Poor Andrew Gilligan. He just can’t get his head round the tax system, no matter how hard he tries. Yesterday, the Telegraph’s most notorious purveyor of dodgy journalism allowed his obsession with London Labour Mayoral challenger Ken Livingstone to cloud his already suspect judgment once again, as he latched on to an item in the Budget document on the subject of service companies.
Gilligan has picked out an item on Page 77 of the PDF document (characteristically, he gets the page number wrong in his blog post) and quoted selectively from it. His analysis misses out the key element: that this is to do with tightening up the hated IR35, one of those tax measures that the Tories liked to kick Pa Broon for introducing, then embraced enthusiastically once in power.
This is the paragraph concerned:
2.207 Personal service companies and IR35 – The Government will introduce a package of measures to tackle avoidance through the use of personal service companies and to make the IR35 legislation easier to understand for those who are genuinely in business. This will include:
(i) strengthening up specialist compliance teams to tackle avoidance of employment income;
(ii) simplifying the way IR35 is administered; and
(iii) subject to consultation, requiring ofﬁce holders/controlling persons who are integral to the running of an organisation to have PAYE and NICs deducted at source by the organisation by which they are engaged. (Finance Bill 2013)
IR35 is the measure that stopped contractors working through limited companies from taking part of their income as dividends and thus avoiding some National Insurance payments, if they were in full time contracts. It does not affect those with no full time job whose companies rely on multiple income streams – like Ken Livingstone and Silveta.
Many full time contract workers wound up their limited companies when IR35 came in, and with most new entrants to this market, used service companies instead. Many of these, in turn, work to maximise returns for those workers while staying on the right side of IR35. The Budget move is trying to ensure that Income Tax and National Insurance contributions get deducted, and therefore collected, more reliably.
So this supposed Ken catcher is nothing of the sort. And Richard Murphy, who Gilligan quotes in his post, has said as much on his blog: this will hit “anyone with most of their consulting income from one client”. Gilligan, you’re a disgrace. Again.
Surely the original point was that Kenneth Robert Livingstone said that people who avoid tax are "rich bastards" who should "not be allowed to vote".
He then earned about a quarter of a million in a year and funnelled it through his company so he didn't pay income tax on it at the full rate and kept himself out of the highest tax bracket.
No one is saying that this is not perfectly legal. No one is saying that other people don't do it.
What people are saying is that to suggest avoiding tax in this perfectly legitimate way is wrong and then avoiding tax in this perfectly legitimate way is hypocritical. Because it is.
The point of this post is to show that Gilligan has once more failed to understand the tax system.
As to whether or not Livingstone is being hypocritical, I refer you to the same question I put to Dan Hodges, who still hasn't given me a straight answer to it: give one example of where Livingstone condemned, or passed adverse comment on, anyone with the same arrangements he has.
"give one example of where Livingstone condemned, or passed adverse comment on, anyone with the same arrangements he has.", He's already said that:
people who avoid tax are "rich bastards" who should "not be allowed to vote".
There's your condemnation.
That does not answer my question, and well you know it. By all means try again, but try not to do a Gilligan and quote so selectively.
How does that not answer your question? Are you stupid?
I knew you'd say that.
The issue is not other people who have similar arrangements, and it's more than a little disingenuous of you to suggest it is. The issue is what he said and what he subsequently did.
He said "No one should be allowed to vote in a British election, let alone sit in Parliament, unless they pay their full share of tax", then he set up a company to allow himself to, perfectly legitmately, use a system he had condemned, to avoid paying his full share.
What he seemed to be saying is that the letter of the (tax) law is all very well, but the spirit of the (tax) law is what's important. Companies and people shouldn't shirk their tax responsibilities to avoid payment (particularly in times of great austerity). Then he personally went and decided to play the letter rather than the spirit.
You're a smart guy, if you can't see the hypocrisy therein it's because you don't want to.
I refer the Hon. Commenter to the answer I gave previously.
That last reply was the the Anonymous commenter btw.
There is an assumption that Livingstone had condemned a system he then used. That is not borne out by the context, which was to do with firms like Vodafone and Philip Green's mob. That's totally different to being UK domiciled and resident and working through a limited company.
But I'll grant you this: it's far easier to kick the likes of Livingstone than for him, or anyone else in his position, to explain the situation with similar brevity.
Perhaps Kenneth should have suffixed his comments with "But not me, it's okay when private individuals like me take advantage of the system because of my politics."
It seems to me that when many people say "People should pay more tax to help us through these hard times." they actually mean "OTHER people should pay more tax to help us through these hard times."
Now you're just projecting. You know what Livingstone said, and that wasn't it.
