Ahahahaha…..tax avoidance in the Labour Party

Although of course this isn\’t tax avoidance: it\’s tax compliance.

John Mills gave the party shares in his shopping channel company, JML, valued at £1.65?million in January. In an interview with The Telegraph, Mr Mills said that the donation was made in shares rather than cash so the tax on the deal would be significantly reduced.

Describing the donation as “tax efficient”, he said the form of the donation was agreed with figures in Labour’s fund-raising team.

Mr Mills said that if he had given £1.65?million from his own income he would have had to pay nearly half of that sum to the taxman.

Or,in order to get that same sum to the Labour Party he would have had to sell twice the shares, pay the tax and then gift over the remainder. It\’s a celver and totally legal method of doing it.

Labour can only sell the shares if Mr Mills, who is the company’s majority-shareholder, agrees.

The party is the only external shareholder among around 40 shareholders in the company, which has sales of more than £100?million a year.

As long as Labour continued to make a loss, it will not pay any levy on the dividend payments, because losses are not taxed by HMRC. A further advantage is that the shares in JML will make Labour’s accounts look healthier by shoring up its balance sheet.

That last sentence might be the most important. With the auditors crawling all over the Co Op Bank it would be nice for Labour to have some assets to place against their overdraft at that bank…..

But even though this is tax compliance I can\’t wait for the insistence that this is just as moral as placing one\’s shares in the family company into a trust to avoid inheritance tax.

17 thoughts on “Ahahahaha…..tax avoidance in the Labour Party”

  1. “But even though this is tax compliance I can’t wait for the insistence that this is just as moral as placing one’s shares in the family company into a trust to avoid inheritance tax.”

    Hadn’t we determined that Margaret Hodges was actually right in claiming that IHT wasn’t paid on family businesses (regardless of being in a trust or not) ?

  2. The Thought Gang

    @ Shinsei

    I don’t recall that. I think it was accepted that Stemcor wasn’t doing anything avoidy with corporation tax… but her ‘personal’ situation hasn’t had much focus. Possibly because she lawyerd up promptly when the questions about Stemcor were asked.

    And besides.. even if it is *legal* for multi-million pound family shareholdings to be free of IHT.. is it *moral*?

  3. The thought gang

    “And besides.. even if it is *legal* for multi-million pound family shareholdings to be free of IHT.. is it *moral*?”

    If they are leftists then yes of course it is. for they have good intentions and are therefore following the spirit of the law. If you have bad intentions (as defined by not being a leftist) then it is not moral.

    I thought it was obvious that morals and the spirit of the law should always be interpreted from a leftist perspective.

  4. @ Shinsei

    yes that’s true – holdings in unlisted trading companies are currently not subject to inheritance tax

    that’s not the same as saying that they weren’t subject to inheritance tax when the shares were originally transferred to the trust, nor is it the same as saying that one of the potential reasons for transferring shares to a trust is to protect from future changes to the IHT regime however

    it may well be a coincidence, but there is quite a high correlation between private wealth in unlisted trading companies and trusts in my experience

  5. “And besides.. even if it is *legal* for multi-million pound family shareholdings to be free of IHT.. is it *moral*?”

    Well unless you want every privately owned (ie mostly small to medium sized ones, the backbone of employment in the UK) to be liquidated on the death of the owner in order to pay the IHT, then yes I’d say its very moral indeed. If the State plans to expropriate 40% of the value of all private businesses every generation or so, it doesn’t bode well for economic growth really does it?

  6. The Pedant-General

    Jim,

    So why do death duties apply to inherited estates?

    The ownership of the company – as amended by the sale or transfer of shares – is entirely unconnected with the operation and balance sheet health of the company concerned.

    The problem here is very chicken and egg. IHT applies on the asset value. The asset value IS the share price. If shares have to be sold to others in order to pay IHT and other buyers do not materialise, it shows that the share price is too high, at which point, the IHT is also too high….

  7. @Pedant General: what do you mean by ‘inherited estates’? If you mean agricultural land then they are exempt from IHT if you have either farmed it yourself for 2 years or owned it for 7+.

    As for the valuation of businesses etc – a) not all private businesses are incorporated, and the assets are privately owned, meaning assets would have to be liquidated to pay IHT and b) where they are incorporated the shares still would have to be sold to pay the IHT, thereby disrupting the ownership/growth of the businesses considerably. And the value of the company (for IHT purposes) is not just what you sell the shares for – are you suggesting that the executors could sell the shares for peanuts and HMRC would accept that as a valuation?

  8. I don’t understand why there’s a tax benefit here – wouldn’t he pay equal CGT if he sold the shares for cash and then made a donation, than if he donates the shares?

  9. Dan: If you donate Business Assets (these shares would qualify) you can claim “Gift Hold-over Relief” until the shares are eventually sold.

  10. The Thought Gang

    @ Jim

    “Well unless you want every privately owned (ie mostly small to medium sized ones, the backbone of employment in the UK) to be liquidated on the death of the owner in order to pay the IHT,”

    Ok. Firstly, I did specify ‘multi million pound’ interests. By all means have exemptions for small businesses if that tickles you.

    Secondly, as per others, you no more have to liquidate a business to pay the IHT thereon than you have to demolish a house to pay IHT on that,

    But, hey, maybe it is ‘moral’ that Hodge’s children get hugely valuable income-producing assets free of charge.. just by luck of birth.. but if you or I work hard to earn a wage we’ll have to hand 40% of it over so that Hodge can earn a tasty wage pontificating about how everyone (else) should pay more tax.

  11. “maybe it is moral that Hodges children get hugely valuable income-producing assets free of charge.. just by luck of birth”

    Yes it is entirely moral, her two facedness notwithstanding. Her forebears worked hard to create the business and IMO have the 100% natural right to give that to their children without the State getting even one of its sticky fingers on it. Just because she’s a c*nt doesn’t mean that the rest of us should have our assets expropriated by the State when we die.

  12. The Thought Gang

    I guess we have a philosophical difference of opinion on IHT. Personally, I’d rather see my children pay tax on my endeavours when I’m dead, than me pay tax on it when I’m alive.

    In the interest of full disclosure.. I don’t have any kids, and might suddenly think differently if I do. Although my parents are under strict instructions to die with as little left in the bank as they possibly can. I’ll sort myself out.

    Your view on IHT is entirely valid.. given I’ve no evidence that you’re prone to preaching about wealth inequality and the likes. But those who demand higher taxes on the money I earn, whilst demanding no taxes on the money their kids do not earn, can fuck off.

  13. @The Thought Gang:

    Bear in mind that if Hodge’s children get valuable income-producing assets they’ll be taxed on that income. From the point of view of the child, it might seem a little unfair to have to pay 40% tax on the assets up front, on a value which is based largely on the income they might generate, and then another whack of tax on the income itself. It’s like having to buy your house and then still pay rent on it.

    I don’t like IHT simply because it’s a very clumsy tax with a huge number of anomalies, that has an effect on what people do which is disproportionate to the amount of tax raised. Bin it and charge CGT on death, says I.

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