Do stop being an idiot Matthew Norman

The serious point here is not about individuals avoiding their tax in what must ritualistically be termed an entirely legal way. The central question is how in the name of all the saints, but particularly that tax collector St Matthew, it is legal at all. A while ago, George Osborne described \”aggressive\” tax avoidance as \”morally repugnant\”. Perhaps the Chancellor has performed another of his nifty U-turns on the sly, but, according to the K2 mountaineer taped by The Times, circumnavigating tax is as easy as ever.

 

The only credible explanation for this failure is lack of political desire… a sort of wilful blindness, to borrow the phrase routinely applied to senior News International management, to practices which simply cannot be that hard to outlaw. If the Government chose, it could legislate next month to ensure that every ha\’penny of self-employed income is taxed at normal rates; and that if philanthropists like Mr Carr wish to loan money to a film production company, they do so out of earned income in the traditional commercial way, offsetting any losses against future income if the company were to go bust.

Look, please just stop being stupid.

The other side of this is all the luvvies gagging for their tax subsidy.

British Films and Tax Relief

The BFI is the national body in charge of the qualification of British films. Films can qualify as British in one of three ways. They must meet the requirements of one of the following:

* The Cultural Test
* One of the UK\’s official bilateral co-production treaties
* The European Convention on Cinematographic Co-production

For more information about the certification unit and the different ways productions can qualify as British, please visit the dedicated page on the BFI Certification Unit website.

Etc etc blah blah blah.

You cannot abolish this sort of tax avoidance unless you also abolish the tax reliefs.

Now me, I\’m just fine with that. Low tax rates with minimal or no allowances and reliefs. Bring it on. It\’s everyone else who thinks that the government should play favourites with hte tax system and subsidies which gives room for the tax avoidance.

And guess what? The film tax breaks have just been extended to TV shows! Carr could lend himself his own money and get the tax relief now!

 

22 thoughts on “Do stop being an idiot Matthew Norman”

  1. Our glorious leader, the statesmanlike Cameron, has just taken time out from running the country to look over the tax affairs of the aforementioned Mr Carr, and pronounce them ‘morally wrong’..

  2. The Pedant-General

    And another thing.

    Mr Carr is not better off at the end of this.
    If he gives £100k – or whatever – to whatever luvvie is after it, he writes a cheque for £60k and the taxman punts in the rest.

    He is, however, £60k lighter at the end of the transaction than he would have been if he hadn’t.

    EIS is a proper scam as your investor has an asset to show for it at full price as well as the tax relief.

  3. I forget who, a Lord Chief Justice or such, but they made the comment in a tax case along the lines of “no one is either legally or morally obliged to regulate their tax affairs to the benefit of the Revenue Service”
    Osbourne probably knows this one, the fuckwit in question here would do well to learn it.

  4. Why is it that everyone has their knickers in a twist over tax payments.
    The revenue is charged with both collecting the appropriate tax and ensuring that the taxed are not over-taxed. Tax avoidance is the duty of every citizen, whilst tax evasion is criminal.
    I think that the powers of darkness (UK uncut et al.) have deliberately muddied the water by confusing the two in the little minds; viz. Paediatrician vs. paedophile.
    For politicians of any kidney to start using terms such as ‘morally repugnant’ and ‘morally wrong’ is populism of the worst sort. I hope that as I write some good investigative journo is turning over stones throughout Westminster.
    Somebody has to shut them up.

  5. Robert, you’re thinking of Lord Clyde: “No man in this country is under the smallest obligation, moral or other, so to arrange his legal relations to his business or to his property as to enable the Inland Revenue to put the largest possible shovel into his stores. “

  6. This is a tax scam created under New Labour using or pretending to use tax rules created by Gordon Brown which is being tackled under the present government.
    So, of course, the “Independent” blames Osborne.

  7. The revenue is charged with both collecting the appropriate tax and ensuring that the taxed are not over-taxed.

    Have you any evidence for the latter? They certainly don’t seem to make any effort in that direction. In fact, they seem to make it as difficult as possible for the over-taxed to reclaim the dane-geld.

  8. The Times wasn’t very clear about how the K2 scheme works, but so far as I can tell it’s got nothing to do with tax reliefs on film production costs. The mechanism seems to be simply to divert one’s income to a Jersey-registered company which then makes one a callable, perpetual interest-free loan. One has to pay tax only on a notional interest rate. The trick is that, allegedly, there’s an implicit understanding that the loan will never be called.

    If that is a fair description, then the scheme is clearly abusive. My best wishes to HMRC in trying to stop it.

  9. Paul B , as ever the voice of reason. Let’s hope HMRC take them down. I’ll declare an interest. – I might get to defend the accountants when their tax dodging clients (to use a neutral term) sue them. It’s an I’ll wind….

  10. @ SE #8
    My wife got a cheque from HMRC last week repaying the tax that her employer had overdeducted in 2011/2 because HMRC had sent them the wrong tax code, without even asking for it. Last year I discovered, while trying to check something else, that I had overlooked a direct debit in a previous year so had overpaid tax and they sent me a refund (incorrectly calculated, so they actually over-refunded me as I had to point out, but the intent was there.)
    Maybe you’ve done something to upset your tax inspector? Or perhaps it’s because I’ve complained so many times about their mistakes that they are trying to avoid any more complaints.

