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Comedian Jimmy Carr and three members of boy band Take That are the latest celebrities to be exposed for saving tax through tax avoidance schemes in the national news.

Jimmy Carr outed for Tax Avoidance

The topic of tax avoidance by large companies and well known faces is hotting up in the British press as of late, coinciding with the release of HMRC’s General Anti Avoidance Rule (GAAR) discussion document; The government hopes that the introduction of the GAAR will deter artificial tax avoidance schemes, providing a ‘level playing field’ for business.

Following top BBC presenters – Chris Evans and Jeremy Paxman – allegedly avoiding tax, funny man Jimmy Carr and Take That members Gary Barlow, Mark Owen and Howard Donald have been targeted by the media for their use of tax avoidance schemes to save tax.

Jimmy Carr’s ‘terrible error of judgement’ over K2 Tax Avoidance Scheme

Jimmy Carr has been outed by the British press for his involvement in an offshore tax avoidance scheme based in Jersey – the K2 tax scheme – that allegedly allowed beneficiary’s to pay as little as one percent tax on money invested. On 19 June the Mail Online reported that Carr ‘puts away £3.3million a year via the K2 tax scheme’, which is said to ‘shelter £168m a year from the taxman’.

Comedian Jimmy Carr took to his Twitter account on the morning of 21 June to apologise to over two million followers for his ‘terrible error of judgement’:

Jimmy Carr Tax Avoidance Jimmy Carr @JimmyCarr

“I appreciate as a comedian, people will expect me to ‘make light’ of this situation, but i’m not going to in this statement as this is obviously a serious matter.

“I met with a financial advisor and he said to me “Do you want to pay less tax? It’s totally legal.” I said “Yes”. I now realise I have made a terrible error of judgement.

“Although I’ve been advised the K2 Tax Scheme is entirely legal, and has been fully disclosed to HMRC, I’m no longer involved in it and will in future conduct my financial affairs much more responsibly. Apologies to everyone. Jimmy Carr.”

Prime Minister, David Cameron, branded Carr’s used of the K2 tax avoidance scheme as ‘morally wrong’: “He is taking the money from those tickets and he, as far as I can see, is putting all of that into some very dodgy tax avoiding schemes”, Cameron told ITV News; ADavid Cameron on Tax Avoidance statement which Leader of the Labour Party, Ed Milliband, responded: “I’m not in favour of tax avoidance obviously, but I don’t think it is for politicians to lecture people about morality.”

HM Revenue and Customs (HMRC) have confirmed that the K2 tax avoidance scheme is now under tax investigation and will be challenged in ‘every way available’: “The government does not intend anyone, no matter who they are, to get away with paying less than they should”, said an HMRC spokesperson.

Since revelations of Jimmy Carr’s involvement in the K2 tax avoidance scheme emerged in the national newspapers, a spokesman for Jersey Finance – Jersey’s representative body of the finance industry – defended the island, thought by some as an offshore tax haven:

“Jersey’s position on tax evasion is very clear. Tax evasion is illegal in Jersey and it is a criminal offence to facilitate or engage in it. Jersey is, and remains, one of the best regulated international finance centres in the world.”

Is it the lack of public knowledge and distinction between tax avoidance and tax evasion in the media that is to blame for people being branded as ‘morally wrong’?

“In our view, conflation between illegal tax evasion and legal tax avoidance, or tax planning is unhelpful in moving any wider debate forward”, Jersey Finance’s spokesperson added.

Fellow comedian John Bishop took to his Twitter account in support of Carr, tweeting:

John Bishop defends Jimmy Carr | Tax Avoidance John Bishop @JohnBishop100

“To be honest @JimmyCarr’s finances are like his jokes – every comedian in the country read it and said I wish I thought of that”

‘Tax That’ – Take That accused of avoiding tax on £26million

Members of boy band Take That – Gary Barlow, Mark Owen and Howard Donald – are believed by HM Revenue and Customs (HMRC) to have invested £26million into a tax avoidance scheme.

According to the Times, members of Take That and their manager were amongst 1,000 people who invested £480million into 62 partnerships in music industry tax avoidance schemes set up to ‘shelter tax’.

The 62 partnerships are run by Icebreaker Management Services, who are being taken to the first tier tax tribunal by HMRC in November. If HMRC are successful in their attempt to shut down the music industry tax avoidance partnerships then Icebreaker Management Services, Tax That – Take That alleged Tax Avoidanceits investors and members of Take That could face paying back millions of pounds in tax.

Legal representative of Gary Barlow and Mark Owen has confirmed that the music stars were investors in two of the Icebreaker partnerships, which they believed to be legitimate investments and not tax avoidance schemes. Companies House records show that the Take That members entered two of the sixty-two available Icebreaker partnerships in March 2010 and September 2011.

The Mail online reported that Icebreaker partnerships typically collect ‘£10million from about a dozen investors and uses the funds to buy music rights in upcoming and established artists’ and that ‘a person who invests £200,000 in cash can earn £1million tax free’ as losses are offset by wealthy investors against other income earned three years previous and investments can be boosted by offshore loans taken out through Icebreaker Management Services.

“We do not accept that the Icebreaker tax schemes have the tax effects their promoters claim,” said a spokesman for HMRC; Icebreaker Management Services have denied that their partnerships are tax avoidance schemes, and that money invested into the music industry schemes are for creating ‘creative and artistic material and taxable profits’.

Tax Avoidance is the ‘moral equivalent’ of benefit cheats

Danny Alexander on Tax AvoidanceFollowing the announcement of the K2 and Icebreaker tax avoidance schemes Chief Secretary to the Treasury, Danny Alexander, compared celebrities and the wealthy avoiding tax to benefit cheats, in a recent interview posted on the Telegraph’s website: “People who are deliberately going out of their way to try and bend the rules to avoid tax, are the moral equivalent of the people who cheat the benefit system”.

Treasury Minister, David Guake, has also agreed with David Cameron that such tax avoidance schemes are ‘morally repugnant’, speaking to BBC Radio 4’s World at One, Guake said that tax avoidance schemes the government will look to close with the introduction of the GAAR are ‘artificial’ and ‘contrived’ arrangements that have no commercial purpose and have been designed purely to avoid tax.

“Graham Aaronson QC has rightly highlighted in his proposals for a general anti avoidance rule, which we are taking forward and, actually, the government is doing an awful lot in this area.”

In the 2010 spending review HMRC received £917m in government funding to focus on levelling the tax playing field by targeting tax avoidance, tax evasion and tax fraud. A fighting battle in which they have clearly stated that no-one is safe.

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