&lt;img src=”//bat.bing.com/action/0?ti=4047056&amp;Ver=2″ height=”0″ width=”0″ style=”display:none; visibility: hidden;” /&gt; &lt;img height=”1″ width=”1″ style=”display:none” src=”https://www.facebook.com/tr?id=678338115628438&amp;ev=PageView&amp;noscript=1″ /&gt; Alex Salmond’s ‘hypocrisy’ of using firm to save tax – Telegraph
Alex Salmond’s ‘hypocrisy’ of using firm to save tax
Outside earnings paid through company despite his pledged crackdown on avoiders
When Alex Salmond campaigned in last year’s general election, he did so on a manifesto that called for a “crackdown on tax avoidance” and said the wealthy should not be able to avoid paying income tax on large chunks of their earnings.
But the former SNP leader now faces a charge of hypocrisy after it emerged that this year he has channelled earnings of more than £120,000 through a new “personal service company”. This would allow him to pay corporation tax at 20 per cent on the money, rather than income tax at up to 45 per cent. He would pay further tax only when he chooses to draw money from his company in future.
By structuring his tax affairs in this way Mr Salmond’s tax bill this year will be reduced by approximately £35,000 after his corporation tax has been paid. His personal tax allowance will also have been retained.
He insists he has done nothing wrong and is simply separating out his earning as an MP and MSP – on which he pays income tax in the normal way – and his outside earnings as an author, newspaper columnist and broadcaster. But accountants shown the figures by The Sunday Telegraph said that the move was clearly a potential legal tax avoidance scheme. “The only reason to do this is to save tax,” said one senior City accountant. “There is nothing Mr Salmond is getting commercial protection from. Why else would you do it?”
In the current tax year, Mr Salmond will earn an estimated £206,000, according to declarations to the parliamentary authorities, putting him in the top 0.2 per cent of all earners in Scotland. He is predicted to earn a further £5,000 before April from a show he presents on the radio station LBC. These have not yet been declared to the parliamentary authorities.
Of his total income about £85,000 is salary from his MP and MSP jobs, from which income tax is deducted in the normal way. However, he also declares earnings of £9,000 a month from the DC Thomson and Aberdeen Journals media groups, paid quarterly in April, July, October and January. He earned a further £12,880 from sales of a book and other media appearances, including a £1,800 fee for appearing on the comedy show Have I Got News for You.
According to parliamentary records, his extra earnings, totalling just under £121,000, were paid into a newly formed private service company, The Chronicles of Deer Ltd. When added to his LBC earnings, this gives a total of approximately £126,000. Mr Salmond is the sole shareholder. His accountant, John Cairns, is the sole director.
An annual income of £211,000 puts Mr Salmond firmly in the 45 per cent tax bracket and cancels his personal allowance. If he was taxed as an individual on this whole sum, the amount due in income tax and National Insurance would be around £88,500. If his non-parliamentary earnings were paid directly to himself, rather than through his company, his tax bill this year would be approximately £35,000 higher.
However, with £126,000 of Mr Salmond’s income paid through a personal company, and taxed under corporation tax, his total bill could fall to around £53,500, saving him around £35,000 in tax. Mr Salmond would have to pay further tax if he took the money out of his company, but his total bill could still be less than paying income tax and NI in the normal way.
Payment through a personal company allows three further main ways of saving tax. In the first, known as “income-spreading”, a large amount of money earned in a year can be held in the company as a cash pile, then paid out in chunks over several years to avoid triggering higher rates of tax. Mr Salmond could also set substantial “company expenses” against tax, further reducing the money he has to pay.
Mr Salmond could make his wife a shareholder in the company and split the income from it with her, benefiting from her tax-free allowance and the fact that she would almost certainly pay less tax on it than he would. If she is a basic-rate taxpayer, she would pay no tax on the income were it to be drawn this tax year. Such arrangements are entirely legal.
Several of these loopholes will be closed from April, but have been used by other politicians and prominent figures. In 2012 it emerged that former Labour mayor of London, Ken Livingstone, had avoided at least £50,000 in tax through the same arrangements.
Ruth Davidson, leader of the Scottish Conservatives, said: “Only this time last year, the SNP said the wealthiest in society should not be able to avoid paying income tax. The SNP is good at preaching to others but not so good at putting it into practice – with the result that Mr Salmond has left himself open to charges of blatant hypocrisy.”
The Chronicles of Deer was set up last February, five months after the referendum. Mr Salmond’s friend and lawyer, Tasmina Ahmed-Sheikh, now an SNP MP, was a director until the general election. It is based at the offices of French Duncan, a Glasgow accountancy firm. The figure for Mr Salmond’s parliamentary salaries reflects the fact that the SNP’s MPs have been instructed to refuse the recent parliamentary pay increase and that Mr Salmond’s MSP salary was reduced by two-thirds when he became an MP in May.
The £211,000 figure for Mr Salmond’s 2015-16 income does not include his pension from his time as First Minister, which he donates to charity, nor a payment for a speech to Bank of America, also given to charity. It has also been reported that he donates his reduced MSP salary to charity, though his declarations say he takes it.
Mr Salmond insisted last night that the company existed “to separate my parliamentary income from my income from publishing and journalism and for no purpose of tax avoidance or evasion”. He would not channel income through his wife, he said.
He said that all the expenses he set against tax through the company were “entirely legitimate and necessary” and the company also paid VAT. He said he would only incur a tax advantage if he ceased to be a higher-rate taxpayer when income was taken from the company, which he said was unlikely. He said he would pay tax on any income he received from the company and had “no intention of paying less tax – that is not the purpose of the company and indeed [I] will make sure that I do not”.