Isn’t This Tax Abuse? Julian Richer Sells Richer Sounds Without Paying Capital Gains Tax

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.

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.”

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:

The company will pay Richer an initial £9.2m for the stake

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:

If Richer Sounds continues to be successful Richer will receive additional payments over a 15 year period

And as I say, no tax will be forthcoming. Because:

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.

A John Lewis style trust, eh? How do they work?

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.

Oh.

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)

Gosh.

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?

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Leo Savantt
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Leo Savantt

The Richer they get the less they pay. Shame in this case as, apart from the hypocrisy and virtue signalling, the sell off to staff, tax break included, is laudable.

tamimisledus
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tamimisledus

Really?
So the richest pay less than the less rich, then the less rich pay less that those even less rich, so the even less rich pay less than the poorest.
So the richest pay less than the poor!
You really haven’t thought that one through, have you?

Leo Savantt
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Leo Savantt

Proportionally the rich pay much less tax than the poor. A family of four on an average wage pays approximately 72% of their income in tax, firstly income tax, then what remains is taxed again via council tax, VAT, fuel tax etc..

Furthermore most of the wealthy structure their activities through companies and pay corporation tax rather than the higher income tax whenever possible.

thammond
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thammond

That’s all nonsense. The average person pays around a third of their post-tax income on housing costs, and quarter or more on food and a fair bit on other items without VAT. You simply cannot get to 72%. Median wage = £29,000. Tax & NI = £5,742. Post tax income = £23,258. Say £15,000 on untaxed housing, untaxed food and non-VAT items leaves £8,258. Say average of 25% tax on that spending = £2,064. So total tax = £7,806. That’s 27% of gross income. Maybe your numerals are the wrong way around? And the rich only “pay less” if they… Read more »

Leo Savantt
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Leo Savantt

If you calculate tax to include the tax cost of the items you buy, which you should do because it is you who is paying, it is about 72%. Somewhere I’ve archived a pdf research paper detailing the tax chain process meticulously. I’ll dig it out when I return home, but for now the calculations in the paper work roughly like this, if I remember correctly. If you buy a pair of shoes out of your taxed income included in the price is VAT, so you are already up to forty percent or more (VAT + income tax + NI).… Read more »

tamimisledus
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tamimisledus

Where is this report of you have?
Please give formal reference and any other discussion of the actual document.

Leo Savantt
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Leo Savantt

As I said when I return home I will dig out the paper.

tamimisledus
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tamimisledus

I thought you would have returned home by now. My mistake.
When do you expect to return home?

tamimisledus
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tamimisledus

The Richer they get the less they pay ….

Your original claim was that the richer pay less tax than those poorer than them.
Now your claim is that the proportion of their income paid in tax by the richer is lower than the tax paid by the poorer.
That is very different from your original claim.
Please don’t make your original claim again.

Leo Savantt
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Leo Savantt

“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.”

Please don’t tell me what I can and can not say.

tamimisledus
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tamimisledus

Well carry on making misleading claims then.
It doesn’t show you or your arguments in a good light.

tamimisledus
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tamimisledus

I didn’t tell you. I asked you politely not to make your original misleading claim again.

tamimisledus
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tamimisledus

Please don’t tell what I can and cannot tell you.

tamimisledus
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tamimisledus

Capital Gains Tax (with its close relative, income tax) is immoral.

Malcolm
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Malcolm

We need to encourage more like Julian Richer to set up and provide jobs for others. And why not no CGT? And while we are at it, no inheritance tax either (or at least the USA threshold ~ £10 million per couple) so that more wealth will be attracted to the UK and the wealthy will not retire elsewhere. That wealth is likely to generate more income tax, more VAT, more Council tax and more employment opportunities than IHT. https://taxfoundation.org/estate-and-inheritance-taxes-around-world/ “Thirteen Countries or Tax Jurisdictions Have Repealed Inheritance or Estate Taxes Since 2000” Macau 2001, Portugal 2004, Slovak Republic 2004,… Read more »

thammond
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thammond

I choose to buy an item at the price offered. I then demand a partial refund if the person selling me that thing makes a profit. Quite a weird and unjustifiable claim, surely?