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Untaxing: the £10bn fridge – the full story
The Friday 4 April episode of Untaxing was the peculiar story of a tax firm, ZLX, that promised a client £30,000 in R&D tax relief for installing a fridge.

The client quickly realised such a claim would be nonsense, and pulled out – but ZLX refused to accept that, and sued them for fees. That ended before a court, which described ZLX’s claim as “comical”. And ZLX’s penchant for litigation continued: when tax advisers discussed the case online, ZLX’s lawyers ordered them to delete their posts.

There was far more to the story than we could pack into 15 minutes. We have evidence of further dubious claims by ZLX, including one involving a vegan doughnut recipe. Plus evidence of the tax qualifications and experience of the key ZLX personnel – they had none, and one of their compliance officer’s only previous employment had been as a bartender.

And we have full details of ZLX’s attempted legal intimidation of the tax professionals who discussed the fridge case on social media.

The episode is available on BBC Sounds.

The fridge

James Mackie Wholesale Limited is a fruit and vegetable wholesaler in Glasgow, supplying supermarkets, hotels and restaurants. In 2021, its owner, Robbie Patterson was introduced to ZLX, who claimed to be research and development tax experts.

The modern small business R&D tax relief was created in 2000, with the laudable aim of incentivising R&D investment. As the name suggests, it’s only available for “research and development”. That term is defined in guidance published by BEIS/DSIT and given statutory force under the Corporation Tax Act 2010. HMRC accurately summarise the rules as follows:

I think most ordinary people would read this, and immediately realise that a fruit and vegetable wholesaler would be highly unlikely to have R&D expenditure that qualified for relief.

But Stephen McCallion, who ran ZLX, told the wholesaler they could claim £30,000 in tax relief.

For installing a fridge.

It was a normal commercial fridge (a “cold room” or “walk-in”). A substantial piece of machinery, costing around £100,000 – but it was not an advance in technology. And it only took the wholesaler fifteen minutes to purchase it and arrange installation.

The accountant

Robbie Patterson signed up with ZLX and, at this point, many small businesses would have trusted the supposed expert and claimed the £30k from HMRC. Mr Patterson did something different: he spoke to his accountant.

The accountant wasn’t an R&D tax specialist, but he knew enough to know that this was not a valid claim. He told Mr Patterson that HMRC would probably pay the £30k, but then chase after it in a few years’ time. That is exactly what happened to thousands of businesses in the next few years.

It was excellent advice from the accountant, and a sound piece of judgment from Robbie Patterson.

The lawsuit

What happened next is hard to explain.

ZLX sued James Mackie Wholesalers. The claim was for the fee ZLX would have received if the R&D claim had gone ahead – £8,000.

The dispute was heard by the Glasgow and Strathkelvin Sheriff Court (broadly equivalent to the English High Court).

The judgment is here. Much of it concerns whether the cancellation fee was ever agreed to by James Mackie (it wasn’t) and whether it was reasonable (it wasn’t). But the sheriff went on to consider whether R&D tax relief was ever available. He was scathing:

and:

James Mackie Wholesale’s accountant saved them from what was, at the least, an entirely invalid R&D tax relief claim. But when we read words like “concocted” in a judgment, then there is a more serious possibility: the accountant may have saved James Mackie from unwittingly participating in a fraud.

There is gossip in the Glasgow legal world that James Mackie Wholesale is not the only client sued by ZLX – but we have been unable to substantiate that.

Who was ZLX?

The fridge case is alarming. Not just that a firm would advise that R&D tax relief was available in such a hopeless case, but that it would be so unaware of the hopelessness of the case that it would take it all the way to a court.

The court judgment suggests that ZLX was a disorganised mess:

Things become clearer when we look at the background of the people involved.

Stephen McCallion himself had no legal, tax or accounting qualifications or experience. That might not matter if he was leading a team of technical specialists.

He was not.

The James Mackie judgment showed that ZLX had a completely unqualified individual trying to progress the R&D claim by arguing with James Mackie’s clearly very competent accountant:

And she was under considerable pressure:

What about the rest of ZLX’s technical and compliance team?

In 2024, ZLX had two people in its compliance team – their previous experience was as a bartender and sales assistant.

