Tuesday, May 13, 2014

Philanthropists give millions to charity, but not the Revenue

from: http://www.thetimes.co.uk/tto/money/tax/article4088121.ece

HM Queen Elizabeth II and musician Gary Barlow on stage during the Diamond Jubilee concert

When David Cameron defended Gary Barlow by highlighting how much the singer did for charity, the Prime Minister tapped into a wider tendency among the super rich to chose philanthropy over the taxman.
Mr Cameron applauded Barlow’s participation in Children in Need, which raised more than £6 million in 2009. However, a year later Barlow and his Take That band mates Howard Donald and Mark Owen, along with their manager, Jonathan Wild, invested the first chunk of £66 million into the Icebreaker tax scheme.
Dozens of billionaires and multimillionaires minimise the amount of tax that they pay to their governments at the same time as donating hugely to good causes. Sir Philip Green, the Top Shop fashion mogul, saved about £285 million in capital gains tax when his company, Arcadia, paid out a £1.3 billion dividend tax-free to his Monaco-based wife, Tina.
Yet Sir Philip has given millions of pounds to charity, including recently pledging £100,000 to help London’s poorest people. In 2012 he estimated his contribution in direct and indirect tax at £2 billion.
Sir David and Sir Frederick Barclay, billionaire owners of the Telegraph newspaper group and high-end hotels, are residents of Monaco, a tax haven. They have donated £16 million to children’s hospitals and were knighted for their support for medical research.
Sir Frederick has said that the brothers left the UK for health reasons 23 years ago and continued to pay personal tax in this country for 18 of those years. “[Our]charitable donations far outweigh what we would have paid in tax if we had remained residents of the UK,” he said.
Philanthropy experts said that many super-rich people believe in a “smaller government” but still want to give something back.
“Some believe they know how to spend their money better,” said Beth Breeze, a director at the University of Kent’s Centre for Philanthropy. “When you pay tax, you feel out of control. You don’t have a say beyond the broad colour of the government. But donors can give their last penny to dogs, if they like, rather than cats. It’s about exercising personal choice.”
Dr Breeze pointed out that some billionaires, such as Warren Buffett, have called for higher taxes on the super-rich. “Some philanthropists feel cross about waste in the public sector,” she said. “But most people don’t like paying tax, whether they are rich or not.”
Theresa Lloyd, the author of the book Why Rich People Give, said there was no evidence that philanthropists avoided taxes more than anyone else. “On the contrary, the people I interviewed are good community citizens,” she said. “Having said that, seeing the difference that their money can make is undoubtedly for some very satisfying. It’s a sense that ‘I’m more effective and could make things happen more quickly’.”
Albert Gubay, the Welsh founder of the discount chain Kwik Save, whose wealth is close to £1 billion, has lived on the Isle of Man since 1971. In 2010 the devout Roman Catholic passed his companies into the hands of a trust, pledging to donate all bar £10 million to good causes.
Leanne Wood, Plaid Cymru’s leader, has questioned whether Mr Gubay’s wealth might have done more good had he remained resident on the British mainland. “By becoming a tax exile on the Isle of Man, Mr Gubay has boosted his personal fortune at the expense of the state,” she said in 2011. According to a profile in the Daily Express, Mr Gubay’s business mantra is: “Every penny wasted in business is a penny lost for the charity pot.”
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Saturday, May 10, 2014

Amazon's UK tax bill 10 million pounds on $7 billion sales

from: http://uk.reuters.com/article/2014/05/09/uk-amazon-com-britain-tax-idUKKBN0DP0Q920140509

A parcel travels along a conveyer belt at Amazon's new distribution centre in Brieselang, near Berlin November 28, 2013. ''  REUTERS/Tobias Schwarz
A parcel travels along a conveyer belt at Amazon's new distribution centre in Brieselang, near Berlin November 28, 2013. ''
CREDIT: REUTERS/TOBIAS SCHWARZ

