Every Little Helps

My thanks to a loyal reader who pointed out a connection between Tesco (the company that has overstated its profit forecast by at least £250M) and HMRC.

What is that connection?

Sir Richard Broadbent, who is currently Chairman of Tesco (and is currently refusing to resign, despite intense pressure to do so).

Broadbent was Executive Chairman of Her Majesty's Customs and Excise between February 2000 and July 2003. During this time, he was responsible for a programme of change management in tax and law enforcement.

My loyal reader notes the following:

"I'm a little bit surprised that you haven't picked up on the connection between HMRC and the scandal of Tesco overstating their profits by £250 million. 

HMRC uses a concept known as *Future Revenue Benefit to grossly inflate the yield figures it reports from compliance work. 

Is it a coincidence that Sir Richard Broadbent was chairman of HMC&E when this concept was introduced and he is now chairman of Tesco? 

Somehow, I think not." 

How "ironic"!

* Future Revenue Benefit

Future Revenue Benefit (FRB) is the estimated monetary amount that will accrue to the Department as a direct result of our compliance activities.

The overriding principle for claiming FRB is that it should be only recorded when you believe there will be a future impact on departmental revenues. The key to whether future revenue benefit can be claimed and to what degree, for example, the number of years, will depend on the behaviour that gave rise to the error and the action HMRC are taking to address it. Additionally, FRB is only applicable if the business is likely to continue trading and tax or other duties still remains.

(This text has been withheld because of exemptions in the Freedom of Information Act 2000)

Tax does have to be taxing.

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Smug Alert

The battle between Tesco and the Guardian, over an article that the Guardian published relating to Tesco's alleged tax arrangements, has taken another twist over the weekend.

The Guardian now admits libel, and has formally offered amends. However, the Guardian made it clear that it would strenuously defend a malicious falsehood claim by the company.

Yet, despite this, the Guardian has chosen to stand astride a self constructed "moral soapbox" and displays a remarkable degree of smugness.

Its defence papers state:

"With profits before tax of over £2.5BN, Tesco has no possible commercial or ethical justification or need for SDLT tax avoidance.

Tesco must at all material times have been aware that many of its customers and shareholders would reasonably deplore tax avoidance of any kind."

What complete and utter crap!

Tax avoidance is legal, and commercially logical.

We all practice it (eg via use of personal allowances, ISAs etc).

What gives the Guardian the right or "moral" superiority to dictate to us that tax avoidance is unethical, or that the shareholders or customers of Tesco would deplore tax avoidance?

Is the Guardian saying that none of its journalists, shareholders, board or readers practice tax avoidance?

As already noted, we all do!

Maybe it should get its head out of its own backside, stop smelling its own farts, and take a good look at reality for once.

This misplaced and odious smugness from the Guardian forms part of the ongoing drip drip drip of negative publicity being spewed forth by the government, their lackeys and HMRC against tax avoidance.

The government is broke and is desperately looking for ways to find more money to feed its insatiable appetite. Once they have broken the backs of the more elaborate and expensive tax avoidance measures, they will come after the more mundane (ones that you, I and the Guardian staff/board/readers use).

Tax does have to be taxing.

The New Statesman, Britain's leading political magazine is delighted to announce that HMRC Is Shite has been nominated for a New Media Award in the category of Campaign For Change. The campaign for change award will go to the individual or organisation that has most effectively influenced opinions and behaviour through the use of new media technology. The winner of this award will champion a cause and provide information and tools to instigate change.

The full press release can be downloaded here.

HMRC Is Shite (www.hmrcisshite.com), also available via the domain www.hmrconline.com, is brought to you by www.kenfrost.com "The Living Brand"

Bring It On

The Tesco vs Guardian dispute, over an article in the Guardian about Tesco's alleged tax avoidance plans, has intensified.

Tesco has demanded that the Guardian issue a front page apology.

As I have already noted, the story in the first place (although it transpires it was factually incorrect) was theoretically a non story.

Tax avoidance is legal.

However, in Brown's Britain (which is broke) the government, left of centre media organs, yesterday's politicians and HMRC are keen to tar tax avoidance with the same brush as tax evasion (which is illegal).

Tesco are to be congratulated for their stand against the ongoing negative publicity spewed forth by HMRC, the government and its lackeys.

The government and HMRC, if they succeed in shutting down complex and expensive avoidance schemes will move on to the more simple every day ones such as ISAs and even personal allowances.

They are broke and they are desperate.

Tax does have to be taxing.

HMRC Is Shite (www.hmrcisshite.com), also available via the domain www.hmrconline.com, is brought to you by www.kenfrost.com "The Living Brand"

Guardian Says Sorry

The Guardian has apologised to Tesco over its reporting of Tesco's tax affairs.

As noted on this site in April, the Guardian wrote an article about Tesco's alleged tax avoidance plans.

Seemingly the Guardian was talking bollocks, and has now stated that it no longer believes that Tesco's Cayman island structures allowed it to avoid up to £1BN in corporation tax.

"The original Guardian articles did not correctly explain the effect of Tesco's tax schemes. It was wrong to state that they were designed to avoid corporation tax. It would have been correct to refer to avoiding SDLT [Stamp Duty Land Tax].