And their technical team – a shift supervisor in a bar (“charge hand”) and a warehouse assistant and sales attendant:¹

Their R&D tax advisers also had little or no relevant experience – this is typical:

It’s important to note that these were very junior personnel who bear no moral or legal responsibility for the claims ZLX made. They were under significant pressure and, given their lack of experience, would not have known that ZLX was making improper R&D tax relief claims. The blame lies with those running ZLX.

The ZLX website showed an impressive roster of consultants, operating across the UK. However in reality these were franchisees, who had been assured they didn’t need finance or accounting experience. Given the ineptitude of McCallion himself, we can only imagine the quality of the claims originated by these franchisees.

There is more evidence of serious problems at ZLX in another case involving the company. Stephen McCallion fell out with his former business partner, William Gray. Gray claims that McCallion promised him half the shares in ZLX. McCallion denies there was such an agreement, but says in any event, Gray defrauded him and was incompetent. McCallion alleges, specifically, that Gray failed to have claim forms signed by clients, and failed to have the figures he submitted to HM Revenue & Customs approved by clients, and failed to attach accurate tax computations to clients’ claim forms, and failed to comply with HMRC standards for tax agents. Gray denies this – he says he wasn’t the consultant with responsibility for the claims.

So it appears to be agreed by both sides that someone working for ZLX was acting highly improperly, and potentially criminally, even if the parties disagree on who that was.

What other claims did ZLX make?

We understand that James Mackie was just one of a number of fruit and vegetable wholesalers who ZLX approached. We would be very surprised if any of them had valid R&D tax relief claims.

Since the James Mackie judgment, we have spoken to employees and clients of ZLX, and there is a consistent pattern of claims being driven by sales and fees, regardless of the technical merit.

One employee was so horrified by one claim they saw being finalised that they captured a screen shot – it was a claim involving a vegan doughnut:²

Tax Policy Associates has also seen evidence, which unfortunately we cannot publish, of extremely large claims made by ZLX with no legal basis at all, and claimed expenditure which an experienced accountant described as “fictitious”.

There is additional evidence of illegitimate claims from ZLX’s own website.

Today the ZLX website is down, but, just after the court case, its website boasted of success across an impressive variety of fields:

Soon after the court case they pruned the list:

Coffee and food shops, pubs, bars, auto dealerships, taxi and car rental companies, cleaning and hygiene companies; events and hospitality? All gone. And, not coincidentally, all businesses with little or no prospect of a valid R&D tax claim.

Healthcare

The ZLX website contained a detailed case study involved R&D tax credits supposedly being claimed for an online pharmacy building what seems to be a very commonplace IT system. That does not look like a valid claim.

And this case study showed a hospital claiming a large amount of tax credits. It names the individuals involved, and so we can identify the client as Ramsay Healthcare. We can also see the tax credits on page 19 of Ramsay Healthcare’s accounts – $AUS12.8m (£6m) claimed in 2021. As it’s a large business, we believe they’d have to have incurred more than £45m of qualifying R&D expenditure. That is surprising for a hospital group that, on the basis of its accounts and other publicly available information, undertakes no medical research.

We asked Ramsay Healthcare for comment, warning them that they’d been advised by a company that appeared to have no R&D tax expertise. They didn’t respond.

Football

The Times has reported on surprisingly large R&D tax relief claims by football clubs, some involving ZLX. The ZLX website gave a series of example projects – none of which look likely to have qualified for relief.³

ZLX was an official partner of Dundee United and, as The Times reported, the club made an R&D tax relief claim worth £600k (implying up to two million pounds of expenditure) which the club’s 2024 accounts say HMRC is now challenging:

In 2021, all of Dundee United’s expenses (“cost of sales” in the accounts) came to £6.9m. We regard it as almost impossible that a third of that could have been qualifying R&D.

ZLX also gave £100k of sponsorship to Hamilton Academicals FC in 2022 – the stadium was renamed the “ZLX Stadium”, and Stephen McCallion became a director.⁴ Hamilton Academical’s accounts for 2022 show £18,596 of fees paid to ZLX, implying the club received £60k worth of R&D tax relief as a result of a ZLX claim.

There are other suspicious case studies on the archived ZLX website, some naming the clients. For example: an esports company, an events production company, and a website development company.

What was it like working for ZLX?

The former ZLX employees we’ve spoken to paint a picture of a business driven entirely by sales, with no consideration as to whether the claims they were making had any merit.