Amazon.com Inc filed accounts on Friday showing a UK tax bill of 10 million pounds despite $7.3 billion sales in Britain, because the company reports most of its European profit in a tax-exempt Luxembourg partnership.
Amazon.co.uk Ltd reported a 56 percent rise in profit to 17 million pounds during 2013 on a 13 percent rise in UK revenues, which one academic said could mean the company came under pressure from the UK tax authority to change its tax arrangements.
Corporate tax avoidance has become a hot topic in Europe following revelations in the past couple of years about how companies like Apple and Google pay little tax in many of their main markets.
Amazon said it follows all the tax rules in every country where it operates. Apple and Google also say they pay all the tax they should. HMRC declined comment.
All Amazon customers in Europe contract directly with and pay Luxembourg based Amazon companies for the goods and services they buy. These companies reduce their taxable income by paying fees to a tax exempt partnership, also based in the Grand Duchy.
Amazon.co.uk is funded by its Luxembourg-based affiliates. The rates of such inter-company remuneration are usually agreed with the UK tax authority. In 2013, intercompany fees paid to Amazon.co.uk Ltd rose 40 percent to 449 million pounds.
The result was that Amazon's current tax bill for 2013 was its biggest ever.
"It's possible Amazon may have come under pressure from HMRC (the UK tax authority) to adjust their inter-company agreements," Prem Sikka, Professor of Accounting at Essex University said.
The amount of money Amazon.com Inc reports through the tax-exempt partnership that sits atop its European corporate structure has dropped sharply in the past two years, after the U.S. tax authority tightened rules it felt were being abused to shift profits.
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Take That stars face the music after tax ruling

from: http://www.theguardian.com/uk-news/2014/may/10/take-that-stars-face-the-music-after-tax-avoidance-ruling

Gary Barlow, Howard Donald and Mark Owen among investors likely to face hefty tax bills after tribunal decision
barlow take that tax tribunal ruling
Gary Barlow is among investors who may face hefty tax bills following the ruling. Photograph: Peter Byrne/PA
Around 1,000 wealthy investors including Take That's Gary Barlow, Howard Donald and Mark Owen could face hefty tax bills after a tax tribunal on Friday ruled that a partnership in which they invested was a tax avoidance scheme.
Barlow's Larkdale LLP is just one of 51 so-called "Icebreaker partnerships", affected by the decision of Judge Colin Bishopp in a landmark victory for HM Revenue and Customs. Investors could now face substantial tax bills as a result of the decision.
Bishopp ruled: "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."
He accepted the partnerships were carrying on the trade of the exploitation of intellectual property rights, often in the creative industries, but said their main aim was to secure tax relief for members. Icebreaker partnership investments included aspiring pop acts, publishing ventures and the sale of "personal alarms".
In evidence, some unnamed Icebreaker partners had earlier told Bishopp they had a genuine interest in the exploitation of rights, that they took an active role in the partnerships, and that they were aiming to make a profit from these ventures. They claimed: "Tax advantages were incidental to and not the principal reason for their having decided to join a partnership."
The judge did not agree. "We are, indeed, quite satisfied that no serious and even moderately sophisticated investor, or one with a competent adviser, genuinely seeking a profit, even one willing to engage in a high-risk venture, but 20 unmindful of any possible tax advantage, would rationally have chosen an Icebreaker partnership."
Through the partnerships, wealthy investors were claiming lucrative tax losses. In some cases Icebreaker scheme partners were attempting to claim tax relief on losses of up to five times more than they invested in the partnerships.
Take That manager Jonathan Wild was also a member of the Larkdale partnership. Other band members, Jason Orange and Robbie Williams, were not Icebreaker investors.
Details of the scheme emerged in 2012 in a Times investigation. At the time Take That's lawyers insisted the bandmates believed the investments were legitimate enterprises and not schemes designed to avoid tax, and that all four named paid "significant tax". There has been no suggestion of any illegality.
Last night HMRC said: "We have put in place generous reliefs to support genuine business investment and our tax reliefs for the creative industries work well, enabling the UK's world-class film, television and video production companies to compete on the global stage.
"But we will not tolerate abuse of the system by people trying to dodge their tax obligations."
It is not clear whether the judgment will be appealed.
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