"It seems to me that when many people say "People should pay more tax to help us through these hard times." they actually mean "OTHER people should pay more tax to help us through these hard times."
You're referring to Boris Johnson, presumably?
What's odd here, and rather depressing, is the inference that the worse a person you are the more you should be allowed to get away with, so Boris agitating for a tax cut that directly benefits him is fine but Livingstone using a perfectly legitimate method of organising his financial affairs in the absence of a regular salaried position is somehow the worst thing since the last bad thing someone on the Left did.
It's rather like *gasp* hypocrisy, isn't it?
"Now you're just projecting"
Hence my conspicuous use of the phrase "It seems to me". This indicates an opinion.
So what did he say? That a big avoidance of tax is immoral but a small avoidance of tax is okay? How small is small? 5K? 20K?
What do you say? Is there a monetary cut off point for immorality?
Given that the accusation of avoidance that underpins your argument comes from Andrew Gilligan, probably the least balanced and principled hack known to British journalism, you're batting on a distinctly sticky track there.
Working through a limited company may save workers money, but it may not. It's not a subject that can be addressed in quick soundbites, which makes it very easy to throw the mud and far more difficult to prevent it sticking.
"You're referring to Boris Johnson, presumably?", No I'm referring to everybody, regardless of politics, creed or colour. It's a deeply cynical comment. And I'm not going to apologise for it.
"the inference that the worse a person you are the more you should be allowed to get away with"
Why should anyone be "allowed" to get away with anything? But this is distraction from the main point. Should people be pulled up on their hypocrisy? I think the answer's "Yes, they should." Some people seem to finagle depending on who it is.
Tim, you're being disingenuous. Kenneth's revenue from was around 250K, yes? If he'd paid income tax on that directly would that have been more or less than him passing it through his company and being taxed for 55K.
Anyone who has a company knows that doing this reduces tax paid, unless you have the worst accountant on earth.
You're a smart guy, if you can't see the hypocrisy it's because you don't want to.
What's that cut off point, by the way?
Income streams taken together do not equal personal income, especially when the company concerned employs a number of other people.
Neither of us has seen Silveta's books - and nor has Gilligan - so we don't know. In any case, why is someone dealing with HMRC in a way they encourage suddenly a hypocrite?
As you've now taken to having a mardy strop to Dan Hodges on Twitter, I assume you've had your say for now.
"As you've now taken to having a mardy strop to Dan Hodges on Twitter", Don't be childish, I made a comment to Dan that I made to you on this very page about not wanting to see the hypocrisy, I thought Dan might enjoy the conversation.
"why is someone dealing with HMRC in a way they encourage suddenly a hypocrite?", We've been over this already, the hypocrisy is in what he said and what he subsequently did.
You seem unable or unwilling to see the point being made, I'm not going to sit here repeating myself all day while we go round in circles. It's almost as bad as the DT Comments section.
The difference to the DT comments section is that there, the default position in responding to anyone of dissenting view is wall-to-wall abuse, usually starting with adverse comment on intelligence.
Going back to the H-word, you assume (as Dan Hodges did, as Gilligan had suckered him before he bothered finding out what was going on) that there is hypocrisy but prove none. And without Silveta's books opened to you, you will have no proof.
Remember, saying "Ooh look at all that income, that's Ken's salary" is a false assumption, especially when he's employing folks.
The fact of the matter is always more complex, which suits Gilligan and of course Lynton Crosby: it's easy for them to slag Ken off in a convenient soundbite, while difficult to respond in an equally snappy manner.
The similarity to the DT is that there's little point in discussing with someone who has already made their mind up.
If an investigation were to show that Kenneth's use of a company did reduce his tax bill would you condemn him for his hypocrisy?
I don't do questions on wife beating either.
I'll take that as a no. Of course an investigation that had such a result would be a nasty Tory trick!!11!one!!
As far as I understand it, HMRC itself prefer that an individual such as Ken Livingstone who has multiple income streams and employs people run their affairs as a ltd company rather than under simple self-assessment...so if he is doing what HMRC prefer, why the criticism?
In my opinion it is simply a de facto loud speaker designed to stop people asking awkward questions about his own record and lack of policies, vision and commitment.
Its good to see someone setting it out in such a straightforward fashion. Livingstone employs people and works for a variety of clients, so a ltd company is the obvious way to administer that. The Taxpayers Alliance is a bogus organisation financed by right wingers whose calls for an investigation may generate headlines - thats the whole point - but are otherwise meaningless.
If there were to be an investigation nothing would come of it, but the election would be over by then so no-one would even notice.
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