“A very small portion of the claims were for qualifying projects and staff were trained to use jargon, buzzwords, and complex sentence structure to beef up narratives and make day-to-day work sound like groundbreaking R&D.”

“The sales team would often try to claim 100% staff time on R&D. I saw the finance team called out for refusing to process a claim for a consultant who was claiming that 60%+ of chefs’ time at a restaurant was spent on a software “R&D” project (a simple booking and order system).”

“Nobody in the technical writing team in my time at ZLX had any tax qualifications”

“Technical work was being done, but the quality of work was poor and there was no oversight or input by anyone tax qualified on the tech side. Tech writers would meet with clients to discuss projects and put a narrative together, so there was never an instance where the narrative itself was made up. The issue on the tech side was mostly pressure from sales colleagues, consultants, and directors to push through claims mixed with the lack of relevant expertise within the tech team.”

“On the finance side, sometimes consultants would seem to invent figures but these were generally caught and called out by the finance team. The bigger issue was more sales people being on finance calls and pushing clients to over-estimate what proportion of staff time, materials etc were expensed as part of the project.”

“The CEO implemented a rule where if qualifying expenditure was below a certain % of revenue you had to flag it to a director. This happened quite often, as sales colleagues would progress claims even if the client’s accounts showed no expenses for wages or materials.”

“It felt like the tactic of the company was to push through as many claims as possible and just deal with/drag out any HMRC reviews.”

“Some very large claims were made for software (six figures) which seemed to have little merit”.

The SLAPP

The tax world had been largely unaware of ZLX until the fridge case was reported. They subsequently became the target of much criticism and even mockery, online and offline.

Paul Rosser is an R&D tax specialist. He was the first to identify that a firm called Green Jellyfish was making R&D claims so questionable that it looked like an organised fraud. Paul worked with us on putting together a report which led to many of those involved being arrested.

Paul posted about the ZLX case on LinkedIn, saying:

“bonkers any advisor would feel this is the proper way to do business and even more bonkers they would let it get to court for the world, and HM Revenue & Customs to see.”

and (in response to criticism from someone else):

“sadly does seem to be the way a lot of dodgy advisors operate“

Another R&D tax adviser, Rufus Meakin, wrote on LinkedIn:

“Bogus R&D Tax Credit claim for standard fridge installation exposed in court ruling. In an intriguing court ruling R&D TaxCredit advisory firm ZLX Business Solutions was found to have encouraged a fruit and vegetable wholesaler to submit a sham R&D claim for the installation of a standard refrigeration unit.“

Three days later, both received a letter from Jones Whyte, a law firm acting for ZLX. The letters were extraordinary:

The letters attached “undertakings” which Messrs Rosser and Meakin were ordered to sign:

These letters were extraordinary:
- The letter to Mr Meakin denies that the R&D claim was bogus, that ZLX encouraged James Mackie to make it, and says the court didn’t make those findings. That must be seen as a deliberate lie by Jones Whyte. The court absolutely did make a finding that the R&D claim was bogus and a sham (the sheriff didn’t use those word, but used other words of equivalent strength). And clearly ZLX encouraged James Mackie to make the claim – that was the whole point of ZLX’s failed lawsuit.
- Mr Rosser had said ZLX “submitted invalid/fraudulent claims”. The Jones Whyte letter says ZLX “entirely refutes this”.⁵ But a court had ruled that the R&D claim would have been invalid, and fraud was a reasonable conclusion to make (see e.g. the word “concocted” in the judgment). Jones Whyte could have reasonably admitted the (attempted) claim was invalid but denied it was fraudulent. But to deny it was “invalid/fraudulent” was improper.
- The letter says Messrs Rosser and Meakin were acting maliciously. It provides no basis for this.
- The letter demands a retraction and apology within 24 hours or “immediate court proceedings” would be raised. That was a bluff. The letter had not followed the “pre-action protocol” required before an English law defamation claim, and indeed was so legally vague that it didn’t even state if it was a Scottish or English claim that was threatened (ZLX are Scottish; Rosser and Meakin are English, and Jones Whyte are based in Glasgow and regulated by both the Scottish Law Society and the SRA).
- Messrs Rosser and Meakin were being ordered to sign undertakings which contained a statement that ZLX did not submit invalid R&D claims. But the James Mackie judgment had established that ZLX had worked very hard indeed to submit an invalid claim for James Mackie Wholesalers. The undertaking Messrs Rosser and Meakin were being asked to sign was false. And – worse- they were unrepresented individuals being asked to sign a legal document without being told to obtain advice.
- The letters were headed “strictly private and confidential”. They claimed to be “without prejudice” and that the letters couldn’t be produced in court, but could be produced by ZLX. Nothing in the letters was confidential. Given they made no attempt to resolve a dispute, it is unlikely they were “without prejudice” – but if they were without prejudice, that goes both ways, and ZLX would not be able to produce them in court. So this was all nonsense.
So a solicitor had sent letters to unrepresented individuals, making false statements that the solicitor should have known was false, making a threat that the solicitor must have known was a bluff, and ordering the individuals to sign a statement that contained a false statement wrongly exonerating ZLX. It was a “SLAPP” – a strategic litigation against public participation.

