Some tax dodging by Arcadia, eh?

Sir Philip said that Arcadia has paid £2.3bn in tax over the past ten years, including £1.3bn in business rates, £591m in corporation tax, and £278m in national insurance contributions.

Just the time to point out that UK Uncut are indeed ignorant know nothings.

The business, as a business, pays all the tax due. A substantial sum as you can see above.

Tina, Lady Green, does not pay UK income tax. For she is neither resident nor domiciled in the UK. And we just don\’t charge income tax to people who don\’t live here and aren\’t from here. We just don\’t.

There ain\’t no tax dodging going on here folks.

40 thoughts on “Some tax dodging by Arcadia, eh?”

  1. Tim

    You and I both know it doesn’t matter. But thanks for keeping on saying it.

    The valid narrative, as we both know, is another.

    I can see the same thing starting here. David Trueba, brother of Fernando, both film directors, Fernando an Oscar winner, has started on the Google/Apple thing saying defending Spain is not waving a flag, but making that type of company pay taxes!!!

  2. Only £591 million in CT over 10 years, that doesn’t sound like an awful lot for a company with an annual turnover of £1.5bn?

  3. I’m no expert, but I think it sounds about reasonable for a company with net profits of the order of £100m+ a year…

  4. Let’s cut to the chase.

    The tax-avoidance screamers won’t give up on this guy because he is a) a wealthy and successful entrepreneur; b) flies at the weekends to Monaco to be with Lady Green, who is perfectly entitled to live there; c) has advised the Tories on streamlining govt ops and is therefore irredeemably tainted; d) is seen in the company of celebrities of whom the wholemeal morally upright and socially aware might take a dim view. There is another reason, but we won’t go there.

    Making advantageous use of the tax system is not illegal. Nor is holding out the begging bowl and shouting that the super wealthy and successful should forever be giving more. It’s just so very tiresome.

    If don’t agree, don’t bother replying – like you, I’m deaf to all opposing argument.

  5. unless they arranged Lady G’s ownership of Arcadia and her Monaco domicile because they wished to avoid paying tax on dividend income.

    I don’t see why you persistently refuse to acknowledge this possibility.

  6. Luis

    There are lots of reasons why someone of considerable wealth would want to live in Monaco. Tax, I’m sure, is one amongst them. However, there are enough ‘lifestyle ‘reasons for me to be quite satisfied that it would be popular amongst the rich even if taxes were in line with other places popular amongst the rich (like, say, London). I think it passes the ‘would you be here for any other reason?’ test.

    Did the Greens consider the potential tax benefits of having assets owned by Mrs Green rather than Mr Green? Almost certainly yes. If Mr Green lived in Monaco and Mrs Green lived in London, is there a pretty good chance that Mr Green would be the shareholder? Almost certainly yes.

    Is this avoidance? Well, yes.. but it’s avoidance in the very mild sense of chosing which of the options, clearly presented by parliament, is the most advantageous to the taxpayer.

    It’s no different to any couple deciding to hold investments in the name of the partner with the lower marginal tax rate. Doing it might be ‘avoidance’, but *not* doing it is ‘idiotic’.

    Anyone dumb enough to voluntarily hand over £300m to the treasury probably lacks the wherewithal to accumlate such a ‘liability’ in the first place.

  7. THG

    sure, you could say they are just doing something that most of us would do, but on a much larger scale.

    john77

    yes I also doubt that

  8. Isn’t the core of the argument here that one person we assume is in practice a beneficial owner of the income is indeed resident in the UK?

  9. Isn’t the core of the argument here that one person we assume is in practice a beneficial owner of the income is indeed resident in the UK?

    If this was established precedent, we would expect the wives of Britain’s Polish plumbers to be taxed by Warsaw. There are compelling reasons why it isn’t.

  10. “Isn’t the core of the argument here that one person we assume is in practice a beneficial owner of the income is indeed resident in the UK?”

    Only if you assume Lady Green (and her income/wealth) is actually the property of her husband I suppose.

  11. Lady Green really does own the shares. She is not the property of her husband. Sir Philip does not own the shares.

    If Lady Green divorced Sir Philip, he wouldn’t be entitled to all the shares. (He could probably get half of them because of the divorce.)

    Justin King, CEO of Sainsbury’s, gave half his shares to his wife in April 2011, for “financial planning purposes”. She divorced him three months later, and he couldn’t do anything about it.

    (Question: if Lady Green made a gift to Sir Philip, would it be taxable?)

