Osborne’s domicile charge is illegal

Posted on

I spent some time last night wondering why it had taken me time to comprehend what George Osborne was really trying to say about domicile yesterday. The observant will have noted that it took me three attempts to get to what I think is a best estimate of the revenue that this charge might raise.

Let me assure you, I acted throughout in good faith. Let me add that many of the commentators in this morning's papers seem as confused. That said, I prefer to get things right first time - and admit I did not.

So, why not, I asked myself? And then the answer dawned on me. It hadn't occurred to me that George Osborne would do something illegal.

Let me explain. A few years ago Mohamed al Fayed had a deal with the Revenue as a result of which he paid them £240,000 a year instead of paying tax on his worldwide income. That seems expensive compared to the Conservatives proposals, but he was one of about 12 people to have such an arrangement at the time.

In 2002 that deal was ruled illegal - after the Revenue took the whole thing to Cort to argue that they had acted outside their powers in granting it. This proved to be correct. They had. As Justice Gill rather nicely put it:

In a true sense the Al Fayeds .. became a privileged group who are not so much taxed by law as untaxed by agreement.

And that is exactly what George Osborne is now proposing.

It so happened I helped make the BBC2 programme on the al Fayed debacle. I guess that yesterday my mind just could not accept that Osborne would create what Lord Gill, again, described as a payment that had given Al Fayed:

"carte blanche" to pay off the tax man - then bring as much cash into the UK as he wanted.

But that's what he is doing.

And it's repugnant.

And ultra vires since the Revenue do not have the power to not tax.

And it should not be treated as a tax payment for double tax treaty purposes - because it isn't. It will be an agreement not to submit a tax return on certain income. And that's not the same thing. Not by a long way.