With your head in the sand, your backside’s exposed

Regular readers will be more than aware that my favoured punishment for tax evaders (and their launderers) is for them to have their tender bits nibbled away by fire ants.  Tax avoiders fare slightly better in the Grossey Scale of Punishment: they can have ordinary ants,which tickle like the devil but probably won’t cause lasting damage.  But a couple of stories in the news recently have made me wonder whether I should reassess my position.  Back in June 2012, three chaps from Take That (an all-male musical combo popular in the 1990s, I understand) were outed as investors in schemes managed by Icebreaker Management Services.  According to the Icebreaker website, the schemes were designed to support “commercial projects in the creative and technology industries [and] income from these projects is shared between the relevant Icebreaker LLP and the companies involved“.  HMRC took a rather more jaundiced view, and claimed that they were tax avoidance schemes.  And indeed, shortly after the three Take That-ers became directors of Larkdale LLP, the partnership reported losses of more than £25 million – which they could then offset against their tax.

Fast forward two years, and a tribunal has now declared in favour of HMRC.  (Is it just me, or have those three aged more than two years?  Maybe it’s the greying stubble.  I know how they feel.  Greying, that is – not stubble.)  In his ruling, Judge Colin Bishopp said: “The underlying, and fundamental, conclusion we have reached is that the Icebreaker scheme is, and was known and understood by all concerned to be, a tax avoidance scheme.”  That’s the interesting bit, isn’t it?  “Understood by all concerned”.  Some of the others concerned have also come to light: on 15 May, ex-hurdler Colin Jackson robustly defended his investment: “The law of the land had stated that you can write those [losses] off on personal tax if you lose.  If you gain, you have to pay the tax.  They’ve now rethought it, reissued it and said those schemes won’t exist any more which is absolutely fine because that certainly won’t stop me from investing into young people who need the help.”  And a few days later sports presenter Gabby Logan said that she had invested in Icebreaker in good faith: “I was advised about a business opportunity six years ago (2008) and I invested in good faith.  It was explained to me as a way of funding new acts in the music industry.  Because of information which came to light in 2012, I decided the investment was not right for me.  With new professional help and advisers, I have for some time been working to resolve the issue and I fully intend to pay any tax which should have been paid, had I not entered the business.”

So how have I changed my position?  Well, not much, it turns out.  I don’t expect pop stars and sportsmen to understand finance and complicated tax legislation – any more than I expect them to be able to pilot their own private jets (unless they’re John Travolta).  But I do expect them to retain professional advisers with that detailed expertise.  And, more importantly, I expect them to have the sense they were born with: if someone suggests to you a scheme that is going to make you shed-loads of money (or save you shed-loads of tax), you – and your advisers – have to ask: why isn’t everyone doing this, then?  Maybe I’ve become too cynical, but my reaction would certainly be, why me?  Why am I getting the lucky inside track on this?  So I’m afraid that I’m not all that convinced by the protestations of ignorance – bring on the ants.

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6 Responses to With your head in the sand, your backside’s exposed

  1. Tanguy, Nikki says:

    Susan you make me laugh, the analogy of someone with the head in the sand and backside exposed certainly caused some chuckles around here.

    Not a pretty thought, but actually if it’s a Take That band member, maybe it is a nice thought!!

  2. Dear Nikki
    I hope you’re not spending too much time envisaging a young man’s bottom…! That said, the three from Take That look a bit grubby to me these days – maybe they’re not as trim as they were either.
    Best wishes from Susan

  3. David Maxwell says:

    Dear Sarah
    I love the headline, and the article and I sympathise with your comments, but I don’t fully agree with them. I can’t comment on Take That (partly because I would have to answer to my wife if I said a word against St Gary), but every subject has the right to plan his or her tax affairs efficiently. Yes, it would be nice if they were all incredibly altruistic and paid the full whack HMRC in its wisdom thinks they should fork out, but that is not going to happen.
    I think the true culprit in this is the Government, this one and the last lot. The tax regime in this country is so complicated, jammed full of loopholes, exceptions, rebates and allowances that no-one understands it fully. This has created a fantastic opportunity, and rich pickings, for intelligent and creative accountants to exploit the system for people whose tax bill has become so large that it becomes worthwhile for them to pay for these services.
    Many of these schemes, especially those that raised funding for the arts (and particularly the film industry) were encouraged by successive governments and given the nod by HMRC. It cannot be right that when the mood changes, suddenly the interpretation of the rules does as well. To commit a criminal offence, it must be clear when you carry out the act that it was illegal: that is not the case with many of these so-called tax crimes…

  4. Dear David
    I suppose this is what I meant by saying that it had made me reconsider. Perhaps these people are more optimistic than I am, but I have always felt that if someone offered me a good way to exploit the system, I would feel in my heart that there must be something wrong with it – not illegal, perhaps, but wrong. And I’m not sure it’s altruism that I hope for, exactly – more an awareness that there must be a reason for it needing to be so clever. Hard to explain.
    But, like you, I do feel that it is the legislators at fault here, for creating a system with shading when it should be much clearer. Personally (and this is only a half-formed thought, so I may change my mind!) I do wonder whether it wouldn’t be better to have tax levied much less on income and much more on expenditure.
    And I’m not sure that they’re being charged with a “tax crime”, are they – aren’t they just being asked to make good on the (what is now considered to be) unpaid tax? St Gary’s halo is a bit tarnished, but not removed!
    Best wishes from Susan

  5. Pingback: All in the mind | I hate money laundering

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