Here’s how my story in today’s paper starts:
Ken Livingstone, who has attacked tax avoiders as “rich bastards” who should “not be allowed to vote,” has avoided at least £50,000 in tax by having himself paid through a personal company.
Companies House documents show that Mr Livingstone, who is Labour’s candidate for the London mayoralty, earned £232,000 in 2009, the first year after he was defeated by Boris Johnson at the last mayoral election. The money, from personal appearances, speechmaking and hosting a radio show, was paid directly into a new company set up by Mr Livingstone and his then partner, now wife, Emma, who are the sole shareholders.
Accountants shown the documents by The Sunday Telegraph say the move appears designed to ensure that Mr Livingstone paid corporation tax at 20 or 21 per cent, rather than income tax at up to 40 per cent – a loophole the former mayor has himself attacked as “Robin Hood in reverse.” Mr Livingstone confirmed the arrangement last night.
He is also able to split his income 50-50 with his wife, even though it was earned entirely by him, saving further substantial amounts of tax, and pay Mrs Livingstone from company funds for acting as his “assistant.”
At almost the exact moment that Ken was setting up his tax-avoidance scheme, he was also writing the following (in his column for The Sun, amusingly enough):
“THESE rich bastards just don’t get it…No one should be allowed to vote in a British election, let alone sit in our Parliament, unless they are paying their full share of tax.
“Cameron’s problem is too many of his team have become super rich by exploiting every tax fiddle. Given he is surrounded by so many millionaires in the shadow cabinet it’s not surprising their tax policies aim to reward the rich and screw the rest of us…
“If Brown wants to get re-elected he should promise to sweep away all the tax scams and everybody should pay tax at the same rate on their earnings and all other income.”
Hear, hear to that, Ken!
Here is the transcript of my conversation with Ken when I rang him up yesterday.
Q: Have you ever engaged in any measures to reduce your tax burden?
A: I have no idea, you’ll have to talk to my accountant.
Q: Have you paid income tax on all the income that’s passed through your company?
A: You’ll have to ask my accountant, I don’t deal with any tax matters.
Q: Well, look, we’ve shown the accounts of your company, Silveta, to three accountants, who say that it is clearly a legal tax avoidance device to pay corporation tax rather than income tax and to split any dividends with your wife, further reducing the tax burden. What do you say to that?
A: Do you expect my wife to work for nothing?
Q: So some of the income in the company is from her employment, is it?
A: Well, she was forced out of her job [as Ken’s PA] once Boris won, and then spent time organising my life and helping with the autobiography, so I think it’s right that she should be paid.
Q: So who’s been paying her?
A: Out of the company.
Q: OK, but the money that came into the company was from your employment, wasn’t it, from LBC and speaking engagements and things like that.
Q: But nobody formally paid into the company for her, right? You’ve been sharing out the profits of the company with her?
A: But there’s no way I could have done all that without her. She had to organise all my after-dinner speaking, travel, and sat there in the attic for three years whilst I dictated the autobiography. I mean, I do think she’s entitled to be paid.
Q: OK. What’s your response to what the accountants say, that this is a legal tax avoidance device to pay corporation rather than income tax?
A: Well, we seem to have paid an awful lot of tax.
Q: Have you paid the full amount of income tax on all the income that’s passed through your company, Silveta?
A: As I’m paid, yes I pay income tax.
Q: But the payment comes into the company, not to you. You’re not paid, the company is paid. Your clients pay the company.
A: Yeah, but then what you get is that we had a big influx of money in the year after I left [the mayoralty] because there were a load of people outstanding wanting me to go and advise them in various parts of the world, and then the money tailed off. So we spread it over the three years.
Q: Right. So let me just be clear on this, Ken. The money was paid in to the company–
A: And we paid tax on it, the company paid tax on it.
Q: The company paid corporation tax, right? And that is less than income tax.
A: [When] it then pays me, you pay an amount of tax that is effectively the same rate as you would have done on income tax.
Q: Well, I’m advised that it is actually substantially less, because Emma [his wife] is a basic rate taxpayer and she doesn’t pay any tax [on company dividends]. And you as a higher-rate tax payer only have to pay 18 per cent, so the overall effect is less. That’s the arrangement.
A: Don’t forget the money when it comes in to the company is taxed. When you add the two together, it is much the same as any directly employed [person.]
Q: It’s not actually, Ken, it is less. But just to be clear about this: when the money comes in it’s taxed at corporation tax [rates] and when you take it out as dividends, you do pay a lesser rate of income tax [and no national insurance], and that’s how it works.
A: You’d have to ask the accountants.
Q: In terms of the dividends, you haven’t actually taken any dividends out. You’ve got a large cash pile sitting there at the moment. So you haven’t actually paid any income tax on any of that money because you haven’t taken it as dividends.
A: I haven’t any idea at all, I’m not involved in any of this. I leave it to the accountant and to Emma.
Q: You have obviously heavily criticised tax avoidance in the past. In 2009, you said: “Cameron’s problem is too many of his team have become super-rich by exploiting every tax fiddle… [We should] sweep away all the tax scams and everybody should pay tax at the same rate on their earnings and all other income.”
A: If you make me Chancellor, if the Telegraph leads a campaign for me to be Chancellor, that’s exactly what I would do….
Q: What’s your response to the charge of hypocrisy?
(Livingstone puts phone down)