In the week in which the coalition will announce massive cuts to public services three high-ranking cabinet ministers face accusations of tax avoidance. Chancellor George Osborne – the man who on Wednesday will spell out the cutbacks the country must suffer – international development secretary Andrew Mitchell and transport secretary Philip Hammond are all named in tonight’s Dispatches, to be broadcast on Channel Four at 8:00, as having saved millions in taxes.
The programme will reveal that Mr Mitchell invested at least £130,000 into offshore investment funds, one of which is based in the Caribbean tax haven of the British Virgin Islands. A British Virgin Islands company won’t pay corporation tax; if it was a UK company owning the property it would pay corporation tax – so clearly there’s a saving there.
The benefit to investors of investing in such a fund is that they will pay tax as and when they cash in, but in the meantime there are better investment returns because the company has got 100 per cent to reinvest rather than about 70 per cent.
Of Mr Hammond, the programme reveals he “did a Philip Green” – i.e. he transferred some of his assets over to his wife, resulting in a much-reduced tax bill for the millionaire. Last October, he transferred 40 per cent of his shares in Castlemead Ltd. (a company which has paid him £3.75 million in dividends since 2003) to his wife.
By transferring shares to his wife, the programme explains, any payouts she receives from the company could be taxed at a lower rate, and the fact that Mr Hammond made this transfer last October – just six months before the new higher rates of tax for high-earners was introduced this April – makes this potential tax saving even more valuable. According to tax experts, she stands to make a tax saving of £180,000 for every £1m of profit.
On to Mr Osborne, and Dispatches reveals his family has set up offshore trusts, one of the most common ways for the super rich to avoid paying inheritance tax – put simply, there will be no inheritance tax to pay on the death of Mr Osborne’s father, a saving of up to £1.6m.
Mr Osborne no longer declares his interest in his family trust in the House of Commons register of members’ interests.
Left Foot Forward has repeatedly highlighted the allegations of tax avoidance made against the Tories, and the party’s refusal to take action against it, from Lord Ashcroft to Philip Green and the circle of hedge fund managers surrounding the chancellor, and in February, we reported how the Conservative party’s MEPs voted against reforms to clamp down on tax dodgers.
For all the rhetoric of Danny Alexander…
“We will be ruthless with those often wealthy people and businesses who think they can treat paying tax as an optional extra. This will mean: A crackdown on those hiding money offshore. And that includes not only those who illegally evade tax but those who use entirely legal means to avoid paying their fair share to the taxman.”
And Nick Clegg…
“We will crack down on the super rich who hide money overseas.”
…it appears that their coalition partners have no intention of closing down the loopholes from which so many of them appear to have benefited so generously at the expense of us all. We’re all in it together, so they say; some more in it than others.