Friday, 22 June 2012


22 JUN 12.

Dear Simon Jenkins – TAX SCAMS ARE LEGAL – you say in the Guardian today.

Oh no they’re not! Oh yes they are!

In tax law in all jurisdictions, inserting a false-step into a chain of transactions nullifies the whole chain. E.G. Jimmy Carr (JC) wins a contract from The London Palladium for £100,000 plus 20% VAT, £120,000. The theatre claims it as a valid tax deduction, rightly getting say, £25,000 knocked off their corporation tax. JC persuades the theatre to switch the contract to Funny-Money-Productions-Jersey-Inc (FMPJI) which is not a real, properly staffed, experienced agency hunting for stage business for JC but is self-evidently a tax-haven brass plate, advertising such “staging-post” services for a nominal fee to thousands of UK tax-payers.

The contract with the London Palladium (and JC’s other contracts) are clearly prior won and owned by JC who assigns them to Jersey – this is obviously an inserted non-commercial step to evade tax. FMPJI does not charge VAT so the theatre’s immediate cash flow is easier and as “everybody is doing it” they go along with the scam. To be valid in law – JC must have a “wholly commercial” agency contract with FMPJI at “arms-length” – FMPJI must have real 3rd party control over the £100,000 – out of JC’s control, otherwise he will be deemed to be “a director by whatever name called” of FMPJI, which would make his life very complex.

The “loan” JC gets from FMPJI must be on wholly commercial terms, be repayable and charged for – otherwise it is another obvious inserted step to evade tax. HMRC has for 100 years assessed whether money coming from overseas to JCs, is INCOME or CAPITAL or LOAN and taxed it accordingly. The loan is clearly (clear to any judge or jury and the ordinary man on the Clapham omnibus) not a normal commercial loan. It is doubtful whether JC would ever let go of real ownership of the £100,000 to Jersey agents who now purport to lend it back to him – unsecured and non-repayable.

The whole scheme is false-accounting; made-up; a fiction; untrue; and carries a potential prison sentence. If questioned in court, JC will either admit to these false steps being inserted or perjure himself and risk a long prison sentence – like Al Capone. As a tax-barrister said to one of our clients being cocksure about such arrangements “You won’t be so cheerful when you are gripping the bar at the Old Bailey”. 

These many “scams” or “complex avoidance schemes” are “contracts illegal as formed”. As JC’s fairy tales unwind, he gets taxed, plus interest and penalties (HMRC rarely bang people up, but remember Lester Piggot.); the invoice from Jersey to the London Palladium fails and the theatre loses its tax-relief on £100,000. Then the VAT men call. Will JC sue his advisers?

The huge question and big story is “Why are ALL UK newscasters, including your good-self, being told to say ‘It is of course completely legal tax avoidance’”, an utterance they make with such assured confidence that they must have studied and practised international tax-law for at least 40 years each. And WHY does the government insist that new anti-avoidance laws have to be forged to stop these schemes, when the necessary laws have existed for a century? All that’s needed to press cases is an honest judge - who is not evading tax.

My professional guess is that tens of thousands of top people have fallen for the glib offshore salesmen (the schemes ARE legal in Jersey and Cayman etc) and have joined such dodgy schemes over the past 30 years (since Thatcher).  Somebody must have bunged the $18 trillion washing around off-shore that the OECD regularly report.  The tax-haven “Rivers of Cash” more than match the “Mountains of Debt” beloved by offshore currency speculators in “The Free Markets”.

The merry habitual tax-dodgers are just waking up to the fact that if their schemes are illegal false-accounting carrying prison sentences (which they almost certainly are) then HMRC will reopen their personal assessments back 30 years and win the back duty tax + compound interest + penalties as HMRC always have done. The evaded VAT elements make for more costs and penalties. The artful dodgers may avoid or evade prison terms.

The great news for your audience – the hoi-polloi, the great unwashed, the little people who pay taxes and are suffering pay reductions to below a living wage – is that the many billions HMRC can thus repatriate to and for the UK will clear all UK deficits, bank black holes and need for austerity. The boost to our economy will be unprecedented. Hurrah! I hear you shout. If I were Cameron & Clegg, I would form a special 500 strong task-force from the intelligence and security services, authorised to use the existing international tax-law presumption of “guilty until proven innocent” to collect the back-duty money in 2 years – and pay them a bonus on all collections banked.  

Go to it Mr Jenkins and all other honest journalists. Make it so!

Noel Hodson

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