Thursday, January 31, 2013

Charity raised £176m, good causes got £55,000



From The Times - http://www.thetimes.co.uk/tto/money/tax/article3673519.ece


One of Britain’s biggest charities is a front for tax avoidance, The Times can reveal.
Wealthy donors used the Cup Trust to avoid £46 million in tax in an extensive abuse of Gift Aid incentives designed to encourage charitable donations.
The registered charity raised £176 million between 2010 and 2011. In 2010 it attracted more donations than the Royal Society for the Protection of Birds, the British Heart Foundation or the Salvation Army.
But instead of using the money for its stated objective, to “improve the lives of young children and adults”, it carried out trades that artificially generated Gift Aid for donors to reduce their tax bills. Investors who “donated” £1 million to the Cup Trust, for example, would receive most of their money back — but still be entitled to claim Gift Aid worth between £250,000 and £375,000.
“Of all the tax avoidance schemes I have come across, this is perhaps the worst,” Margaret Hodge, chairwoman of the Public Accounts Committee, said. “I thought I was past being shocked, but this genuinely has shocked me.
“To exploit a mechanism designed to encourage charitable giving in order to avoid tax is just disgusting. The Charity Commission certainly has questions to answer about how such flagrant abuse was allowed to occur.”
The Cup Trust is only one of several tax schemes on the market that manipulate charity law, The Times has learnt. George Osborne, the Chancellor, introduced a cap of £50,000 on charitable tax relief last year after identifying widespread abuse. But an outcry from philanthropists persuaded the Government to change its mind.
“A lot of people thought Osborne was excessive, but this case just proves that something needs to be done,” John Hemming, chairman of the Charity Tax Group, said. “The public will mistrust charities when this sort of activity is undertaken. It’s up to the authorities to stop this.”
Charity experts questioned yesterday how the Charity Commissiongave the Cup Trust a clean bill of health, despite a two-year investigation into its “governance and activities.”
The regulator, which has had its budget cut by a third, failed to take action despite the charity’s accounts disclosing that it was controlled by Matthew Jenner, the boss of NT Advisors, a well-known tax avoidance firm whose initials stand for “No Tax”.
“The commission were and are wholly unable to tackle this huge abuse of the charitable sector,” one former Charity Commission employee said. “Usually they have one accountant spread across many, many cases with limited investigative time or ability to obtain documents.”
The Revenue admits it is “well aware” that many tax avoidance schemes involve Gift Aid, introduced in 1990 to allow charities to claim tax relief on all donations. Donors paying the higher 40 or 50 per cent rates of tax can also claim Gift Aid to reduce their tax bill to the basic rate of 20 per cent.
Mr Jenner exploited these rules by arranging for the Cup Trust to purchase huge yearly quantities of gilts, or government bonds. It is understood that the gilts were sold for a minimal sum via third parties to investors, who then sold them at market value and “donated” the proceeds to the Cup Trust.
The end result of the complex transaction was that investors could generate large Gift Aid claims that could shelter other income simply by paying fees to NT Advisors and making a nominal donation to charitable causes.
The Cup Trust made sure that it donated this nominal amount to other charities to fulfil its “charitable objective”. In 2010, a payment of £55,000, representing 0.03 per cent of the total donations, was transferred to six unnamed “UK registered charities”.
Other NT Advisors schemes have attracted hundreds of high-net worth investors including the BBC presenter Chris Moyles and the comedian Jimmy Carr, who was exposed by The Times last year for investing millions of pounds in an aggressive tax avoidance scheme called K2. There is no suggestion, however, that these individuals invested in the Cup Trust, “The Cup Trust is a scheme which appears to function simply as a mechanism for deriving tax relief based on the Gift Aid legislation,” Alastair McEwan, of Rebus Investment Solutions, said.
“The scheme itself is designed to generate significant Gift Aid, in the region of £46.4 million, despite the fact that very little of the money is actually being used for any charitable benefit.”
Another person, with knowledge of the scheme, said: “It was a tax planning strategy to mitigate higher-rate income with no economic loss to the individual.
“There is a ‘donation’ per client. But obviously there is a mismatch between the amount the individual claims and the amount the charity gets in its hands.”
It is understood that legal changes will now prevent the Cup Trust from raising future funds, but will not affect claims already made for tax relief. It is not known whether HMRC has disputed these.

