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Osborne 'shocked' by amount of tax avoidance by rich

The 20 biggest tax avoiders legally reduced their income tax bills by a total of £145m in a year

10 Apr 2012 Accountancy Age

By Richard Crump

george-osborne-conference

THE CHANCELLOR has said he is "shocked" that some of the wealthiest individuals in the country are paying "virtually no" income tax.

George Osborne told The Telegraph that he has seen "anonymised" tax returns which show that some of highest earners in the UK are able to avoid paying income tax entirely.

A study by HM Revenue & Customs (HMRC) found that multi-millionaires are using aggressive tax avoidance schemes to reduce their income tax to an average of 10%.

Osborne was not shown the details of the individuals involved, but told The Telegraph that the returns he had seen revealed that the 20 biggest tax avoiders had used three main loopholes to legally reduce their income tax bills by a total of £145m in a year.

The loopholes include writing off business losses, offsetting the cost of business mortgages or borrowing on buy-to-let properties against their income tax bills and taking advantage of tax relief on charitable donantions.

"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," Osborne told The Telegraph.

"I'm talking about people right at the top. I'm talking about people with incomes of many millions of pounds a year.

Visitor comments

The sound of silence

Are tax specialists still on holiday or has this news item stunned them into silence? What are the tax community's views of this development? The general public are agrieved.

Posted by from the outside looking in, 10 Apr 2012

Losses etc

Yes - it is truly shocking that loan interest can be claimed against income. It is even more shocking that, if such interest contributes to a loss in year one, this loss can be carried forward and offset against a profit in year two. No wonder we are in a mess!

Posted by Ludwig, 10 Apr 2012

Let's attract more of these "tax whales"

Who cares that they only pay 10%. 10% of someone earning £10m+ a year is still £1m in direct tax, plus all the VAT raised when they spend their money whilst living here.

It takes 120 people on average UK wage to pay the same amount in tax.

Surely we should be attracting more of these "tax whales" to swim to the UK.

Posted by Dave Chaplin, 10 Apr 2012

Not the Tax Accountants fault

Income from property on a buy to let basis is taxed as the "Top Slice" of income, or on top of any employment you may have had. Secondly, this vehicle of taxation on the Income Tax Return is effectively operated on a sole trader basis. Why then if a small sole trader generates losses in year 1 and carries them forward in to years 2, 3 and beyond should the property investor not be allowed to. Don't clamour for change when the vast majority of people pay tax on proceeds from property properly. I guess you would be one of the people who cry foul play if Buy to Lets were done on a Gross Receipts basis, undermining the property market in the UK further? Never look at Tax and the economy on an isolated basis, otherwise we could pick holes in the budget all day long. Unfortunately the media continues drive home the notion that people who are high earners are bad people. We should ask questions of the people who write and enforce legislation they are the issue. People will exploit loopholes all year every year if they are available of that there is no doubt

Posted by Mani, 10 Apr 2012

Why is Osborne shocked?

Why would George Osborne be shocked to find out that the rich are paying little or no tax. When it has long been known that the poor don't pay tax because unfortunately they don't have the income, the rich don't pay because they can afford to pay for help to avoid paying tax, so the tax burden for the UK has always been born by the middle classes.

Posted by Peter Standing, 10 Apr 2012

Tax avoidance is legal

Mr Osborne should clearly get out a bit more often if he is surprised by this! High earners engage accountants to help them mitigate tax, and they will continue to do so, with the protection of the law. What happened to the basic principle set out in the Courts that “Every man is entitled if he can to arrange his affairs so 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 that 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” (IRC v Duke of Westminster [ 1936 ] AC1 (HL)).

Posted by Geoffrey, 10 Apr 2012

Shocking

Maybe the irony of the first comment was lost on the second commentator. I am a tax practitioner and was hoping to read of some juicy scheme I would kick myself for having overlooked, but what do we see - offsetting business losses, charitable donation, and interest expenses. You can argue whether charitable donations should be tax deductible but if you have a business mortgage or make losses why on earth would the general public not expect them to reduce taxable income? Spare us the synthetic anger George

Posted by Cotswolder, 10 Apr 2012

everyone loves to knock the rich!

I don't know why George was surprised - he must have some friends in that list! No seriously now, tax is a cost. Like every other cost you face in life or business you do want you can (within the rules) to minimise it.

Anyone and everyone who is being honest with themselves wants to have more money in their own bank accounts and to reduce their costs - and lets face it it is easy to knock the rich and complain that they don't pay their fair share. But tax isn't fair ... and the politicians can change the tax rules and they frequently do!

But let me pose another question to you, gentle reader. Would you take the gamble of putting your house, car and financial health on the line to start a business? Would you gamble being homeless to provide employment for other people? Well that is what I did, and what other people who started up a business did and do. So if I take such a huge gamble, why can't I get tax relief for the cost of borrowing against my house to fund a business? and Ludwig calls getting this sort of tax relief truly shocking!

I think that too many people lose sight of something basic and important - as Bill Clinton memorably said 'its the economy stupid!' Well the Government and the media talk about the economy, but at an everyday level it means businesses like mine making a profit and employing people. don't forget, no profit = no jobs. Tax is a cost, reduce my tax bill and I make more profit.

As a tax saving specialist, I say 'get real' to those who whine about business people not paying enough tax.

Posted by jonathan Vowles, 10 Apr 2012

Really?

Assume most people would organise their affairs to pay the most tax and no-one on benefits would ever position themselves so as to maximise them, or claim what there were not allowed. uk hypocrisy, jealousy and envy is what made me leave and join a country where I will pay 10% and who are shocked that we in the uk give handouts and houses to people who do nothing when their families should look after them. My tax exit from the uk has cost the salaries of 15-25 nurses.... Careful how hard you push the so called rich... You need them to contribute 79% of uk taxes.

Posted by Bob dobalina, 10 Apr 2012

It's Time For A Crackdown On All These Cheats!

The 'ordinary man and woman' pays their taxes, and the majority appreciate the reasons why. However, these 'cheats' need to be stopped without further ado! Where there are legal loopholes they must be closed forthwith, and the culprits brought to book, in court if need be.. I know of hardworking people and pensioners who are being relentlessly chased by HMRC for relatively small amounts, and yet here we are with the very rich managing to pay little or even no tax because of 'clever' tax avoidance schemes - the 'experts' who dream them up should also be ashamed of themselves - just totally unacceptable! Come on Mr Osbourne, start doing the business now on behalf of all taxpayers!

Posted by K J Stones FCCA FCMI, 10 Apr 2012

Expensive accountants?

Does it really take a clever, expensive tax accountant that only the rich can afford to advise his client to set off his losses against his profits, claim relief for interest on business-related borrowings and for charitable donations? Does the Chancellor really regard these as "aggressive tax avoidance schemes"? As total taxable income is calculated AFTER these deductions, I fail to understand how they reduce the rate of tax payable on taxable income. I think our Chancellor, may be a little confused.

Posted by Tim, 10 Apr 2012

Interest

Thankyou Cotswolder. Am I all that obscure?

Posted by Ludwig, 10 Apr 2012

Osborne 'shocked' by amount of tax avoidance by rich

I can't see Osborne surviving after admitting this.

If he really didn't know, he’s either lying or stupid.

Everyman in the street knows the well off have been avoiding tax for years, and we didn’t need to see a tax return to prove it.

Cameron did an interview with Andrew Marr before he became PM on just this subject.

Posted by David Lambert, 10 Apr 2012

 

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