Sunday Times [01/04/12] Page 5 :
Ex-Tory Treasurer settles £4.7m bill with the Revenue by John Ungoed-Thomas
Michael Spencer, the financier and former conservative treasurer, has agreed to pay a tax bill of £4.7m owed from a scheme that allowed him to avoid millions of pounds in tax for nearly a decade.
One of Spencer's companies channelled £9.5m to a trust - money which was then paid to him via loans with no repayment date. It meant there was no requirement to pay income tax or national insurance.
Similar schemes using employment benefit trusts (EBT's) - which are typically based offshore - have been used across the city to provide millions of pounds in loans for some of the highest paid financiers.
HM Revenue & Customs (HMRC) is now pursuing unpaid income tax for schemes which it considers were in fact “disguised remuneration” and widely used for tax avoidance.
A source close to Spencer said loans scheme was never intended to avoid tax and could “at worst” be considered tax deferral. The source added that the device had landed Spencer with a bigger tax bill then he would have otherwise had.
City firms, banks and football clubs are under investigation for using the schemes. Rangers football club, which is in administration, faces a potential tax bill of £50m over loans it made to players which were never paid back.
One senior consultant said: “These schemes have been widely used in the city and football clubs to take money out of companies without the requirement to pay income tax and national insurance.
Spencer, 56, group chief executive of ICAP, the inter-dealing broker, was treasurer of the conservative party from 2007 to 2010. His investment company, IPGL, has donated more than £3.7m to the party.
He received loans totalling £9.5, up until March 2011 from IPGL and paid a small amount of tax because the low rate of interest was considered a perk of his employment. He has recently agreed to pay the full rate of income tax on the loans, which has meant a bill of about £4.7m.
A spokesman for Spencer, who was ranked 145th with £520m in last year’s Sunday Times rich list, said : “Michael Spencer is a UK domiciled and resident taxpayer and one of the largest individual taxpayers in Britain.
“In recent years he has borrowed certain sums from the employee benefit trust of IPGL, his own private company. These loans are repayable on demand. These loans have always been fully disclosed to HMRC and Mr Spencer has paid full tax due on them. HMRC has fully agreed and accepted the tax treatment of these loans.”
A spokesman for the HMRC said it would not comment on Individual cases, but normally considered any loans from EBTs should be treated as income. “HMRC will continue with its challenges to such loans and seek to categorise them as earnings,” said a spokesman.
The government introduced laws to tackle such schemes las year and has mounted on of its bigger investigations into the use of these trusts. It estimates it is owed £1.7 billion by companies that have used EBTs and has written to 2,690 employers inviting them to settle. UBS and Deutsche Bank are fighting a tax tribunal case against HMRC which claims the two banks used such schemes to avoid tax.
Ex-Tory Treasurer settles £4.7m bill with the Revenue by John Ungoed-Thomas
Michael Spencer, the financier and former conservative treasurer, has agreed to pay a tax bill of £4.7m owed from a scheme that allowed him to avoid millions of pounds in tax for nearly a decade.
One of Spencer's companies channelled £9.5m to a trust - money which was then paid to him via loans with no repayment date. It meant there was no requirement to pay income tax or national insurance.
Similar schemes using employment benefit trusts (EBT's) - which are typically based offshore - have been used across the city to provide millions of pounds in loans for some of the highest paid financiers.
HM Revenue & Customs (HMRC) is now pursuing unpaid income tax for schemes which it considers were in fact “disguised remuneration” and widely used for tax avoidance.
A source close to Spencer said loans scheme was never intended to avoid tax and could “at worst” be considered tax deferral. The source added that the device had landed Spencer with a bigger tax bill then he would have otherwise had.
City firms, banks and football clubs are under investigation for using the schemes. Rangers football club, which is in administration, faces a potential tax bill of £50m over loans it made to players which were never paid back.
One senior consultant said: “These schemes have been widely used in the city and football clubs to take money out of companies without the requirement to pay income tax and national insurance.
Spencer, 56, group chief executive of ICAP, the inter-dealing broker, was treasurer of the conservative party from 2007 to 2010. His investment company, IPGL, has donated more than £3.7m to the party.
He received loans totalling £9.5, up until March 2011 from IPGL and paid a small amount of tax because the low rate of interest was considered a perk of his employment. He has recently agreed to pay the full rate of income tax on the loans, which has meant a bill of about £4.7m.
A spokesman for Spencer, who was ranked 145th with £520m in last year’s Sunday Times rich list, said : “Michael Spencer is a UK domiciled and resident taxpayer and one of the largest individual taxpayers in Britain.
“In recent years he has borrowed certain sums from the employee benefit trust of IPGL, his own private company. These loans are repayable on demand. These loans have always been fully disclosed to HMRC and Mr Spencer has paid full tax due on them. HMRC has fully agreed and accepted the tax treatment of these loans.”
A spokesman for the HMRC said it would not comment on Individual cases, but normally considered any loans from EBTs should be treated as income. “HMRC will continue with its challenges to such loans and seek to categorise them as earnings,” said a spokesman.
The government introduced laws to tackle such schemes las year and has mounted on of its bigger investigations into the use of these trusts. It estimates it is owed £1.7 billion by companies that have used EBTs and has written to 2,690 employers inviting them to settle. UBS and Deutsche Bank are fighting a tax tribunal case against HMRC which claims the two banks used such schemes to avoid tax.