Tuesday, January 29, 2013

Amazon 'lays waste' to the high street with record £14bn in Christmas sales



From Daily Mail - http://www.dailymail.co.uk/news/article-2269842/Amazon-lays-waste-high-street-record-14bn-Christmas-sales.html

Amazon set to announce record Christmas sales as high street struggles


  • Internet store made £14 billion in worldwide sales in just three months
  • Amazon has come under attack though for avoiding millions of pounds in tax

Amazon is set to announce record Christmas trading as it continues to ‘lay waste’ to the beleaguered high street.
In just three months the internet store made £14 billion in worldwide sales – with one tenth of that from UK shoppers.
But Amazon has been under attack for avoiding millions of pounds in taxes. Critics say this enables the company to slash prices and undercut rivals.

An estimated 17,500 high street jobs are at risk after 1,400 stores closed down over the Christmas period. And industry experts warn more retail failures could see one in five shops boarded up.
Household names including HMV, Jessops, Blockbuster and Comet have all collapsed into administration during the past two months.

Yet Amazon’s expected sales rise is an increase of almost a third compared with 2011.
Waterstone’s founder Tim Waterstone previously said Amazon had a ‘rude, contemptuous, arrogant and subversive’ attitude to competitors.

And John Lewis boss Andy Street has called for a ‘level playing field’ to stop it ‘out-trading’ rivals.
Amazon was also dubbed ‘immoral’ for avoiding tax by funnelling revenue to Luxembourg.

In 2011, the most recent year where figures are available, Amazon paid just £1.8 million despite raking in sales of £3.35 billion in the UK – a figure the firm tried to keep secret until it was exposed by MPs.




Sunday, January 27, 2013

Libor Scandal summarised

From FT - http://www.ft.com/indepth/libor-scandal


From COMPANIES Jan 25, 2013

Ex-Barclays chiefs named in Libor case

Bob Diamond, chief executive of Barclays©Bloomberg

Former bank executives among 25 detailed in regulatory case

From COMPANIES Jan 24, 2013

Barclays top brass face fresh Libor heat

Email suggests executives knew about lowball submissions

From COMPANIES Jan 24, 2013

Barclays executives named in Libor case

Diamond and Ricci are among those released to the High Court


From MARKETS Jan 23, 2013

UK watchdog investigation into possible rule breaches

From COMPANIES Jan 22, 2013

Barclays staff lose plea for anonymity

Judge rejects request ahead of Libor-related damages lawsuit

From COMPANIES Jan 17, 2013

Barclays eyes bonus pool to pay Libor fine

Move comes as new chief warns employees over ethics

Chief Executive Officer of UBS, Andrea Orcel arrives at Portcullis House in London©ReutersFrom COMPANIES Jan 9, 2013

UBS’s Orcel admits banks must change

‘We became too arrogant,’ says investment bank head

UBS AG logo at the London offices©BloombergFrom COMPANIES Jan 10, 2013

Former UBS bosses deny Libor knowledge

Quartet say they did not know rate-setting system under scrutiny

From COMPANIES Jan 11, 2013

RBS eyes bonus pot to recoup Libor losses

Lender might dip into funds to help pay possible fine

Starbucks threatens Cameron after 'unfair' tax attacks


From the Telegraph - http://www.telegraph.co.uk/news/politics/9829108/Starbucks-threatens-Cameron-after-unfair-tax-attacks.html

Starbucks has threatened to suspend millions of pounds of investment in Britain after what it described as constant and unfair attacks over its tax affairs by David Cameron and the Government.

Photo: Getty
Kris Engskov, the multinational’s UK managing director, demanded talks at Downing Street after the Prime Minister said tax-avoiding companies had to “wake up and smell the coffee”.
Mr Cameron’s use of the phrase at the World Economic Forum in Switzerland last week was taken as a direct attack on Starbucks which has been criticised for not paying corporation tax in Britain.
Mr Engskov was so concerned about the “politicisation” of the tax issue that he asked for the talks at No 10, where he met officials last Friday. Starbucks argues that it makes no profits in the UK and so is not required to pay the tax. “The PM is singling the business out for cheap shots, a company that, it should not be forgotten, has pledged to pay tax now and into the future,” said a source close to the firm.
The warning on investment comes amid concern among businesses that Government rhetoric on tax avoidance is hurting their image while their creation of jobs and wealth is not highlighted. Today, Boris Johnson, the Mayor of London, tells The Sunday Telegraph: “We should stop bashing wealth creation — such talk is absolute nonsense.”
The US coffee chain has found itself under regular attack after it was disclosed that since its arrival in Britain in 1998, it has paid £8.5 million in corporation tax, despite total sales of £3 billion. It said last month it had made a profit in only one year.

