One Show presenter Matt Baker famously asked David Cameron, “How do you sleep at night?” It’s a question that could reasonably put to many of the UK’s political elite over their astonishingly hypocritical attitude to taxation.
Contractors could be forgiven for thinking that, despite the apparently widespread adoption of tax avoidance strategies by those elected or appointed to high office, HMRC only appears to target us, the general public. As with the MPs’ expenses scandal of 2009, it seems that there are plenty of rules for us, but none for them. And, when they are subject to rules, those rules are either so loose as to be worthless, or so lightly enforced that they may as well not be there.
Despite introducing IR35 in the early years of his term as Prime Minister, according to Private Eye and later reports by Robert Mendick in the Telegraph and similar Mail Online reports by Sam Greenhill and Daniel Martin, Tony Blair appears to have adopted a tax management strategy the envy of your average business mogul. Depending on which report you read, Blair incurs between £8m and £11m in unattributed administrative expenses on a turnover of £12m, and pays only £315,000 in corporation tax. Wow, his accountants are good – where do I sign up?
There is a very good chance that, had a run of the mill contractor like you or me, been paid highly and frequently for delivering our personal services in a context where a substitute would be unacceptable, we’d have a status inspector from HMRC breathing down our necks like a shot. In that situation it’s likely we, and Blair, would fail the other tests of employment of an IR35 fishing exploration. So we’d be seen by the taxman as ‘high risk’, yet Blair isn’t. Why not?
Next on the list is former Foreign Secretary David Miliband, brother to hapless Labour Party Leader Ed. According to Mail Online, David Miliband is paid up to £21,000 a day for his personal services. And the Mail on Sunday’s Glen Owen reports that he is also using an intermediary – in this case a limited company – to bill for earnings based on delivering personal services.
What’s more, Miliband is using an ‘income shifting’ strategy to split income with his wife on a 50:50 basis, when that income is based purely on his earnings-generating activities. This is an approach the former Labour government in which he served vowed to outlaw. So where’s the HMRC inspector ready to pounce with a copy of the settlements legislation? Why is Miliband not in the high-risk band for IR35 – after all, IR35 works on a contract by contract basis?
These are just two of the more blatant and high profile examples of what appear to be the keen tax-avoidance habits of some of our political elite. There are no doubt many other tax-evasion skeletons to be found in the cupboards of many other current and former politicians. And, as the expenses scandal showed, politicians of all parties were involved, yet despite a very small number of high-profile imprisonments, many of the worst offenders were simply allowed to quietly resign from parliament at the next election.
It should also be noted that, with a current cabinet in which 23 of the 29 members are millionaires or multi-millionaires, it would not be beyond the realms of possibility for them to have taken advantage of some ‘interesting’ tax avoidance measures.
Let’s get this straight: The business acumen and hard work by Blair et al that goes into earning those staggering sums is to be applauded. If you have a lot to contribute and are handsomely rewarded, there’s no shame in it. Indeed, that’s what keeps most contractors going in the career path they have chosen.
But to then flirt with the extremes of tax avoidance strategies that you have tried to legislate out of existence for the rest of us smacks of the deepest hypocrisy – even in the current generation of politicians who excel at a ‘do what I say, not what I do’ style of political leadership.
That’s why we could all be forgiven for thinking that there are no rules for them, just rules for us that HMRC delights in selectively enforcing.