We look forward to the Richard Murphy article on this outrageous piece of tax dodging

David Miliband:

Mr Miliband’s burgeoning post-ministerial income is siphoned into the company owned with his wife, called The Office Of David Miliband Limited.

Tsk, eh, tsk!

Financial analysts say the tactic is usually deployed to reduce a joint tax bill by taking income in the form of share dividends and exploiting both partners’ tax-free allowances.

Well, no, it\’s not really about personal allowances, not for a two professional family. It\’s about employers\’ national insurance.

If the money goes into a company, pays corporation tax, that c tax is imputed to the dividends and then income tax is topped up to higher rate then it\’s all much of a muchness for the total inome tax bill as against just declaring it as income in the first place.

However, take it as dividends and the employers\’ NI does not have to be paid, saving some 13 or 14%.

So we look forward to the Ritchie piece denouncing this egregious tax abuse. For that\’s how he so described these actions in a report for (I think) the TUC.

Of course, when Ritchie was earning well he used this dodge himself but now he\’s on a grant from the Rowntree folk he\’s pure and so above criticism.

But consistency does mean that he should condemn this behaviour, no? And so we wait…..

12 comments on “We look forward to the Richard Murphy article on this outrageous piece of tax dodging

  1. The employer’s NIC saving is ocmparing taking dividends out of the company vs taking salary out of the company. But really you should be comparing using a company vs not using a company.

    If he didn’t use a company, he’d be self-employed and paying NI at 2% (his MP salary having taken him past the main rate).

    So where husband and wife are both earning more than £42,500, there isn’t much tax saving from using a company.

    They could also be getting a few tax-free benefits in kind as directors, which would add to the tax saving, but that won’t be huge.

    The other option is that they might not be taking all the profits out as dividends, in which case they’ll only pay the 20% corporation tax now. And later, if wife’s income is below the higher rate threshold, she can take dividends out tax-free.

    Or perhaps they’re thinking of emigrating after he leaves politics, in which case the dividends might also be tax-free.

  2. Hang on, I think I’ve worked it out – political campaign costs.

    Will post later once I’ve thought it through.

  3. If he didn’t use a company, he’d be self-employed and paying NI at 2% (his MP salary having taken him past the main rate).

    Nope. Your calculations for Class 1 and Class 4 NI contributions are not combined – so he’d be paying at 9% between 7 & 42k and 2% thereafter.

    And I didn’t think there was any NI (employees or employers) on dividends (although the Revenoo are trying to clamp down on ‘income shifters’)?

  4. @ Richard
    Self-employed NI is a small flat rate plus 8% of income after you’ve passed the minimum threshold.

  5. Surreptitious Evil (#4) – there is an NI cap that basically gives a mechanism for combining Class 1 and Class 4. So only 2%.

    And I didn’t say there was NI on dividends.

  6. Right, here’s how I think this is working.

    Miliband is probably spending quite a lot of money on political campaigning, building up his support (both policies and potential supporters).

    That’s not a tax-deductible expense, so he has to pay for it out of taxed income.

    So if Miliband gives a speech, and is paid for it, that’s taxable income, at 40% or 50% (depending on how much he makes, but at least 40% since his MP’s salary will take him up to that level).

    If he gives the speech on behalf of his company, and it’s paid for it, that’s taxable income, but only taxed at 20%.

    Then the company spends its after-tax profits on the political campaigning. Not Miliband’s income, so no income tax payable on it.

    So he’s effectively paying his political campaigning out of money that’s only been taxed at 20%, rather than money that’s been taxed at 50%. Which gives him 60% more firepower for the same pre-tax income.

  7. Another possibility is that the company is claiming that the political campaigning costs are a tax-deductible business expense. That would be more difficult (you’d have to show a connection between the expense and the income), but might be possible depending on what the income was.

  8. I tried to have a look at the accounts, but it was only formed in December 2010 and there aren’t any available yet.

  9. Richie will go all out for Milliband D, because he despises the Labour right wing and Blairite remnants of which David M is one of the higher profile members.

Leave a Reply

Name and email are required. Your email address will not be published.

This site uses Akismet to reduce spam. Learn how your comment data is processed.

We look forward to the Richard Murphy article on this outrageous piece of tax dodging

David Miliband:

Mr Miliband’s burgeoning post-ministerial income is siphoned into the company owned with his wife, called The Office Of David Miliband Limited.

Leave a Reply

Name and email are required. Your email address will not be published.

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Leave a Reply

Name and email are required. Your email address will not be published.

This site uses Akismet to reduce spam. Learn how your comment data is processed.