Now isn’t this interesting? Julian Richer is selling Richer Sounds, his audio retailing company. Which is great, obviously, we always like to see those who have done well cashing in. But the thing is he’s structured the sale in a manner that means he doesn’t have to pay any capital gains tax. Yes, that’s right, one of the dynastic fortunes of our time will be monetised without the Treasury getting even a sniff at it.
It should be pointed out that this is all entirely legal. But that never stops the tax campaigners does it? Amazon pays absolutely every bean that the law states it should pay and yet they’re abused as tax dodging bastards. Apple’s the biggest single taxpayer ever in the United States and yet they’re actually prosecuted by the European Union over the matter.
It gets even better. Julian Richer actually funds an outfit snarling at the multinationals for not paying tax.[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””] A wealthy former Tory party donor is to fund a new independent tax watchdog that will pore over the opaque finances of multinational companies and individuals to expose tax avoidance. Julian Richer, who founded the hi-fi and TV specialist Richer Sounds, is bankrolling the non-profit venture Taxwatch after growing angry at the UK’s increasingly “broken” tax system. “I’m outraged by the status quo,” said Richer. “We pay our taxes but these people are just laughing at us. You can’t move these days for stories about people and companies trying to find ever more ingenious ways to avoid paying their tax bill, whether it’s tech giants, celebrities or major landowners.” [/perfectpullquote]
Julian Richer will pay no capital gains tax on the sale of Richer Sounds. Even though he’s cashing in with an initial near £10 million receipt:[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””]The company will pay Richer an initial £9.2m for the stake[/perfectpullquote]
No CGT – nor, obviously, income tax – will be due on that sum. No nurses will be employed as the NHS has more money by his gaining those millions. And that’s the initial payment. The total is going to be rather larger:[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””]If Richer Sounds continues to be successful Richer will receive additional payments over a 15 year period[/perfectpullquote]
And as I say, no tax will be forthcoming. Because:[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””] The founder of Richer Sounds is handing control of the hi-fi and TV retail chain to staff, in a move that will also give employees large cash bonuses. Julian Richer will announce to staff on Tuesday that he has transferred 60% of his shares into a John Lewis-style trust. [/perfectpullquote]
A John Lewis style trust, eh? How do they work?[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””] Employee ownership trusts If you own a trading company, you can now sell some, or all, of your shares to an employee ownership trust (EOT) (subject to satisfying certain conditions) for full market value without incurring any capital gains tax liability in a way which also benefits your employees. [/perfectpullquote]
Oh.[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””]No capital gains, income or inheritance tax liabilities should arise on the disposal of a controlling interest in a company to an EOT (or on the subsequent receipt of the purchase price by the former shareholders)[/perfectpullquote]
The Treasury doesn’t get 20% of the sum, does it?
Now, I know people who shout that obeying the tax law exactly as it is written is tax abuse. I’ve even got into an argument with Richard Brooks, one of the people being funded by Julian Richer, on the point. Brooks insisting that Vodafone obeying the law on controlled foreign companies was tax avoidance, me insisting it wasn’t.
But of course this is different. Entrepreneur cashes in his life’s work without paying capital gains or income tax. Yes, that’s obviously different because reasons.
Julian Richer is entirely and absolutely obeying the law here. What’s going to be interesting though is the reaction from those tax campaigners who complain so bitterly when others do exactly the same, entirely and wholly obey the law.
Think about Arcadia, Taveta and all that for a moment. Tina, Lady Green, does not pay UK tax on the dividends she receives. This is loudly condemned. It has most certainly been called tax abuse, tax dodging and tax avoidance. The reason she doesn’t pay that UK tax is because she’s a foreigner living in a foreign country.
But this is different because, right? Even, tax abuse and tax compliance all depend upon who is doing it? Will tax campaigners insist that it’s just fine because mates n’all?