The Chancellor, Chiswell & Corporation Tax
Posted on January 14, 2019
As much as Brexit is causing the government multiple headaches, it seems there is a silver lining of distraction for the chancellor, Phillip Hammond.
Evidence has emerged that a company he is involved with, Chiswell (Moorgate) has played a clever game with losses. This is to avoid paying around £300k in Corporation Tax.
How Corporation Tax Works
For those of you who are PAYE employees who don’t run a business, you may be understandably ignorant of how corporation tax works. So, I will explain it in the simplest form.
Imagine a scenario where you have a Ltd company. Imagine that company has a recent trading period from the 30th April 2017 to 30th April 2018. During that period, the company generated £100k of business.
During that period of business, you paid £60k in salaries, £20k on materials and £10k on office equipment and phone/heating/internet bills. You are now left with 10k. This is regarded as pre-tax profit and is liable to 19% corporation tax.
So, this means that on January 31st, 2019 (or before then if you are feeling generous) you would be due to pay corporation tax of £1.9k.
Chiswell (Moorgate) Ltd
Since Chiswell was set up in 2010, it has posted total profits of £1.6 million. The tax it has paid on those profits equals £5,964.00 or 0.4%. Remember, the corporation tax rate is supposed to be 19%.
How Chiswell have avoided tax is far more complex. It is suggested that they do it by saving up the years where they make a loss and set them off against the years of profit. This not illegal but also not something, if I was chancellor, I would want to brag about.
I certainly wouldn’t want to brag about it if I was claiming to be clamping down on companies who were aggressively avoiding corporation tax.
Where this is galling for any of you like me who run a small business, is that we don’t get away with these things. We will be paying our corporation tax on the 31st January. Personally, I take solace in the fact it proves I have had a decent year and I am doing my bit for public services.
However, my patience does wear thin when it dawns on me that our chancellor is involved in a company that is taking the piss out of the system.
Tell me how that is right?
If you want to read more about this, go here.