Tax matters are the flavour of the month in the UK at the moment with the government’s tax enforcement arm HMRC being rather vocal about the amount of tax that is and (somewhat more importantly) isn’t being paid into the nation’s coffers. The government is pointing the finger at members of the public and cash-in-hand payments amongst other things, whereas public opinion seems to be that the blame lies with large companies and wealthy individuals who and utilize loopholes to avoid taxation as well as the government for having such a leaky system. Many of these loopholes are intended to aid and encourage individuals and businesses in furthering the British economy, such as R&D Tax Credits. However, some of these loopholes are being exploited.
One such high profile example was the issue of Jimmy Carr, which prompted many people to brand him “immoral”. The comedian was involved in a legal tax avoidance scheme known as the K2 tax shelter, which, although as previously stated is completely legal and was detailed in full to HMRC, sparked a nationwide outrage with Prime Minister David Cameron calling the comic’s use of the K2 scheme “morally wrong”. Mr Carr has since apologised for, claiming that he realised he had made an “error of judgement”.
Another example of this is the Vodafone Tax Scandal, where they not only managed to avoid a reported £6 billion in payments due to a deal struck with tax minister Dave Hartnett, but also saw a drop last year in corporation tax from £140 million to absolutely nothing, and of course, when the general public got wind of the story, public opinion of the company declined tremendously. The issue wasn’t forgotten, with sympathy for them particularly low when it came to their rivals being allowed a 4G license in the UK as opposed to them. Members of the public were quick to utilise social networks with messages appearing everywhere taking digs at the communications company. ‘Vodafone’s reaction to Orange and T-Mobile getting 4G license: “frankly shocked” Public reaction to unpaid tax bill: “frankly shocked”’ was pretty much in tune with the majority of posts on micro-blogging site twitter.
The ill-feeling wasn’t just targeted at the celebrities and companies, as HMRC scored a massive own-goal in terms of PR when they claimed that members of the public who pay out cash-in-hand to small-time tradesmen are contributing to the national economic problem by encouraging and allowing people to evade tax. The word “immoral” was tossed about and suddenly there was a backlash of public outrage at the suggestion that “Joe Tradesman” was to blame for the lack of tax revenue as opposed to the rules and loophole that allowed the rich to escape their fair share of payments.
Perhaps the highest profile of them all was Google’s tax evasion issue. It isn’t the first time that Google have been criticised over their tax payments, but due to the prominence of social networking and the ease of which information can flow around the internet, it’s most definitely the most high profile. The search and Social Media giants paid a £6m in profit on a reported £3.95bn profit. The correct amount for them to pay would have been reportedly £218m higher than what they currently paid. Again, this was completely legal and the company’s accountants utilised loopholes in the system to avoid a large chunk of their “expected” tax payments.
Of course, there are many loopholes in the system, all derived from initiatives designed to help and/or reward companies, and when used correctly can greatly help the industry and the business equally. For example, R&D tax credits as seen on randdukltd.co.uk, reward companies who actively invest in research or development that will aid their field and industry as a whole. So as long as tax credits are being used for the good of everyone, there can be no issue.