right, for nobody owes any public duty to pay more than the law demands: taxes are enforced exactions, not voluntary contributions. To demand more in the name of morals is mere cant."

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Replying to AndyC555:
By Mike18
17th Sep 2023 15:59

What is the argument for lower taxes on wealth than on income? Compare the liability of the average taxpayer with the richest in terms of the proportion of their earnings. It is not 'fair' under any objective measure. Some billionaires have demanded higher taxes on the rich, not because they have higher morals, but from self interest as they understand how rising inequality is damaging society. They have not defined fairness, they just know it is missing.

Objectively, rental income should be added to the list of gains that should be taxed more heavily than wages or salaries. I don't dispute that the law is the law, nor can you dispute that the law is made by and for those who benefit, and the absence of fairness.

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By JessicaRain
15th Sep 2023 13:00

Pretty sure I'm in the wrong profession because I find the level of greed of Lord Sugar and people like him revolting.

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By AndyC555
15th Sep 2023 14:06

Not that I know the ins and outs of this case but if Lord Sugar is also tax resident in Australia, I would have thought that Article 4.3 of the UK/Australia tax treaty comes into play.

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