Richard Murphy is one of the country’s go-to guys on tax avoidance investigations. But he’s totally missed the point of the BBC show. Far from attempting to create an advertisement for tax avoidance, the good citizens of Crickhowell are highlighting the disgraceful way that, when it comes to tax, only the little guy pays.
Yes, there’s a risk that villagers across the country will ape this little corner of the Brecon Beacons and set up similar aggressive offshore structures, but it’s highly unlikely. For starters, HMRC would clamp down on them quicker than you can say “I love Jersey”.
In this game, while the likes of Vodafone get to have fireside chats with the taxman to discuss how much they feel like paying, the little guy ends up in court.
Having said that, it will be fascinating to learn how the villagers have done it. I asked a tax expert, who was equally intrigued. He said that, while it would be possible for Joe Bloggs the butcher to set up a new company in low-tax Jersey, under the Controlled Foreign Companies Act he’d still have to pay UK taxes on the profit he makes here.
He could set up Joe Bloggs Trading (Jersey) Ltd to supply his meat, Joe Bloggs Cleaning Services (Jersey) Ltd to launder his aprons and Joe Bloggs Steelcare (Jersey) Ltd to sharpen his knives, paying them all for their services and thus reducing his taxable profits. But it would only slice a small percentage off his tax bill. Worse still, the savings would be outweighed by the heavy fees he’d incur.
And there’s the rub. As my tax expert put it: “If you had £100m profit I could save you £1m and it would cost you £100,000. If you had £1m profit I could save you £10,000 but it would still cost you £100,000. If you’re big, the fees are worth paying. If you’re not, you’ve just got to pay your taxes.”
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