I note the right wing blogosphere is seeking yet again to question my integrity – this time because I have run limited companies – which it is suggested ‚Äòcould not be justified but for tax reasons’ (or words to that effect). It’s some indication of the lack of commercial experience of these people that they don’t a) ask and b) realise that there might be other reasons for running companies and c) realise I may not have avoided tax as a result.
For the record – of course I’ve owned and run companies. In the last decade these have been formed without exception for one reason – to differentiate my activities as a chartered accountant (undertaken in my sole name) from other activities undertaken. The reason has never been tax driven – it’s been to prevent confusion at the request of my professional indemnity insurers.
And yes – my wife has owned shares in these businesses – 50% in one, where we had hope the business would sell at least as much of her work as mine (in the event it didn’t sell much of either!), 10% in another where sure as heck she put at least that much effort in, and 1% in Tax Research LLP which I suspect massively under-rewards her countless hours of contribution.
Were dividends paid? Yes, in two cases, the last some years ago. In one company (which in the end mainly sold software I’d written) because the sums involved were so small the result was the same as if PAYE had applied, so not tax was avoided. In the other a salary was paid – and the dividend reflected the commercial substance of the deal as I perceived it then, and now i.e. this was speculative reward on an activity undertaken separate from that from which I earned my main income at the time – and on which main income I was paying NIC at the maximum required rate by law. In other words – the dividend put me in the same position as if the income had been received by my accountancy practice, as I’d have preferred (bar 1% NIC – I accept – and some things can’t be helped). I did not in other words seek to avoid the NIC that would have due if the income had been received by me in my accountancy practice, which would have been my preference.
When that situation changed – and it did because work on tax issues began to outpace and replace my work as an accountant in practice – then I also changed the structure of the businesses to reflect that fact and Tax Research LLP became my main trading entity – and has been since. It, along with my continuing income as a chartered accountant (and there is some) is taxed as income arises. This ensured that in this new scenario all tax and NIC due was paid when using a company and paying dividends may not have achieved that result because I considered that important.
Is that indicative of tax abusive behaviour? Well if you are an anarcho-capitalist apparently it does. For the rest of the world it reflects the fact that the substance of these issues accorded with the necessary underlying commercial situation largely imposed upon me if confusion on PII was not to arise. Tax was not a motive. In other words the behaviour was tax compliant in my opinion.
So what does this say? A number of things, I think. The first is that these people seem to have lost the argument so they’re seeking to play the man. Of course I’m not alone in being subject to such abuse. I note someone the other day bracketed me with Will Hutton and Polly Toynbee as people they like to abuse – and I can live with being in their company.
Second, it shows something more profound. I make no claim to being a paragon of virtue, or to having not changed my mind on occasion (if I’d been wiser, for example, the Tax Gap Limited would always have been an LLP – but I didn’t get that right at the time I incorporated it) or to having not learned from experience. Well, that puts me amongst the rest of humanity then doesn’t it? But apparently not for these people. If I am flawed like the rest of us – and if my thinking has changed over time (as it obviously has) and my behaviour with it then apparently I’m a hypocrite in their book – which is absurd.
So what’s the real issue?
First of all – as I’ve often said the issue is one of intimidation – they seek to propagate the message that if anyone stands up to their vicious form of capitalism they will seek to crush them. So much for a belief in liberty! It takes courage to stand up to such behaviour. They know that. They want to stop others entering the fray by behaving as they do. In that way they hope to crush our current democratic way of life in the UK, Europe and beyond, not least by eliminating debate.
Second, this is philosophical – or maybe ideological as I’m not sure to credit them with a philosophy is entirely appropriate. Their utterly incomprehensible believe in human rationality does not allow them to accept that the real human condition is far removed from their single minded belief in a singular, selfish purpose for life.
Thirdly – and building on that second point – their belief that all of life is rational does not of course allow them to accept that a person can change, develop, learn or progress. When economic equilibrium is their goal – a stable, steady state of nirvana, only capable of fulfilment when all are utterly selfish – then progress is complete anathema to them. Yet, we all do progress – and I’m quite willing to acknowledge the fact that I have. Indeed if you want real evidence of that they should read Accountancy for October 1985 and realise that in some ways I am the architect of the one person, dividend paying company phenomena for I wrote just about the first article exploring how to do it. I have come a long way since I was 27 – thankfully. And I’m not apologising to anyone for having changed my mind for the better on a great many issues on the way.
Fourthly – and most importantly – they are recognising that they’re losing by having to reduce the argument to this level. I guess I’ll take this as a sign of success.
But that, I think is enough on these issues – and I suspect there will be no more from me on them, because a) there is nothing to find, as I’ve said before and b) there are real issues to tackle – which they’d rather I did not address.
They’re mistaken if they think that won’t happen.