Tax avoidance in spotlight once more, but not how you think

Industry news roundup: week ended 19 Sept 2013:

So here it is, plain as day: there’s way too much tax avoidance going on right now, but much of it is coming from within the Government if you can believe it!

There’s an old spooky story where a young woman is receiving threatening phone calls. She rings up the police and they tell her they’ll trace the call, and after the latest one the coppers call her back. “Get out right now,” they tell her. “The call is coming from inside your own house!” Well, that’s how I feel about this particular set of news, as it turns out that there’s some rather shoddy accountancy practices emerging right from Her Majesty’s Revenue & Customs.

First, it turns out that David Heaton, an HMRC tax adviser – one that sits on the GAAR panel, for pity’s sake – had to vacate his position after he was caught on film talking about ways to get out of paying your fair share. In fact, he said that if you followed his instructions you could keep the taxman’s ‘grubby mitts’ off your hard-earned cash.

So let me reiterate this in case you’re having trouble understanding: Heaton, who gets paid by HMRC to be on a panel for rooting out tax avoidance, was caught going around telling people how to avoid paying your fair share.  Does this give anyone besides me a monster headache?

Meanwhile, this isn’t the only instance where the Government has been found implicitly endorsing tax avoidance. It also came out this week that the shares-for-rights employment scheme is being abused by private equity firms as a route to eliminating some of their debt to the tax authority.

The scheme is relatively simple – a worker can receive a share that could be valued anywhere from as low as £2,000 to as high as £50,000 and that would be exempt from capital gains tax, provided they give up a whole raft of employment rights like redundancy pay-offs or taking time off for training purposes. Meanwhile there are whole firms that are taking advantage of this and perverting it – like the sale of Whitworths, a dried fruit supplier, from its former owner European Capital to Equistone, another private equity firm.

The £90 million deal would see eight senior managers being given £50,000 in shares each from Equistone – and if these managers sell these shares and turn a profit, the 28 per cent capital gains tax will be waived. In other words, they’re getting £50,000 each tax-free, thanks to a wrongheaded Government scheme. Thanks, Chancellor! Bloody idiot.

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