Apple stuffs $1bn a week into tax havens

From Sunday Times - http://www.thesundaytimes.co.uk/sto/business/Tech_and_Media/article1202350.ece

iPhone display showing Apple share performance
APPLE is stashing almost $1bn a week beyond the reach of the American taxman after ramping up efforts to slash its bill.
The Silicon Valley company squirrelled away more than $11bn (£7bn) in its warren of subsidiaries in low-tax countries and tax havens in the final three months of 2012.
This legitimate manoeuvre raises the amount of cash Apple has shielded from the American authorities to a colossal $94bn, according to documents filed last week. The revelation will inflame public anger over tax avoidance by large corporations, which is raging on both sides of the Atlantic.

Wednesday, January 23, 2013

Davos man thrives while the rest of us pay for his excesses


from - http://www.guardian.co.uk/commentisfree/2013/jan/20/davos-world-economic-forum-bad-capitalism?CMP=twt_gu

'Dynamism' is the World Economic Forum's watchword as the way out of the crisis and it is meaningless


The village of Davos
The village of Davos where the World Economic Forum meets. Photograph: Fabrice Coffrini/AFP/Getty Images
More than 2,500 alpha men and women from more than 100 countries will descend on Davos this week to spend four days discussing the world's urgent need to adopt "resilient dynamism". This, the organising watchword for this year's annual gathering of panjandrums at the World Economic Forum, is allegedly the way out of the crisis. It is meaningless.
Who, for example, would support non-resilient stagnation? Western capitalism, and, arguably, global capitalism, has arrived at an apparent dead end. It is in profound trouble. But if the best answer to austerity and economic malaise is resilient dynamism every delegate should stay at home. As a call to action, you might as well urge everyone to be manly, womanly and decisive. Virtuous states of mind, but hardly blueprints for action.
In any case, for most of the business leaders attending Davos, the economic malaise is an abstraction. Profits as a share of GDP in almost all western countries are at record highs, along with executive pay. Meanwhile, real wages for the majority are stagnating, if not falling, justified by our economic leaders in Davos as the proper if sad consequence of "structural adjustment". Goldman Sachs, for example, shamed from deferring its bonus payments into the next financial year so that its staff could enjoy the lower tax rate, has just enjoyed a bumper year. Davos men and women are prospering. No structural adjustment for them.
There will doubtless be the usual appeals for more free trade, more scientific research and more investment in skills as the expensively clad executives move from seminar and sonorous keynote speech to reception and back to the dinner table. But what there will not be at Davos is a willingness to countenance a sea change in the way capitalism is organised. It can do what it will and that is to continue to confer fortunes on those at the top, with little risk, while directing pain on to others.
The paradox is that the chief reason capitalism is in crisis is that without such challenges it has undermined its own dynamism and capacity for innovation. Instead, it merely offers enormous and unjustified self-enrichment for those at the top.
Nor does the malign impact of inequality stop there. I was stunned to read in a recent IMF working paper, with the hardly catchy title Income Inequality and Current Account Imbalances, that the whole – yes the whole – of the deterioration of the British current account deficit between the early 1970s and 2007 could be explained by the rise in British inequality. It is a similar, if less acute, story across the rest of the industrialised or, rather, deindustrialising west.
What the IMF team shows is that as the share of national income devoted to profits and top pay rises to its current levels, so a noxious economic dynamic is created. By definition, there is less of the pie available to the mass of wage earners, whose real wages become squeezed. To sustain their living standards, they borrow, which has been easier than ever over the past 40 years as banks take advantage of financial deregulation. Overall demand thus carries on growing, but at the price of sucking in imports and ever higher personal debt levels for ordinary wage earners.
Finally, the music stops, as it has now, as both debt and import levels become unsustainable. The state of play in Britain – crazy levels of private sector debt and a record trade deficit – can thus be explained by the rise of inequality. And one of the chief causes of that, the IMF believes, is the decline in trade union bargaining power!