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30 Mar 2009
A Labour former defence minister, who earns more than £115,000 from outside business interests, has failed to declare a family firm that could be used to avoid tax, the Sunday Times reported.
Adam Ingram, 62, the MP for East Kilbride, Strathaven and Lesmahagow, set up the company with his wife, Maureen, last May as a vehicle for his consultancies and directorships, the newspaper said.
Under Commons rules he should have declared his interest in Adam Ingram Advisory Ltd to the parliamentary standards commissioner. The paper quoted Ingram as saying that his failure to declare an interest was 'a misunderstanding on my part, which I am now immediately rectifying'.
Hours later, by coincidence, the MP told his local Labour party that he would leave the Commons at the next general election.
Payments for consultancy services made to a company such as Ingram’s do not incur the normal 40% higher rate income tax nor are National Insurance contributions payable, the Sunday Times said. Instead, company income is subject only to corporation tax at 21% for small firms.
Many people use corporate vehicles as a way of reducing their tax bill by retaining profits within the corporation while they are still high earners. They pay themselves dividends at a point in the future when they have fallen into a lower income tax band.
Ingram told the Sunday Times that his company was not set up for the purpose of avoiding tax. He is the sole director and shareholder of Adam Ingram Advisory Ltd, while his wife is the company secretary. Ingram said he had not paid his wife any money and he would pay the full rate of income tax when he took any cash out of the company.
'This is not any attempt at tax avoidance whatsoever,' Ingrma told the Sunday Times. 'I am one of those people who is more than prepared to pay my taxes and all income will be properly declared and properly taxed.
'Nothing has come through that company that has not been individually registered in the register of interests.'
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Tax Avoidance
Get your facts right Mr. Ingram.
Tax avoidance is a legal strategy to reduce your tax bill. For example setting up a company to receive your fees and avoid paying higher rate tax.
This is clearly a case of tax avoidance.
Tax evasion is an illegal attempt to mislead HMRC e.g. by not disclosing certain sources of income, in order to avoid paying tax.
The main issue here is that Mr. Ingram has failed to disclose the company, and his income, to the government. It is very important to disclose all forms of income because politicians are in a position where they could easily accept bribes in order to influence certain political outcomes.
Someone should throw the book at him. Maybe Mr. Ingram should read it too.
Posted by: Andy K, 30 Mar 2009 | 00:00
To be fair...
Well, the company structure does also provide the benefit of limited liability. That alone is enough for many people with similar business to form a company.
OK, so I would wager good money that the tax benefits were a major consideration. All that means is he has an accountant - you'll be hard pressed to find anyone in similar circumstances not doing the same thing. Frankly, if they're not then they should go get an accountant.
While this does fall squarely in the definition of avoidance, the term has been somewhat transformed to conjure up images of picking loopholes in the law; something that would be evasion if only lawmakers could fix it. But this is more "tax efficient", no more morally objectionable than deciding to delay selling some shares because you've already made large taxable gains that year.
For what it's worth my interpretation of the article is that he did declare all the interests, but put them down as personal interests rather than declaring that they came via his wholly-controlled company. This is hardly novel either, it takes a concerted effort to convince most clients that "their" company is it's own legal person.
Of course, we rightfully expect politicians to make accurate disclosure. This has moved on from being an ethical issue to also being part of the job. He has failed here, but I think we need to differentiate between blunders and deceit.
Posted by: Dave, 30 Mar 2009 | 00:00