Uninformed commentary

[king_pellinor]

I've seen this around a few times in the last few days:

http://3.bp.blogspot.com/-Tpsju1uJiws/T-L_Ebbwh0I/AAAAAAAAAXM/YQ4ffrSSYFw/s1600/Jimmy.gif

Can I say that, yes, I am a bit angry.  Or at least I'm rather fed up that once again people are going off on rants about things that they're completely misunderstanding in order to support their own agendas. 

As a Chartered Tax Advisor I flatter myself that I can unnderstand the situation a little better than some journalists.  Let me review some of the things said here:

The scheme Jimmy Carr used was "completely legal and disclosed to HMRC".  Well, OK, it was disclosed to HMRC under the rules which say "things like this are dodgy, so you have to tell us so we can investigate".  It's also legal, in that you can do pretty much what you like with your money these days.  But so far no-one knows whether it's effective in reducing his tax bill, as it takes a while to take these things to court.  From what I know about it, it's very very similar to the sort of thing caught by the "disguised remuneration" rules, if it's not actually caught by them, so the least you can say about it is that Parliament have explicitly tried to tax this sort of thing. 

Vodafone "told HMRC they wouldn't pay their tax bill... this was completely illegal".  Hold on, the question revolved around the transfer pricing legislation as it applies to controlled foreign companies, which is two notoriously difficult and subjective areas at once.  The amount of the liability depended on hypothetical interest rates between group companies across borders.  Vodafone thought that at most the bill might come to about £2bn if the courts supported a relatively high rate, but in the event HMRC agreed on a rate that left the bill standing at £1.25bn.  Vodafone probably went in at £1bn or less, I'd imagine.

This sort of thing happens all the time: you have to pick a number, you say it's low, HMRC say it's higher, you argue it out and maybe go to the courts, and eventually you agree on something which is as objective as you can manage.  You can't get the "right" number as there's no such thing, there's just a hypothetical number that each of you can be not-too-unhappy about using.

Somebody (no-one seems to know who) suggested that the bill should have been £6bn.  HMRC don't seem to have ever suggested that, it's just a straw man to beat Vodafone with, and it's been remarkably effective.  Now maybe HMRC agreed a lower rate than they might have done to settle the case, but then I'm sure Vodafone were hoping the bill could be lower still.  No tax has been avoided or evaded at all - the "£4.75bn" never existed except in press speculation.

So what we have on the internet now is saying that deliberately flouting the expressed will of Parliament so as not to pay £1.65m is OK, but having a tax liability which is smaller than an arbitrary imaginary number is evil.

No wonder morale in HMRC is low, if they have to deal with this sort of thing.

And don't get me started on the recent stuff about Vodafone making UK profits and not paying UK tax... remember when they paid billions and billions for 3G licences a few years ago, Mr Journalist...?  You don't think they should get some relief for that?  The deferred tax charge is right there in the accounts, for crying out loud!  Oh, you don't know what deferred tax is?  Then maybe you shouldn't be writing articles about tax, eh?

Maybe I should start blogging about football :-D