Jimmy Carr tax avoidance worse than IR35?

21 June 2012

Jimmy Carr and some members of Take That (excluding Robbie Williams) are included in the highly paid entertainers who have been reported as benefiting from reduced tax payments by following cleverly thought out schemes recommended by their accountants.

The temptation to avoid or pay reduced tax is no doubt as a result of the new 50% tax rate which is bad enough without even considering National Insurance that needs to be paid on top of this. Reports suggest by using "tax avoidance" schemes actual tax can be as low as 1%. Funnily enough Jimmy Carr previously did a comedy sketch mocking Barclays for avoiding tax.

Definitions: Tax Avoidance is legally finding ways of paying less tax. Tax Evasion is illegally paying less or no tax!

David Cameron has said that use of these schemes which some claim are within HMRC rules is "morally wrong".

It is clearly not correct that highly paid entertainers working and living in the UK, being paid by UK taxpayers should pay less tax than honest working people earning much less than them.

With all recent news being on HMRC focusing on contractors who are potentially breaching IR35 rules by operating through their own limited companies we hope that HMRC focus on the many millions of tax these highly paid entertainers are avoiding.

It is true contractors can pay less tax working through their own limited companies but they still pay the appropriate levels of tax that exist on dividend income. This recognises the entrepreneurial nature of being a contractor where the contractor is in effect running a business generating their own income and responsible for the delivery of their service.

Clearly it is correct for HMRC to focus on the off payroll schemes operated by some very senior government officials where the true nature is not of a contractor but an employee.

It is just being reported that Jimmy Carr has tweeted he made an error of judgment. Sounds like an apology but will he now pay the tax he would have normally paid?