Dispatches : Secrets of the Taxman
If you missed Dispatches last night you can catch up now. Also copy below from the nice people at Channel 4.
It’s a perfectly legal activity. Frowned upon by some and actively encouraged by others. Tax avoidance is now a subject that has taken centre stage of the political debate. The Chancellor has described some tax avoidance as ‘morally repugnant’ and The Prime Minister has called it ‘morally unacceptable’.
Nobody likes paying taxes but with nation’s finances in such a desparate state the job of collecting tax revenue has become vital to fund public services. And that jobs falls to Her Majesty’s Revenue and Customs.
Recently HMRC has been criticised for doing ‘sweetheart’ deals with companies like Goldman Sachs and appearing not to care enough about avoidance schemes like the one used by comedian Jimmy Carr to avoid paying income tax. To some, it has appeared that when it comes to paying tax there is one rule for the rich and big business and another for everybody else.
We at Dispatches decided to take a closer look at those who are running The Revenue. At the top, is a board with non-executive directors who have the job of holding the HMRC to account. These directors are appointed to ensure the highest standards of governance and advise on the Revenue’s strategy.
The first board director we looked at was Phil Hodkinson, a former finance director at banking group HBOS plc. Hodkinson has a very important role at the Revenue as he is the chair of the HMRC’s ethics and responsibilities committee.
On the HMRC website it states that as well as being a trustee of the BBC’s Children in Need he was a director of a FTSE 100 company called Resolution Ltd, where he earns more than £125,000 a year for a few days work a year. Following a few inquiries about this company, it quickly emerged that Resolution Ltd was not structured like a typical FTSE 100 company.
Resolution Ltd is in the business of buying – and within a few years – selling life insurance firms for a large profit. Although its main operating business, like Friends Provident, are all in the UK, the listed firm is actually incorporated in Guernsey for tax purposes. This means the company’s board, of which Hodkinson is part of, has to fly to Guernsey to make key strategic decisions.
Why would a company go to this length? Resolution Ltd and Mr Hodkinson insists the company is not in Guernsey for tax purposes but other financial reasons. Yet that appeared to contradict a statement in Resolution Ltd’s own company documents. Tax experts we spoke to explained that one tax Resolution Ltd will not have to worry about is a tax on any capital gain they make from selling a life insurance firm.
If they were resident in the UK for tax purposes, then they might potentially face a large tax bill when they dispose of parts of their business. There are some exemptions that might apply but the taxation of life assurance funds is very complex and being offshore in Guernsey means Resolution Ltd does not have to worry about any future corporate taxes on the sale of UK businesses.
Mr Hodkinson told us that as a board member of HMRC it was important to him that tax avoidance wasn’t a motivation for being in Guernsey and that the Revenue was aware of his role with Resolution Ltd.
Dispatches also examined the outside interests of other board directors. Until a few days ago, John Spence chaired the HMRC’s audit and risk committee. Mr Spence is also non-executive chairman of SpicerHaart – an estate agent and financial services group.
One of the most controversial areas of tax avoidance is schemes to enable the wealthy to avoid paying stamp duy when they buy a property. We were surprised to discover a manager at one of SpicerHaart’s branches advertising that he could help buyers avoid up to 50% stamp duty, which he confirmed through a series of emails and a phone call.
We decided to ring a few more branches up to see how widespread this was. We called a number of branches of Fine, SpicerHaart’s top-end agency, and one of their associate directors said he’d be able to help us avoid stamp duty using a perfectly legal scheme. As a prospective buyer, we arranged to view a £2.6m property he was selling and when we met him the SpicerHaart employee claimed if we used the scheme we could avoid paying more than £50,000 in stamp duty.
He told us he’d already helped tycoons from China and India avoid large stamp duty bills.
Mr Spence told us that SpicerHaart does not condone any schemes that avoid stamp duty and the two managers Dispatches had spoken to had broken company rules.
During the course of our investigation we also discovered that the outgoing chairman of HMRC, Mike Clasper, was a director of subsidiary company of Which? Ltd, which uses the offshore tax haven of Mauritius to invest in its publishing venture in India. Tax campaigners claim companies use Mauritius in this way to avoid paying certain taxes in India.
Clasper told us the company was not avoiding taxes either in India or the UK.
The man who will be replacing Clasper is Ian Barlow, who was a senior partner of accountancy firm KPMG. When we looked at his track record we discovered that during the time he headed up KPMG’s tax department the firm was involved in a number of controversial tax avoidance schemes that ended up in court. One was aimed at helping a corporate client avoid some £4m in VAT.
The HMRC told us they were aware of Barlow’s past and had hired him for his extensive knowledge of tax.
In its attempts to bring in more tax revenue, the HMRC has recently awarded contracts to a number of debt collecting agencies to chase upto £1.5bn in unpaid taxes. As part of our investigation, Dispatches decided to look at some of these firm. One company that won a contract to collect £100m in unpaid taxes was Apex Credit Management Ltd, which is based in Stratford-upon-Avon.
But once again, inquiries quickly began to reveal it was not as simple as that. A corporate ownership structure emerged that revealed Apex Credit Management Ltd was ultimately controlled by a firm based offshore in Guernsey. While this is all perfectly legal, tax campaigners might ask if it’s appropriate for HMRC to award a contract to collect UK takes to company whose main corporate owner is located in a tax haven.
HMRC told us that Apex was registered in the UK and won its contract through a proper tender process. It added there was no legal reasons to exclude them.
Original article here.