As many readers of this blog will know, I am a director of the Fair Tax Mark.
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If I am investing in shares, it would be nice to know how many of there are out there, rather than the company simply being able to dilute my shareholding away. Let alone the rights associated with these shares.
As such, the way it currently stands, these shares are actually more like floating rate notes, with a terrible yield.
It would also be nice to know how much the directors have invested and how many shares they hold.
I have invested £2,500 at present
Ethical Consumer has provided £5,000 so far
And yes, they are like floating rate notes: that is what is permitted by this type of entity
OK thanks for the information. I assume these shares offer no voting or ownership rights over the company? So are essentially subordinated debt?
I also note that you are looking into EIS tax relief on these shares. Whilst there is nothing wrong with this, isn’t it a little bit hypocritical to attack other companies for tax avoidance who have simply used similar tax reliefs written into law?
They carry a vote – but each member has a vote irrespective of the number of shares
The decision on EIS is not made yet
It is plainly within the spirit of the law. We never criticise companies for being plainly within the spirit of the law
As a word of advice, I suggest that you carefully think through the ownership/voting rights situation with these shares.
Normally one would expect to have one vote per share. Without this larger investors can easily be disenfranchised by a group of small ones.
Likewise, without actually knowing how many shares are in issue, and how many are held by directors etc, it is impossible to value the company or ascertain who actually controls the majority stake. Which, apart from the high risk and small return makes such an investment even less appealing for a serious investor. Those investing would be essentially making a donation rather than making a serious investment decision.
As for the “spirit of the law”, I can’t agree with you. The laws specify what mechanisms to reduce tax is legal (avoidance) and illegal (evasion). The concept of the spirit of the law roughly translates in this case to what you think the law should be, not what it is.
You have regularly attacked various companies for minimising their tax bills. Off the top of my head, you attacked Vodafone who used the SSE, though omitted any criticism when the Guardian through GMG used exactly the same law to avoid their tax bill.
The question at Vodafone was not the SSE
Sorry – that’s just not true
Danny, you clearly have neither experience nor knowledge of what an Industrial and Provident Society is all about. Nor does it seem to occur to you that taking advantage of a specific law offering a specific tax relief is no more tax avoidance than deducting your legally mandated annual personal allowance from your income in order to arrive at your taxable income.
Bluntly, most of your arguments betray your ignorance.
Thanks Nick
And well said
Nick, as you may know, the UK is a tax haven. Taking advantage of a particular relief is still tax avoidance and abuse.
The fact it has the clear blessing and even encouragement of a democratically elected government is irrelevant – many tax havens are democracies.
Your comment makes no sense at all
Sorry, this is something I thought I learned from reading this blog. I can’t remember the exact blog but you were pretty clear about it, and I think you’ve said it a number of times.
I’m pretty sure you’ve said something along these lines before: just because the UK government likes and encourages certain tax activity (eg claiming a relief) doesn’t mean it can’t be tax avoidance, especially if the country involved is a tax haven.
And I’m pretty sure you’ve said the UK is a tax haven.
I don’t know much about tax and get most of my education on it from this blog.
What have I misunderstood?
You have misunderstood the definition of avoidance
And you are confusing government behaviour in need of change with personal behaviour
They are not the same thing
Thanks. I remember the blog that caused the confusion.
It’s here http://www.taxresearch.org.uk/Blog/2014/04/16/starbucks-another-exercise-in-tax-avoidance/
According to your report, Starbucks did something that Mr Osborne actively encouraged. This would seem to me that Starbucks acted both within the letter and spirit of the law (regardless of what you and I think of the merits of that law).
And yet you said Starbucks were doing tax avoidance.
And it seems the reason you gave in the Comments was: the UK is a tax haven, so anything a taxpayer does (even if encouraged by a democratic government) in a tax haven is tax avoidance.
Sorry for taking up your time, but I clearly have the wrong end of the pineapple here. I would appreciate clarification if you have the time.
