So the media are going crazy at the moment over the Paradise Papers, but what do they actually mean celebrities and the wealthy are really doing?
The Queen has reportedly invested £10m into funds in Cayman. Well, not the Queen, but her advisors on behalf of the Dutchy of Lancaster. And these heinous investments are into what? You may ask, well UK companies Threshers and Brighthouse make up part of it. And is she avoiding any tax. Well as her former press secretary states:
‘anyone with an ounce of financial nous knows profits coming into the UK from offshore is taxed at the full whack’
Bearing in mind, the Queen isn’t actually subject to tax, but voluntarily pays tax on investments, any funds coming into the UK will be subject to tax. Especially since the funds are generally used for upkeep and pensions for retired staff.
So the queen has invested into UK companies to provide an income, which she voluntarily pays tax on anyway, to maintain properties and fund pensions. Dreadful.
Lewis Hamilton has bought a private jet. Lucky him. But he decided to buy it in the Isle of Man for business purposes and in doing so was then allowed to reclaim the VAT. The issue is that he didn’t declare any personal use… but you know what I’m not sure many business owners keep detailed records of their personal use of company cars or otherwise.
At the same time Oxford and Cambridge Universities also invested millions in offshore funds, as did a long list of MPs, business owners and wealthy individuals. Was it to avoid tax? Or simply because that’s where the funds were structured?
Unfortunately the media in the UK have now taken a view that everyone should ideally be paying as much tax as possible. That there’s no need for rewards for the risks that business owners take and that anyone who looks to structure their tax affairs in any way is effectively a criminal. However, at the same time tax avoidance is positively encouraged by the government through pension schemes, ISAs, EIS and Seed EIS, VCT schemes, EMI schemes, share schemes, R&D tax credits, film and entertainment credits and numerous other schemes designed to mitigate tax.
The big difference seems to simply be about scale. I have some clients who’s entire life savings are held in ISAs and they effectively pay no tax on their income (one couple with over £1m in ISAs). I have others who chose pensions and paid no tax to build the fund, yet are taxed for every penny they take out. I have other clients with millions held offshore who have paid tax on every penny. Guess who the media would like to investigate though.