  12. you don’t have to think that a woman’s property is actually the property of her husband, or have to deny that Lady Green really does own the shares etc. to think that between the two of them the planned the ownership of Arcadia to avoid paying taxes on dividends, and agreed between them that Lady Green would own the company and maybe give Philip generous housekeeping allowance or whatever.

  13. these two beliefs are consistent:

    1. the laws that apply in the tax affairs of the Greens are there for good reason and we wouldn’t want to change them

    2. the Green are exploiting the existence of these laws to arrange their affairs to dodge paying tax on dividend income

    it’s even possible to also think

    3. it would be preferable if rich people were not able to cook up perfectly legal scheme to avoid paying tax

    I don’t see the need to deny that the Greens have, most likely, not discovered that the lack of payable tax on dividend income is a happy unplanned side effect of decisions they took for other reasons, but, more likely, they planned things to be the way they are to dodge paying income tax on their income from Arcadia, and did so by giving Lady G who lives in Monaco ownership of said income.

  14. Surely what bothers the wingnuts at UK Uncut (should be UK Unhinged…) is the LAdy Green pays no tax because she is resident in Monanco. If she lived in, say, France, she would pay French taxes, would she not? So why are they not jumping up and down about all the foreign owners of Footsie shares (IIRC about 60% by value) who similarly don’t pay UK tax?

    All they are trying to do is to inflict taxation on a resident of another country, not to raise any extra in the UK.

    And that would work how, exactly….

  15. further… because the substance of the “tax dodger” accusation against Green is that he and his wife have arranged things to avoid tax on dividend income, the corp tax, rates, NI contributions etc. that Arcadia have paid are entirely beside the point.

    If the context was different and some lefty put up a post of similar quality, our host would be describing them with four letter words.

  16. You can argue the law, morality and fiduciary duty all you like; the fact is that this whole foofaraw is about the narrative.

    As far as the gummint is concerned, the only reason we have to make these neccessary cuts, (and yet the deficit is rising), is that these naughty multinationals aren’t paying their fair share.

    As far as the left is concerned, the only reason we have to make any sort of cuts is that those evil multinationals are stealing all our money.

    Both sides know this is nonsense, but both are getting their excuses in first.

  17. Luis

    You might well understand what the basis of the ‘complaint’ here actually is.. but the popular narrative is somewhat, er, ‘eclectic’. You don’t have to go far to find people claiming that TopShop/Arcadia ‘pay no tax’ or that Phillip Green dodged tax on his £1bn ‘bonus’ by ‘routing it through tax havens’.

    Basically, some people don’t know what they’re on about, and some more people are full of shit. And, from time to time, it’s worth correcting some of the obvious errors.. and drawing the clear distinction between what Arcadia does and what it’s shareholder does is entirely valid.

    We’ve got the UK Uncut side talking bollocks and failing to coherently present what actually happened and why it might be deemed inequitable. That makes it pretty easy for people on the other side of the fence to pick them apart and/or obfuscate (depending on whether they think that the system, as it stands, is actually entirely fair).

    I’m with you, I think. At least, I’m happy to ask the question.. is it appropriate that dividends from UK companies to overseas shareholders should be free of tax. I don’t care if they’re rich or poor, mind. Mr and Mrs Green should be subject to the same rules as everyone else.

    The Greens are just one example of where this rule has come into play. They work for the narrative being presented because of all the reasons referred to elsewhere. All good if your aim is publicity, but it does also amount to an mob vilification of a particular individual which, when combined with the free-flowing ignorance of most of the accusers, tends to have me sympathising with the billionaires a little more than I’d like.

    The big problem with the current debate on tax avoidance is that the campaigners (and politicians) keep picking really poor examples. There’s loads of dodgy and aggressive tax planning out there, but in their quest for high-profile ‘targets’ they’re banging on about individuals making entirely uncontroversial tax planning decisions, and companies doing precisely what the lawmakers seem to want them to do.

  18. yes this problem comes up a lot

    there is a case to be made that it’s too easy for corporations and rich people to avoid taxes, and that “something ought to be done”. With some caveats, I’d go along with that.

    but the campaigners that make a noise on these issues spout an awful lot of rubbish, to the extent, I fear, that they are counter productive.

    I reckon the same is true for a lot of “issues” and the right isn’t immune to it either.

  19. “is it appropriate that dividends from UK companies to overseas shareholders should be free of tax.”

