Jimmy Carr: Stars who avoid tax 'no better than benefit cheats' says Danny Alexander

Jimmy Carr: Stars who avoid tax 'no better than benefit cheats' says Danny Alexander

• Danny Alexander made a withering attack on those who don’t pay their ‘fair share’
  
• Emerged that comedian Jimmy Carr is one of thousands using a legal off-shore scheme to pay as little as 1 per cent income tax

By Stephen Wright, Jason Groves and Nick Fagge

PUBLISHED: 17:32 EST, 19 June 2012 | UPDATED: 03:15 EST, 20 June 2012

Strong words: Danny Alexander made a withering attack on those who don't pay their 'fair share'

Multi-millionaires who use tax avoidance schemes to pay low income tax are the ‘moral equivalent of benefit cheats’, a Cabinet Minister said yesterday.

Danny Alexander made a withering attack on those who don’t pay their ‘fair share’ after it emerged that comedian Jimmy Carr is one of thousands using a legal off-shore scheme to pay as little as 1 per cent income tax.

Trendy comic Carr, who has publicly mocked tax avoidance schemes, is believed to be the largest beneficiary of a Jersey-based accountancy arrangement said to shelter £168million a year from the taxman.

He puts away £3.3million a year via the K2 tax scheme, which is used by more than 1,000 tax avoiders, it was claimed.

K2 works by transferring salaries into a Jersey-based trust, which lends investors back the money. 

Because the loan can technically be recalled, it is not subject to income tax.

Carr’s lawyers confirmed his K 2 membership but said there was nothing unlawful about managing his affairs in a ‘tax efficient manner’, and that they had been disclosed to the relevant authorities.

Nice ride: Jimmy Carr fills his Bentley with petrol

Carr recently performed a comedy sketch lampooning Barclays, which has been criticised for tax avoidance.

Taxing time: Jimmy Carr with girlfriend Karoline Copping

Playing a female bank clerk, he joked: ‘Why don’t you apply for the Barclays 1 per cent tax scam?

‘You will need the world’s biggest, most aggressive team of blood-hungry amoral tax lawyers. If you meet the criteria, you’ll pay 1 per cent tax, like Barclays do.’

But, after details of how little tax he pays were disclosed by The Times, Chief Secretary to the Treasury Mr Alexander revealed that tax officials are examining the scheme used by Carr ‘with a view to either shutting it down or getting the money back in some other way’.

‘At a time of real economic difficulty for our country, it is vitally important that everyone pays their fair share of tax,’ he said.

‘People who dodge the tax system are the moral equivalent of benefit cheats and we are coming to get them. We are taking steps wherever we can to ensure that everyone pays their fair share.’

Chancellor George Osborne used his Budget speech in March to attack what he called ‘morally repugnant’ tax abuses.

Yesterday he said: ‘I do expect people to pay their taxes. We will take the action necessary to ensure that they do.’

Individual tax avoidance costs the economy £4.5billion out of £7billion lost in total every year.

Exchequer Secretary to the Treasury David Gauke agreed that Carr’s tax avoidance scheme was similar to the ‘morally repugnant’ ones referred to by Mr Osborne.

Such comments will be of concern not only to Carr, 39, but a host of footballers, celebrities and businessmen who employ accountants to avoid paying vast sums of tax.

HMRC confirmed it is investigating the K2 scheme and vowed to ‘challenge it in every way available’.

It also confirmed that in a separate investigation it is looking closely at perks enjoyed by super-rich Premier League footballers.

Carr’s tax affairs began to unravel when Roy Lyness, of Peak Performance Accountants, which runs the K2 scheme, told clients after the Budget: ‘We’re delighted to inform you that most of the powerful tax-saving opportunities survived unscathed.’ 

Posing as an IT consultant earning £280,000 a year, an undercover Times reporter was reportedly told that K2 could slash a hypothetical tax bill of £127,000 to £3,500, equivalent to a personal income tax rate of 1.25 per cent.

‘It’s a game of cat and mouse,’ Mr Lyness said. ‘The Revenue closes one scheme, we find another way round it.’

The tax avoiding scheme works in a number of stages. First, a member must resign from their employment in the UK and become an employee of Jersey-based K2.

The member’s original employer must then agree to pay for the worker’s services through K2, paying the old salary to the Jersey company.

K2 then pays the member the minimum wage and lends the balance through a separate Jersey-based trust. Because loans are not taxable, the member will avoid tax on the vast majority of their salary and only pay income tax on the minimum wage.

The scheme works only because HMRC is told the loans could be recalled. But according to The Times, a reporter was allegedly assured by K2 officials that such a thing was unlikely to happen.

On stage in Tunbridge Wells last night, Carr told his audience: ‘I haven’t been reading newspapers today.’ When a heckler shouted: ‘You don’t pay tax!’, he replied: ‘I pay exactly as much as I need to but no more.’

Backing: Carr was supported by comedians including BBC regular John Bishop

Twitter users yesterday branded Jimmy Carr a ‘hypocrite’ over his tax avoidance â€" as a string of his fellow comedians leapt to his defence and tried to make light of the scandal.

Carr is one of the most popular celebrities on Twitter, with more than two million followers, but yesterday he faced a barrage of critical tweets.

Many of those who posted messages were furious that Carr was paying next to nothing in tax even though he has poked fun at corporations which fail to pay their share.

However, Carr was supported by comedians including BBC regular John Bishop, who wrote: ‘To be honest Jimmy Carr’s finances are like his jokes â€" every comedian in the country read it and said, “I wish I thought of that”.’

Bishop also tweeted: ‘All Greece have to do is appoint Jimmy Carr as finance minister and it will all be sorted.’

Former Trigger Happy TV host Dom Joly also stood up for Carr on Twitter, say ing he was a ‘very nice man who does a lot for good causes’.

Comedian Rufus Hound said Carr ‘works incredibly hard’ and has done ‘absolutely nothing illegal’, adding in a tweet: ‘A lot of people here seem to be making the case that tax avoidance’s morally wrong. In which case vote to change it. I do.’

However, he later admitted that he could ‘understand the incredulity’ over the tax avoidance. And Scottish comedian Brian Limond lamented the ‘silence from Jimmy Carr’s celebrity chums as he snatches money from the poor’.

Presenter and Heart FM breakfast show host Jamie Theakston tweeted: ‘Jimmy Carr earnt £3.5m last year ... after tax, that’s nearly £3.5m.’

Among the general public much of the scorn for Carr was focused on a sketch for Channel 4 show 10 O’Clock Live last year in which he criticised Barclays for its ‘1 per cent tax scam’.

Twitter user Mark Worgan said: ‘Just read the Jimmy Carr story â€" oh dear, oh dear, it’s the hypocrisy that gets you in the end.’

Scott Gray added: ‘Don’t worry, my dad’s been paying tax for you. Earlier today he said he was nipping to the Post Office to pay the “Carr Tax”.’ Anna Roche tweeted: ‘The next episode of 8 Out of 10 Cats is going to be awkward â€" “What’s the nation been talking about this week?” “Jimmy Carr is a tax avoider”.’

Irving Hill tweeted: ‘So not only is Jimmy Carr not funny but somehow he manages to pay less tax than a cleaner.’

Others were quick to use the revelations about Carr to criticise the tax system.

One wrote: ‘I’m more angry at a system that allows the rich to pay just 1 per cent tax than I am at Jimmy Carr for taking advantage of it.’

Meanwhile, former Deputy Prime Minister Lord Prescott tweeted: ‘Just read that shocking secret about Jimmy Carr in The Times. Never knew he was a comedian.’Alexander made a withering attack on those who don’t pay their ‘fair share’

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