By Alex Hawkes
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When David Cameron suggested he would shun anyone involved in ‘aggressive tax avoidance’, he probably didn’t realise how many people he might have to strike off his Christmas card list.
Financial Mail can reveal that more than a quarter of the Prime Minister’s Business Advisory Group have some link with tax avoidance.
Of the 23 top executives that give high-level advice to the Prime Minister, three run businesses that moved offshore to limit their tax bills, while a further three have invested in film partnership tax schemes, which are being closely scrutinised by Revenue Customs.
Offshore: WPP boss Sir Martin Sorrell, who is in Cameron's advice group, opted to move the advertising giant to Ireland in 2008 to escape new tax avoidance laws
Another business leader was brought in by the Government to serve as a non-executive director on the board of the Department for Communities and Local Government. She has set up a personal limited company â€" a structure that can be used to avoid tax.
Cameron said he disapproved of this use of limited companies in an interview on Radio 4’s Today last week in which he said he would not have personal dealings with anyone involved in aggressive tax avoidance.
Cameron set up the Group in October 2010 to help him understand the concerns of top corporations. But relations with business leaders could now prove frostier.
Chancellor George Osborne may have bowed to pressure to reduce the top rate of tax from 50p to 45p, but with the local elections looming this week, Cameron is seeking to align himself with voters and distance himself from apparent tax avoidance strategies.
BT chairman Sir Michael Rake is one of the most senior business people gathered round Cameron. He chaired accountancy giant KPMG when it was fined $450million (£277million) for its promotion of illegal tax shelters in America â€" though it is a mess he is credited with having cleared up rather than created.
Sir James Dyson moved the ownership of his vacuum cleaner business to Malta in 2009
Then there is inventor Sir James Dyson, who moved the ownership of his vacuum cleaner business to Malta in 2009, which could save him hundreds of millions of pounds in capital gains tax in the event of a sale.
Another adviser, Eric Schmidt, is chairman of Google, which takes payments for its British advertising revenue through an Irish company, allowing it to avoid an estimated £200million in corporation tax in 2010.
And Sir Martin Sorrell, the chief executive of WPP who is also on the Group, opted to move the advertising giant to Ireland in 2008 to escape new laws tackling tax avoidance on companies’ foreign profits.
Cameron may feel he can still speak to Sorrell, however, given that the Coalition changed the rules so the company could move back. If there was any tax avoidance motive involved, Cameron clearly did not regard it as aggressive.
A further three members of the Group have invested in film tax partnership schemes, which allowed them to offset initial investments against their income tax bills.
Some of these schemes backed genuine projects and the tax breaks were offered by the Government to encourage investment. But many are being investigated by Revenue Customs amid suggestions that they were arranged to take advantage of tax incentives without genuinely investing the cash in films.
Adviser: Google chairman Eric Schmidt avoided an estimated £200million in corporation tax in 2010
Paul Walsh, chief executive of drinks giant Diageo; Sam Laidlaw, chief executive of British Gas-owner Centrica; and Dick Olver, chairman of defence group BAE Systems, all put money into film schemes developed by tax advisers at Ingenious Media.
Walsh was a partner in Mole Films, which invested in Bollywood drama Bride and Prejudice as well as the children’s TV series The Secret World of Benjamin Bear.
He also put cash into Kennet Films, another film partnership, and Ingenious Media 2, a third film investment plan, alongside football stars Emile Heskey and Steven Gerrard.
Olver was an investor in Ingenious Film Partners 2 LLP, as was Laidlaw. The partnership they backed invested in Avatar and the upcoming Life of Pi.
A spokesman for Olver said: ‘Dick Olver made one investment in the British film industry via Ingenious Film Partners 2 in 2004-5.
‘At that time it was recommended by [financial services group] UBS and approved by Revenue Customs. The fund is successful, owning Avatar and other British films and is paying appropriate tax on its profits.’
Magic: Investors backing the film Bride and Prejudice were offered tax benefits
Meanwhile, Sara Weller, a non-executive director at Lloyds Banking Group who was brought into the Department for Communities and Local Government as part of a Coalition initiative to introduce business experience into the Government, has her own limited company.
Sara Weller Limited was set up in September 2011 after she left her job as managing director of Argos and handles income from her consultancy work. Weller said the company is ‘largely inactive’ and that its turnover in the past year has been below £5,000.
‘Fees from my position as a Department for Communities and Local Government non-executive director and my other plc board directorships are not paid to this company; all are paid via PAYE with normal tax and NIC deductions.’
Rake said: ‘We do need to remember that tax planning is legal. Determining which parts of tax avoidance do not have any business basis is a very complicated area.’
Ingenious Investments chief executive James Clayton said his company’s situation was different from that of Eclipse 35, the film company that last week lost a tax avoidance tribunal battle with Revenue Customs.
However, Ingenious’s film investment schemes have been under investigation for years by Revenue Customs for potentially breaking tax rules.
The company has asked the Tax Tribunal to set a deadline for the investigation to come to an end.
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One in four is that all? The problem is that they can legally avoid paying tax. If Cameron really found tax avoidance so abhorrent he would do something about the law that allows it to happen. Will he do anything about it? I think not.
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So tax avoidance is OK now then Dave?
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