    Am I right in thinking that all dividends paid to UK taxpayers are free of tax (as long as you are a basic rate taxpayer) and the amount of tax credit shown on a dividend certificate is purely notional, and not representative of any actual tax paid by the company on your behalf? And only higher rate UK taxpayers have to pay more tax on their dividend income, at around an effective rate of 25%?

    And thus in order to tax Lady Green’s (or any other foreigner’s) dividend income we would have to treat her as a UK resident, and demand full tax returns be made with respect of all her (and every other foreigner in receipt of UK dividends) income to determine whether she was indeed a higher rate tax payer, and whether any extra tax was due? And then enforce such requirements how exactly, as she (and they) are not under the jurisdiction of UK law?

  20. There is another reason, but we won’t go there.

    Would that be the same reason for the particular hatred that the Left has for the bank known as the Vampire Squid and the insistence of referring to George Osborne by his original name?

    Anyway, isn’t one of the arguments for corporation tax that HMRC gets a bite of the cherry before any dividend payments potentially end up overseas?

  21. Jim

    I think you’re right on how we tax dividends now.

    An easier way to tax overseas people would be to have companies withold tax on dividends. Then put in place rules to enable individuals to reclaim that tax if/where appropriate.

    The witholding could be done according to the residence of the recipient, meaning that countries with which we have bilateral tax agreements could be exempted, thus targetting only those individuals in ‘tax havens’. So we can say that a person resident in France can receive all the divi and pay French income tax thereon, but we say to someone in Monaco ‘if you’re not paying your tax there, you can pay it here’

    I do not, for one moment, claim to have thought all this through. It’s merely something I think can be looked at.

    There are good reasons why someone who lives in Monaco should not have to pay UK tax on their dividends from UK companies. Such as: they don’t live here. On the flip side, one can argue that the income is earned from UK people, so it’s all fair enough.

    Like I say… it’s something worth discussing.

  22. Jim,
    No. Dividend income is taxed at 10% up to the £34k.
    32.5% up to £150k and 42.5% above £150k…. of the gross dividend. The brackets are inclusive of salary income and benefits in kind such as car benefit and fuel benefit.

    Mark Wadsworth has a simple solution for all this nonsense.

  23. TTG, so we set up loads of bilateral agreements with lots of other countries. Some might have similar tax rates to ours, but some might have quite different rates. Those with different rates could be lower than the UK’s. According to the all powerful all knowing god Ritchie such countries are tax havens. So it will not matter that agreements have been set up to pay tax in that other country, people living there and taking UK dividends are still tax dodgers. You can never win by bending over and accommodating people whose views are all based on emotions whipped up by those with vested interests.

    The point is, it doesn’t matter that people living in low income tax countries aren’t paying tax on dividends. They’ll be paying some other tax, or paying high prices for the exclusivity of living in such a nice place. And if they are taking some UK pounds, they are still employing lots of UK workers who pay tax.

    And just to reiterate, the point is that it doesn’t matter that they aren’t paying tax in the UK. That they aren’t paying tax means that others aren’t going to be forced to pay either. If the mob manage to change the rules to make Lady Green pay, then what’s to stop them making you and me pay more than we would really like.

    Lotus51, Marks’s solution is a bit too simplistic. He comes up with many answers to show that his plan works, but if it was so simple and obvious why would he need to.

  24. Some dividends are taxed. I reside outside the UK & (foolishly) once invested in dividend-yielding shares in several EU countries, including the UK. They all applied a withholding tax. The UK’s was about 21%.
    Anyone know how Mrs G avoids that?

  25. Jim

    The ‘logistical’ issue I accept entirely… though we won’t worry ourselves with Murphy’s definition of a tax haven (for starters, he thinks that the UK is one, so he, presumably, would be nappy even if Mr Green had received the dividend). Not sure the fact that they already pay a lot to live in nice places matters much… we don’t give people who live in London lower tax rates than people who live in Hull.

    As for “If the mob manage to change the rules to make Lady Green pay, then what’s to stop them making you and me pay more than we would really like.”… well I already pay more than I’d like to. If the mob can force changes through the democratic system then that’s just the way it goes.

  26. Thomas Gibbon

    Easy. She sets up a trust with a Malta subsidiary and uses Malta’s double tax treaty network to avoid foreign withholding taxes on dividends. Just needs to suffer around 5% tax in Malta, but that’s a lot less than the standard 25% to 35% dividend withholding taxes which would have applied. Oh, and Malta does not itself levy withholding tax on dividends paid to non-resident shareholders.