The suggestion was Starbucks was arbitraging international law i.e. round UK law by using another lawGe
That is tax avoidance
Thanks.
But according to that blog, Starbucks wasn’t exploiting an obscure loophole dreamed up by clever accountants. It was doing something Mr Osborne deliberately wanted them (and similar companies) to do. You say so in the headline.
If Mr Osborne says ‘I want you to arbitrage’ then I have trouble seeing how arbitraging is against either the letter or the spirit of the law.
You and I might not like arbitraging behaviour. But hey, we’re not elected so we don’t get to decide these things.
This is universally considered tax avoidance – the whole OECD BEPS project is based on that premise
I don’t think that’s an overstatement in any way
Thanks but I’m not sure I’m any clearer.
Based on what premise or set of principles is it universally considered? George Osborne for one doesn’t think arbitrage is tax avoidance, and for better or worse, his view counts for a lot!
Most people I know of think tax avoidance is something that is strictly legal but it is a taking advantage of a loophole which is not intended by government. For example, some accidental quirk in the wording of the law. ‘Against the spirit of the law’ is the way it is usually couched.
If you’re taking advantage of something that results in paying less tax BUT it is deliberately encouraged by government, then it is not avoidance. Tax free ISAs are deliberately encouraged, and therefore not tax avoidance. Arbitrage is deliberately encouraged (as you say, by the Chancellor, no less), so should not be tax avoidance for the same reason.
What is the underlying principle that separates the ISAs from the arbitrage thing? Or what you’re doing with your new company. The ‘spirit of the law’ doesn’t seem to be it.
Arbitrage is clearly not encouraged by the OECD with G8 and UK government backing
I think you’re beginning to waste my time
Thanks. One last question and I will drop it.
If it doesn’t have UK govt backing, why did you say (in the headline in your post) it was something ‘deliberately promoted’ by George Osborne’s part?
Can you see how this is confusing?
Yes
In 11,000 posts I will sometimes create internal inconsistencies
Inevitably
Thanks for that, fair enough, we all make mistakes.
But which version do you stand by?
I stand by my unambiguous definition of tax avoidance
Intersting.
But before deciding whether to invest, or whether any payment would effectively be a donation, I would like to understand a little more of the business model.
Presumably the income to pay salaries and interest on the loan notes will come from licensing fees.
Can there be enough licensing fees to plausibly cover the overheads?
This is not the place to discuss that
Please mail me
Sorry – don’t understand why, when you’ve clearly asked your readership to invest, this is surely the place to anser any questions people have.
I gave a link – which provides a place where questions can be asked
If I may raise a point of pedantry, the site states:
“The Fair Tax Mark, unlike banks and building societies, is not subject to prudential supervision by the Financial Services Authority.”
No one has been subject to prudential regulation by the FSA for over a year now.
Pedantry indeed.
Your current position is wholly inconsistent with what you have been saying on this blog and elsewhere for years
Your Missing Billions report was based on comparing headline corporate tax rates to tax payments, and calling the difference avoidance, even though much of it related to capital allowances, R&D tax credits, the SSE and other tax incentives expressly introduced by Parliament.
You have condemned Philip Green for using the independent taxation of married couples and the non taxation of non-residents/non-domiciles – in line with current tax law
http://www.taxresearch.org.uk/Blog/2006/06/19/sir-philip-green-the-rewards-of-tax-avoidance/
http://www.taxresearch.org.uk/Blog/2010/08/13/sir-philip-green-the-wrong-man-to-head-a-review-of-public-spending/
You have condemned Boots for claiming interest deductions – in line with current tax law
http://www.taxresearch.org.uk/Blog/2013/10/15/another-day-another-tax-abuse-story-this-time-its-boots/
http://www.taxresearch.org.uk/Blog/2013/11/28/war-on-want-land-a-blow-on-alliance-boots/
I could go on.
Will you be apologising to those individuals and companies you have falsely accused of tax avoidance?
I gave already answered the point
And what you are ignoring us the international arbitrage in all this’d positions that make them utterly different
But why bother with facts?