60 Second: How your house can be a tax dodger

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How your house can be a tax dodger,

The super rich love buying houses in London; not that they live in them – they’ve got super yachts, houses in Palm Springs and Monaco for that.

But buying a house can be a great way to avoid tax. First, you need a good accountant and lawyer. And, of course, it’s vital that you keep your identity secret; they’ll see to that.

Having never engaged in this activity myself (I pay up and shut up) I don’t fully know how these tax havens work but here’s my attempt at explaining.

It’s quite easy really.

Step 1. Set up a company in Panama.

Step 2. Take out a huge loan against a company you own registered in the UK.

Step 3. You then have to set up a subsidiary for your company in Panama and transfer the loan interest payment to the first company you have set up in Panama.

Step 4. You then have to set up another company in Switzerland which will be responsible for ensuring that any business interests in Europe first have their profits diverted to the UK, to take advantage of the capital spending allowances.

Step 5. You need to bill excess profits to the second company in Panama.

If you’re getting a bit lost at this stage, don’t worry the top legal and accountancy firms come – at an appropriate fee, of course.

Step 6. The second Panama company then has to bill the first for mortgage interest payments to further reduce profit owed. This will offset against losses capital but not account day-to-day losses in Europe. For which you have to build another complex web of structures.

It’s simple if you understand it….. Which I don’t pretend to.

e56457e6-f623-4ad3-aa6e-01d37fefab89The advantage of this for those that can afford it is that they pay less tax and they can often use these vehicles to conceal ownership.

For those of us who live in more modest accommodation, the cost of fees easily outweighs the tax advantage. So I’ll just have to pay up.

Surely there needs to be some sort of transparency as to who owns what.

A transparent national register of ownership is what is needed. Politicians love talking about transparency. Hopefully, we will see it in action.

Frighteningly, I think I’m beginning to think like Jeremy Corbyn.

Have a good weekend.

Tom


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