    Remarkable that tax regimes like those of Malta, Luxembourg, Holland, Denmark, Belgium and Ireland exist inside the EU, with EU approval, but there you go!

  27. @Lotus 51: I don’t think it the tax credit on dividends actually represents cash sent by the company to HMRC on the shareholders behalf. If I read this correctly (http://www.hmrc.gov.uk/taxon/uk.htm#2) the tax credit is a purely notional credit against tax that would otherwise be due if the dividend was paid gross. See the bit at the bottom entitled “Can you claim the tax credit if you don’t normally pay tax?”

    Its actually news to me that UK dividends are actually tax free for basic rate tax payers; I always assumed the tax credit was for tax paid on my behalf by the company.

  28. Jim…I know you have problems with tax. But the company pays corporation tax on its taxable profits. The comp-any declares a dividend.

    The recipient of the dividend is assumed to have paid a notional rate of tax, because the comapny’s profits have already been taxed.

    If the recipient is a high-earner, the state levies more tax.

    is that so difficult?

  29. maybe if I have patience I will explain about capital allowances on agricultural buildings versus capital allowances on plant and machinery…but I somehow think you are determined not to understand it. However, John B does not understand the difference either.

  30. There are good reasons why someone who lives in Monaco should not have to pay UK tax on their dividends from UK companies. Such as: they don’t live here. On the flip side, one can argue that the income is earned from UK people, so it’s all fair enough.

    Where this gets messy is when you have a global company (such as BP) which pays tax in the UK. You can’t say that the income is earned from UK people, except for their operations in the UK: most of it is earned from abroad.

  31. @diogenes: yes of course the dividend is paid out of profit after corporation tax. The point is that there is no INCOME tax on dividend payments to basic rate tax payers. This I did not know, and I don’t think Lotus 51 realises it either.

    As for capital allowances, AFAIA I can buy machinery and plant up to £25K pa and get 100% allowance, and if I build a barn I get nothing whatsoever. If you know anything different (and can prove it) I’m all ears because thats what my accountant tells me, and I’d be rather happy to be able to build a couple of new sheds and reduce my tax bill.

  32. Can we please stop confusing the profits earned by the company with Lady Green’s personal income? As far as I can see the facts are these:

    – Arcadia pays the tax due on its corporate profits
    – Sir Philip pays the tax due on his salary
    – Lady Green is neither a UK citizen nor resident in the UK, so pays no UK tax on her income from her Arcadia shareholdings
    – In the UK, married women are entitled to own property (including shareholdings) in their own right and their husbands have no claim on the income from that property. Therefore Sir Philip cannot be taxed on the income from Lady Green’s shareholdings.

    Whether the Greens chose to organise their affairs so as to avoid paying UK tax (or tax anywhere else, for that matter) on Lady Green’s income is frankly irrelevant. Lady Green can live whereever she chooses. There is nothing illegal or even particularly immoral going on here from a tax point of view, though some might regard the decision of Sir Philip and Lady Green to live in different countries as a bit odd.

    The only solution to this problem would be to repeal the Married Women’s Property Act and reintroduce joint taxation of married couples (actually this has already effectively happened for low-income couples because tax credits are calculated on household income). And perhaps introduce a new law saying that married women must live with their husbands (note, not the other way round). I’m sure UK Uncut supporters would fight for these progressive changes, wouldn’t they? oh wait……

  33. Tax law bit of thread done to death, but I’m quite surprised Diogenes has randomly turned up to say that I don’t understand capital allowances. In the same spirit, I’m pointing out that I do.

    FC: to a point. The fact that the Greens are a married couple should not mean that they are treated any worse than if they were two random people of either gender or affiliation. But nominal legal ownership is not the only thing the taxman considers when determining beneficial ownership, and it’s not fair to say that anyone questioning the beneficial ownership in this case believes that the MWPA 1882 should be repealed.

  34. john b

    UK Uncut’s argument is precisely that the Greens SHOULD be treated worse than two unrelated people of random gender.

    As far as “beneficial ownership” is concerned, in what way does Sir Philip benefit from his wife’s income if they live – and receive their respective incomes – in two different countries? They may be avoiding UK tax, but they are maintaining two very expensive households.

    There is no way this can be resolved without undermining the rights of married women. Therefore UK Uncut should SHUT UP. If ever there were an example of hard cases potentially making extremely bad law, it is this.

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