  11. I’d say that Carr has a possible problem now that he’s been caught admitting that he is aware that the loan agreement is a sham. Thus it is open to legal attack by the IRD with a fair prospect that they succeed, and he’d be up for penalties that could cost him a good deal.

    These sort of non-recourse loans are a common mechanism, IMHO any non-recourse loan deals should be invalid for taxation purposes, just make them non-qualifying items.

  12. SE:
    Below taken from the HMR&C ‘Charter’
    They always seem stupid, vicious bastards when you owe tax, but they are only people doing their best with a lousy system and too much legislation.
    I am NOT a tax man, and have been dunned by them in the past, but I try to see their point of view.
    The politicos are the unforgivable snakes in the grass

    2 Help and support you to get things right

    We want to give you as much certainty as we can that you are paying or claiming the right amount.

    We will:

    provide information that helps you understand what you have to do and when you have to do it
    provide information that clearly explains the taxes, duties, exemptions, allowances, reliefs and tax credits that we are responsible for
    process the information you give us as quickly and accurately as we can
    put mistakes right as soon as we can.

  13. PaulB (#9), if it’s just that then it isn’t such a great tax dodging scheme.

    If your company lends you money, you have to pay tax every year on the notional interest on that loan (at HMRC official rates).

    It’s basically tax deferral, with an annual interest charge so long as it remains deferred.

    If you can invest the money and get a higher return than the official interest rate, then you’re quids in. But if it’s just what you say it is, that’s the only advantage of the scheme – that margin between the return you can get and the interest you have to pay HMRC.

  14. The official rate is currently 4%, so the annual tax will be less than 2%. Paying tax in perpetuity on a fair interest rate is roughly the same as just paying the tax on the principle, so I agree that the scheme is not that great on that basis. Perhaps he will consider the advantages of relocating to a more favourable tax environment for a few years at some time in the future.

  15. Would he not have to pay tax on the loan as if it were a dividend eventually? Not trying to justify it, just wondering how it works. Presumably the Jersey thing prevents HMRC from charging any notional tax.

  16. Don’t you think it’s amusing that his friends are using the “Fred Goodwin” defence – he’s my friend and we have fun together, and by the way he gives some money and time to charity?

  17. John & Nick,

    You are talking about personal taxation – I’m currently annoyed with business taxation. I stick my own tax return in, I get a small BACS payment back after about a month. John’s wife got the payment back without chasing it because the employer had to submit a P14 for her and the numbers didn’t crunch correctly.

    On the other hand, my business has overpaid employment taxes for the last 3 years (it comes of the moderately complex rules to stop directors gaming their pay to provide NI benefits.) Each year, I need to claim a refund. They then send me, about a couple of weeks later, a form demanding why I overpaid. “Same as last year – your rules & insufficient money being paid to non-directors to allow me to make it up by paying you diddly-squat in Month 12.”

    3 or so months later, I get a cheque.

    This is not:

    process the information you give us as quickly and accurately as we can …
    put mistakes right as soon as we can

    Especially when if you fail to run the payroll on time (cash-flow, as ever) they’re right up you demanding why you haven’t forked over the monthly geld.

  18. Bruce (#16), the whole amount is only taxed if the money is written off by the company. Otherwise he just keeps paying tax on the interest each year.

    As PaulB says, if it is just a loan scheme then it’s not much of a tax scam because paying interest forever is the same as just paying the tax in the first place.

    In which case, I wonder if there’s been a bit of mis-selling by the scheme promoter, and it’s not actually as good as Carr thought it was.

    It’s only a good scheme if:
    a) the government has set the interest rate too low, so that this becomes a cheap way of borrowing; or
    b) as PaulB implies, he goes non-resident for the year in which the loan is written off (although that’s much more difficult than it used to be).

    (or possibly if he’s likely to die soon; not sure what happens on death)

  19. @Robert the Biker and David Gillies: the full Lord Clyde quote is in Ayrshire Pullman Motor Services and Ritchie v. IRC (1929) 14 TC 754. (Yes, Ritchie, I know. 😎 )

    “No man in the country is under the smallest obligation, moral or other, so to arrange his legal relations to his business or property
    as to enable the Inland Revenue to put the largest possible shovel in his stores.
    The Inland Revenue is not slow, and quite rightly, to take every advantage which is open to it under the Taxing Statutes for the purposes of depleting the taxpayer’s pocket.
    And the taxpayer is in like manner entitled to be astute to prevent, so far as he honestly can, the depletion of his means by the Inland Revenue”.

    Also, Lord Tomlin, in the House of Lords, IRC v. Duke of Westminster (1936) 19 TC 490, [1936] AC 1:

    “Every man is entitled if he can to order his affairs so as that the tax attaching under the appropriate Acts is less than it otherwise would be. If he succeeds in ordering them so as to secure this result, then, however unappreciative the Commissioners of Inland Revenue or his fellow taxpayers may be of his ingenuity, he cannot be compelled to pay an increased tax.”

  20. @ SE
    Yes, that is part of the general civil service distrust and dislike of any entrepreneur or self-employed individual. I thought you were talking about income tax which has started getting better since the election.

Leave a Reply

Your email address will not be published. Required fields are marked *