That is not how law firms are permitted to behave.

Messrs Rosser and Meakin are part of the informal team of advisers we work with. We had been planning to write an article about ZLX so discussed the matter, and agreed Tax Policy Associates would send a collective response, both seeking comment from Jones Whyte and forcing them to retract their legal threats:⁶

Three days later, Jones Whyte wrote to us saying they were no longer instructed.

We will be reporting the firm to the Solicitors Regulation Authority.

After Jones Whyte ceased acting, we spent some time trying to obtain comment from ZLX and its owner, Stephen McCallion. He eventually sent us a bizarre email in which he made a number of claims contradicted by the court record, most including that he had never advised that installing a fridge would qualify for R&D tax relief.

We challenged Mr McCallion on this and he sent us a longer reply, in which he complains that the Sheriff believed James Mackie’s account over his, and that in fact Mr McCallion believed tax relief was available because James Mackie had developed a “bespoke chill unit with specific qualities relating to the increase of the shelf life of James Mackie’s products”. We do not believe this for several reasons. First, the Sheriff had ample opportunity to hear evidence and reach a conclusion. Second, it is not credible that a fruit and vegetable wholesaler would develop its own refrigeration technology. Third, if Mr McCallion really had believed this, he would have dropped his lawsuit as soon as it became clear James Mackie had undertaken no such development.

Mr McCallion’s reply is here:

Messrs Rosser and Meakin were not the only people threatened by ZLX. We are aware of three other cases; likely there are more.

The bigger picture

The James Mackie fridge ended up costing HMRC, and the wider body of taxpayers, nothing. But similar meritless claims by ZLX and others have cost the UK billions of pounds.

Here’s the number of R&D tax relief claims over the last 25 years:⁷

That explosion in small business claims after 2014 was because of firms like ZLX.

HMRC has published an analysis of R&D tax relief claims made in 2020/21. They found that half of all claims were incorrect in at least some respect. One quarter of claims were fully disallowed. Another 10% were fraudulent (5% by value). For SMEs, HMRC estimated that 25.8% of all claims by value were wrong or fraudulent. For large companies, 4.6%.

We analysed that data and estimated the total lost tax since 2000 – if we apply that 2020/21 level of fraud over all the tax relief data, the figure for lost tax is £10bn:

The future

R&D tax relief has been a scandal. Billions of pounds have been lost to wrong and fraudulent claims. And, much more recently, HMRC has reacted to this dismal history by blocking many claims which are in fact valid.

There are lessons which need to be learned:
- We cannot create reliefs like R&D tax relief. It’s generous, vague, and impossible to police – a dangerous combination. Better to have narrowly focussed reliefs which are only available to a much smaller number of businesses doing really serious R&D. The smaller number means the scheme can be more generous, and that HMRC can realistically pre-clear R&D before companies commit to it.
- We need regulation of tax advisers like ZLX, and criminal and civil charges pursued against people who recklessly or intentionally rip off their clients and HMRC. After the Spring Statement, the Government launched a consultation which is very much going in the right direction.
- As with many other bad actors, dodgy tax advisers abuse libel law to silence their accusers. They face no consequences for this. That has to change.
We expect HMRC is already investigating R&D tax relief claims made by ZLX. However we believe there should also be a criminal investigation. Creating a firm staffed by unqualified former-bartenders, pushing people to make sales at any cost, and “concocting” technical reports was (at a minimum) reckless. It was foreseeable and perhaps inevitable that wrong R&D tax relief claims would be made. Whether this was “dishonest”⁸ is something that a jury should decide.⁹

Image by ChatGPT 4o.

