The report found that Britain’s 20 biggest tax avoiders have used three main loopholes to legally reduce their their income tax bills by a total of £145 million in a year.
Two thirds of them wrote off business losses in one of their companies against their income tax bill, reducing it by as much as half .
Several of them offset the cost of business mortgages or borrowing on buy-to-let properties against their income tax bill, while others took advantage of relief on donations to charity.
None of these are tax dodging in the least. Not even tax avoidance, let alone tax evasion.
If you are in business and the business loses money this is a loss to you. Of course this should be discounted when calculating the income you have on which you pay tax. Similarly, interest on loans: standard deductible business expense. It\’s a business expense just as much as the widgets which are inputs to your wodget making process is.
And tax reliefs on donations to charity….this is a very silly claim indeed. For you\’ve actually got to, you know, give the money to charity. You can\’t keep it yourself and then claim the tax back.
The analysis convinced Mr Osborne that millionaires must pay a minimum rate of tax equivalent to about a third of their earnings, which has been described as a “tycoon tax”.
Mr Osborne told The Daily Telegraph: “I was shocked to see that some of the very wealthiest people in the country have organised their tax affairs, and to be fair it’s within the tax laws, so that they were regularly paying virtually no income tax. And I don’t think that’s right.
“I’m talking about people right at the top. I’m talking about people with incomes of many millions of pounds a year. The general principle is that people should pay income tax and that includes people with the highest incomes.
This is insane. Because the whole difficulty comes when we work out what actually is income which is subject to income tax. Captial gains are not subject to income tax, just as one example. So, those buy to let properties. Stick then in a company, the interest is deductible as a business expense there. Don\’t take any dividends and no tax is payable on income that isn\’t being collected. 15 years down the line the rent had paid off a chunk of the mortgage and the company is sold for a capital gain equal to the equity built up in the property. As there is no income there is no income tax.
I\’m sure some of our tax people around here can come up with other examples. It all revolves around what is the definition of income which should be subject to income tax.
Now, if Georgie is saying bollocks to all of that, we don\’t care. If we see you getting £100 and thus we want £30 of it, regardless of the source or type of income then he\’s mad. Entirely stark staring bonkers.