Tax avoidance is wrong – and now we know it

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The Telegraph has reported that Treasury Minister Kitty Ussher MP:

told the tax authorities that her Burnley home was her “principal residence” for a single month in 2007, enabling her to avoid capital gains tax.

According to a letter from her accountants, Miss Ussher had previously told HM Revenue & Customs that a house in south London was her principal residence.

Miss Ussher, who was only appointed Exchequer Secretary to the Treasury in this month’s reshuffle, temporarily changed the designation of her main home for tax purposes in early 2007, shortly before she joined the Treasury when Gordon Brown became Prime Minister.

Miss Ussher sold the property in March 2007 for £62,000, a profit of more than £40,000. Accountants calculate that the minister and her husband saved between £9,750 and £16,800 in tax.

As the Telegraph makes clear, this is legal.

And as is also made very clear, she did this for just a month on the advice of her accountants, who prepared the necessary elections for her.

But it was a blatant case of tax avoidance: clearly no one swaps their place of main residence for a month, as she claimed to have done, however legal that claim might be.

And that is the point: this transaction may have been legal, but it was also very obviously unacceptable. Tax avoidance is clearly unacceptable now: people have to be tax compliant, where tax compliance is seeking to pay the right amount of tax (but no more) in the right place at the right time where right means that the economic substance of the transactions undertaken coincides with the place and form in which they are reported for taxation purposes.  The claim that the  property sold was a main residence for just a month obviously does not meet this requirement.

This should send shock waves down the banks of all who ever plan to seek public office and those who advise them. The old mantra that ‘it’s legal so it is acceptable’ no longer holds true. Tax avoidance is unacceptable now: tax compliance is required. And this will spread: the same will become true of companies and their directors. A new standard has been set.

I had little time for Kitty Ussher as a minister: she struck me as an unreformed neo-liberal in New Labour clothing. But for providing this unambiguous proof that tax avoidance is harmful I offer her my thanks. I somehow doubt she’ll see the benefit, but society will.

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