Thanks to Paul Rosser of R&D Consulting and Rufus Meakin of MSC R&D. Paul tells the story in his own words here – he deserves full credit for discovering and pursuing a series of R&D tax credit scandals over the last couple of years

Thanks also to V and C for their R&D tax relief expertise. And thanks to all the former ZLX clients and employees and their tax advisers who gave us their stories (despite ZLX’s reputation for bullying its critics).

Thanks most of all to Robbie Patterson – without his business sense and persistence, we’d never have heard of ZLX.
Footnotes
1. There was a third individual who we haven’t been able to identify. ↩︎
2. We don’t know if the claim was actually made, but it’s shocking that this would make it past an initial short conversation. ↩︎
3. Specifically:
  
  “Long term fitness levels and wellbeing of the clubs elite athletes”. That is very vague. Any project in this area would need specific goals as to the improvements they were attempting to achieve, and scientific/technological reasons why the results would be uncertain. It’s not clear what those could be.
  
  “Injury prevention and rehabilitation methods”. This would need medical-style trials to be able to accurately determine if the methods offered a measured improvement against existing methods. The advisers we spoke to were sceptical that this was realistic for all but the largest clubs.
  
  “Dietary and nutritional advancements”. Again very vague, and proper trials would be required to gauge the improvement sought over existing knowledge in the public domain.
  
  “Stadium and Training Pitches”. It seems very unlikely any expenditure here would be qualifying.
  
  “Stadiums Spectator Interaction” and “Media and Multi-media”. These are an extremely well-developed area, e.g. apps, electronic billboards. It would be surprising if a football club were to make a scientific or technological advance.
  
  “COVID Compliance Measures”. Absent novel medical research, this will just be the same kind of measures implemented across the country during Covid. The fact something is complicated and difficult does not make it qualifying R&D expenditure. ↩︎
4. Although that directorship ceased in January 2024. ↩︎
5. This was a classic abuse of the word “refute”. ↩︎
6. This was complicated by the fact that ZLX’s lawyer had misspelt his own email address in his letter; I am omitting the back-and-forth where we tried to work out how to email the firm. ↩︎
7. All data from official statistics available here. ↩︎
8. The subjective element of the test for dishonesty (see Ghosh (1982)) was removed by Ivey [2017] for civil cases, and that decision was confirmed to apply to criminal cases in Barton [2020]. The fact that a defendant might plead he or she was acting in line with what others in the sector were doing, and therefore did not believe it to be dishonest is no longer relevant if the jury finds they knew what they were doing and it was objectively dishonest. ↩︎
9. The leading textbook of criminal law and practice, Archbold, says: “In most cases the jury will need no further direction than the short two-limb test in Barton “(a) what was the defendant’s actual state of knowledge or belief as to the facts and (b) was his conduct dishonest by the standards of ordinary decent people?” ↩︎
6 April 2025
No, VAT isn’t a tariff – here’s what Trump (and others) get wrong
Today’s episode of Untaxing is about Jaffa cakes and VAT.

With the benefit of hindsight, that’s a very small VAT issue on a day when VAT has become a very large geopolitical issue.

Donald Trump is considering applying tariffs to much of the world because of VAT. He believes it’s a tariff. You’ll be unsurprised to hear that I disagree. But the details of why he’s wrong are interesting, and go beyond “all UK buyers pay VAT so there’s no discrimination”.

So, whilst there are many good articles explaining why VAT isn’t a tariff, I’ve written one with more detail, more footnotes, some beer, a theorem from 1936, and a callback to Jaffa Cakes.

What is a tariff?

A tariff is a type of tax which applies to imported goods but not locally-produced goods. That’s the World Trade Organisation definition (and tariffs are very much its thing) as well as the approach followed by the OECD in its own research.

Most countries impose tariffs on a variety of imports, usually with a complex series of rules (“schedules“) setting out which tariff applies to which goods.

So, for example, the UK imposes a 10% duty ¹ on importing most types of car. A car showroom buying cars from a British car manufacturer doesn’t pay this; a car showroom buying from a foreign manufacturer does. This is a tariff.

What isn’t a tariff?

Tariffs are sometimes called “duties”. That’s confusing, because not all duties are tariffs.

Take beer duty.

