Tax planning is not just for the rich

When a government minister is turning out to be incompetent or corrupt, why does the Telegraph need to resort to a petty smear on Jeremy Hunt’s tax position? They write:

Jeremy Hunt avoided more than £100,000 in tax in a £1.8 million property deal weeks before the 2010 election, The Daily Telegraph can disclose.

The Culture Secretary was paid a dividend by the company he founded in the form of half its office building. The offices were then immediately leased back to the same company.

Accountants said that the deal allowed Mr Hunt to legally reduce his potential tax bill by more than £100,000 because it was completed just days before an announced 10 per cent rise in the tax on dividends in April 2010.

A dividend is a payout from a company to its shareholders. Hunt and his partner took the step of paying themselves with a building. Before the transaction, the company owned half a building. After the transaction, it did not, and it starts to pay rent to the new owners. The company is less valuable as a result, less secure to borrow against, and has a new bill to pay. Hunt gained the same half-building, but paid tax on the transfer, as he should. Each position has its trade-offs, both for the business and its shareholders.

Jeremy Hunt actually incurred a greater personal tax liability than if he’d left the building in the business’ hands. It’s a cash-out, exactly the tidying of affairs you might expect from a shadow cabinet minister who might be expecting election. So yes, he did do it “weeks before the 2010 election”. Because every general election since 1979 has fallen within “weeks of” the end of the personal tax year. Is it avoidance that he raced to complete the transaction before that date? If that’s the case, every ordinary saver racing to use their ISA by April 6th is a tax avoider. It’s not a secret; everyone who completes a tax return will know its implications.

In January, The Guardian also smeared Emma Harrison in the same way. She is a personal friend of the Prime Minister, runs a company ridden with fraud, but neither of these are obstacles to receiving even more public cash. But the Guardian tried to foment an iota of extra outrage with the headline “Welfare boss Emma Harrison made a pile renting out her stately home to A4e”. Yes £1.7m it is a lot of money that their readers won’t have. Yes inherited wealth is distasteful. And yes yes yes, it’s truly disgusting and cowardly that government would pay half a billion pounds to a cost-cutting private firm to take on a basic crutch of the welfare state, rather than employing people directly from the public purse. But there should be no outrage at renting out your home to your business, even if you own both. Every freelance journalist working for the Guardian will have done the same thing on their personal tax return, counting their rent & electricity bills against their taxable income – HMRC tell you how.

Ordinary salaried workers should know about tax planning, and not automatically equate it with the moral swamp occupied by Vodafone and Topshop. Both of these smears distract from scandals that deserve focussed attention. They suggest that any step taken to pay less than the maximum possible tax bill is cheating, and that only the rich can ever benefit. That’s choosing to swap coverage of public scandal with the promotion of ignorance and envy. And with that choice, the Telegraph & Guardian make their readers poorer.

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