Churchill Taxation
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It’s been an Icebreaker

May 17th, 2014 by

It’s been an interesting few days. Yet again tax avoidance has been in the press, all over the TV. Everyone has an opinion.

Gary Barlow was “found guilty” (as one paper put it) of investing in a product that had tax avoidance as its main purpose. Hmmm. And as a result Margaret Hodge suggested he should give back his OBE.

Very interesting train of thought. Gary Barlow, one of 1,000 participants in that particular product, had been advised to invest cash in an entity which raises funds for the entertainment industry. No doubt the conversation went along the lines of “And as a thank you for helping the entertainment industry, HMRC provides tax breaks within the legislation”. In effect, he invested in a product which was legal and he no doubt thought was a genuine commercial arrangement (let’s not forget this is only a First Tier Tribunal case and might yet be appealed).

As a tax adviser, I have seen similar types of products sold over a number of years. Clients generally speaking don’t want to understand the minutiae of the investments they make – that’s what they pay (quite handsomely) the advisors that they have on board. If they can invest in a worthwhile cause, with a chance of making a bit of cash along the way and securing tax breaks, why would they say no? If Icebreaker got it wrong and the product ultimately fails in the Courts on the ground of commerciality, how is this the fault of the investors? In what other walk of life would we blame the investor if the investment manager gets it wrong and the product fails to deliver?

From inside the profession, it is infuriating to watch the spin that is put on such cases in the media, which we all know only tells part of the story. However, from HMRC’s point of view, it is no doubt a gift from up above. A high profile case and a great way of warning off other taxpayers (particularly those in the public eye) from even attempting to minimise their tax bills. Even though it was perfectly legitimate. And let’s not forget, if the product ultimately fails, the participants will pay back all the tax plus interest. So the Treasury won’t be out of pocket.

As to whether Gary Barlow should return his OBE, in my opinion, unless they criminalise tax avoidance and tax mitigation, he ain’t done anything wrong and shouldn’t be publicly shamed. If he really wanted to avoid his UK taxes, he would simply move abroad.

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