As a result, the figure of 'up to £1bn' - calculated as the amount which could have been saved on the disposal of £5bn of property - is wrong. The loss to the exchequer is likely to be nearer the region of £90m-£100m."

All very well, but even if there had been a tax avoidance plan that could have saved £1BN, the Guardian has been duped by Hartnett and Brown into their web of deception that tax avoidance is somehow wrong.

So what if Tesco had in fact put together a tax avoidance plan for saving £1BN?

Tax avoidance is perfectly legal, we all do it each year by eg claiming our personal allowances.

Hartnett and Brown are keen to tar tax avoidance with the same brush as tax evasion (which is illegal) because they desperately need to increase the tax take, as the government's finances are blown.

Once they have cracked down on high profile schemes, they will turn their attention to the more "mundane" ones such as isa's and possibly even personal allowances.

The Guardian was duped into playing the government's and HMRC's game, yet they still don't see this. Their apology snidely refers to "clever accountants", thus leading the reader to conclude that tax avoidance is somewhat "dodgy".

However, being the Guardian, it chooses to cite their "righteous moralism" over "correctly reporting the facts" as being justification for the error.

"We remain ready to defend our journalism - in court, if necessary. We believe these matters should be subject to debate and scrutiny, and we invite further informed analysis from any readers with experience in accountancy or tax law."

They want input, I suggest that you give them some; here is their email tax@guardian.co.uk

Tax avoidance is legal!

The most effective way for the government to reduce the time, effort and money spent by HMRC on chasing tax avoiders is to simplify the tax system; thus making it unnecessary for companies and individuals to set up complex and costly tax avoidance structures.

Unfortunately, Brown and Darling don't do "simplification".

Tax does have to be taxing.

HMRC Is Shite (www.hmrcisshite.com), also available via the domain www.hmrconline.com, is brought to you by www.kenfrost.com "The Living Brand"

Negative Spin

I have stated a number of times on this site my concern over the "subtle" negative spin being propagated by Hartnett, Brown and certain elements within HMRC over tax avoidance.

They would have us believe that tax avoidance is wrong, and bordering on being illegal. Hartnett et al are cunning in their campaign, they seek to highlight the multi million pound "aggressive" (their word) tax avoidance schemes practised by large companies and very wealthy individuals.

They know that this drip drip drip of negative publicity, because it only relates to the super wealthy and multi nationals, has the desired effect of persuading the ordinary taxpayer that tax avoidance is the tool of the rich and (human nature being what it is) should be aggressively resisted.

Now here is the problem:

1 Tax avoidance (legitimately reducing your taxable income) is legal, it is tax evasion (hiding taxable income) that is illegal.

2 We all practice tax avoidance by the very fact that we use personal allowances, isa's, tax credits etc.

Why then would Hartnett et al seek to create the false impression of illegality wrt avoidance?

Three reasons:

1 Brown is running out of money, he desperately needs to increase the tax take; cutting back on people's legal right to reduce tax, by making it more difficult for them to avoid tax and by slandering them, is an easy option.

2 HMRC et al are softening the rest of us up for reductions in tax allowances (personal allowances are already not in fact raised in line with inflation).

3 HMRC and Brown are softening us up for legislation that will make avoidance illegal.

Indeed, so effective has this drip drip drip of negative publicity been that even Tesco and The Guardian have been suckered into a fight over it.

Tesco is suing The Guardian over claims the paper made about its tax planning.

Tesco claims that the Guardian wrongly alleged that Tesco had set up a tax avoidance structure offshore to avoid paying up to £1BN in corporation tax, and that the supermarket had already avoided £500m in corporation tax using the structure.

It claims it has saved only £23M in stamp duty from the scheme, and could avoid a further £30M-£40M from the structure, again in stamp duty.

The paper said the claims were an attempt to "chill public debate" on tax avoidance issues.

The Guardian are quoted in Accountancy Age:

"We have never claimed Tesco behaved illegally. These are matters of considerable political importance at present, debated by all parties."

So we have here two large organisations, one legally using legitimate tax avoidance techniques the other reporting on those techniques and stating that they are not illegal.

Had Hartnett et al not been feeding the public misconceptions about tax avoidance there would be no story here and the Guardian would never have bothered to print it, and Tesco (had the Guardian printed this non story) would not be bothered about the Guardian printing it in the first place.

This is the direct consequence of the HMRC and government campaign to denigrate those that practice tax avoidance, and to imprgenate tax avoidance with the stench of disrepute.

As I have already said, all of us practice tax avoidance. Once HMRC, Hartnett and Brown have curtailed the legitimate activities of the large companies, they will come for the rest of us, who then will stand up for us?

"In Germany they came first for the Communists,
and I didn't speak up because I wasn't a Communist.
Then they came for the Jews,
and I didn't speak up because I wasn't a Jew.
Then they came for the trade unionists,
and I didn't speak up because I wasn't a trade unionist.
The they came for the Catholics,
and I didn't speak up because I was a Protestant.
Then they came for me,
and by that time no one was left to speak up."

Martin Niemoeller

To repeat:

Tax avoidance is legal, tax evasion is illegal.

HMRC want you to believe something else!

Tax does have to be taxing.

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