The UK imposes a £21.78 duty on each litre of alcohol contained in beer. Beer brewed in the UK to be sold in the UK is subject to the duty at the point it is produced. Beer brewed outside the UK is subject to duty when it’s imported.

Another feature: if beer is brewed in the UK to be exported then it’s generally not taxed.

This kind of tax is often called “destination-based”, because whether the duty applies depends entirely on where the consumer is, and not on where the producer is. Most countries in Europe and beyond also have destination-based alcohol duties.²

Another example of a destination-based tax is the various US State³ sales taxes. These generally apply to sales of goods and services to consumers in the State, whether the seller itself is in the State or outside it; they don’t apply to in-State sellers exporting to another country. ⁴

A destination-based tax is not a tariff, because it applies to both locally-produced and imported goods. There are (necessarily) different collection mechanisms for foreign and domestic sellers, but the overall tax result is broadly the same.

Why is VAT different?

VAT, in principle, is just another destination-based tax like beer duty or New York State sales tax. It’s charged where the ultimate consumer is in the UK, and not charged where the ultimate consumer is outside the UK. The location of the seller is irrelevant.

But the administrative detail of how VAT works is very different.

Sales taxes apply once and once only, to the final sale to the consumer. A business selling a car to someone living in New York has to charge State and local sales taxes. The rest of the supply chain – the suppliers of the raw materials, the car manufacturer, etc – is unaffected by the tax.

VAT applies at every level of the supply chain – to the “value added” at that level. To take a simplified example:

So:
- When the producer sells the steel for £100, it has to charge 20% VAT – so it charges the car manufacturer £100 plus £20 VAT, and accounts for the £20 to HMRC.
- When the car maker sells the car for £150 it also has to charge 20% VAT, so the consumer pays £180. The car maker recover the “input” VAT of £20 it paid to the steel producer, so it accounts to HMRC for £10 – i.e. £30 minus £20.
- The overall VAT paid is £30 – just as if this was a simple 20% sales tax only paid by the car maker. But it’s collected at each step in the supply chain.
- Of course in reality there will be hundreds or thousands of businesses in the supply chain, each collecting a small amount of that final £30 of VAT.
And here’s the result if it’s a US business selling to a UK consumer:

There is of course no VAT when the US steel producer supplies the steel to the US car maker. The only charge is “import VAT” when the car maker imports into the UK. The result, however, is the same: £30 of VAT.

I’ve used the UK in these examples, but the result would be the same across the EU (as UK VAT remains almost identical to EU VAT). It’s also the same in most – and possibly all- the other countries that apply a VAT or GST.⁵

Why is VAT so complicated?

Why does VAT work this way, when the ultimate result is the same as a simple 20% sales tax? Wouldn’t it be simpler to just work like a US State sales tax, and collect that 20% all in one go at the final sale?

There is only one reason why VAT works this way: tax evasion.
- The “final sale” can be a tricky concept to apply. If I’m buying a car, I can easily claim I’m a business, and so (illegally) escape sales tax. The seller has limited ability or incentive to check my bona fides. VAT doesn’t have that problem, because a seller charges VAT to everyone. A consumer can’t recover VAT; other people can. We can therefore expect much higher rates of tax evasion under a sales tax than a VAT.⁶
- You can try to limit the “false business” problem by putting stringent rules on sellers; but then you can have the opposite problem, with sales tax being applied when it shouldn’t be. You’d then have a “cascade” of sales tax hits instead of just one. That would be economically damaging.
- VAT collects from everybody. No need to work out if you’re selling to a business or a consumer.⁷
- And another big advantage: if almost everyone in the supply chain is filing VAT returns then it’s often easy for a tax authority to spot the ones who aren’t. VAT creates its own audit trail.
- And if all of this fails, and only one person in the supply chain fails to pay VAT, then it’s only their value-add which goes untaxed.
It’s therefore received wisdom amongst tax economists that US-style sales taxes are only viable up to a certain percentage of the sale. Beyond that, and to the levels that European economics require to fund their spending, sales taxes would be widely evaded and/or would be economically damaging. And even at the US levels, VAT would be preferable.

Why does Trump think VAT is a tariff?

One possibility is that he doesn’t understand that a domestic producer selling into the UK faces the same VAT as a US producer.

Another possibility is that he misunderstands how VAT is credited when UK businesses are exporting.⁸

Here’s how it works:

The car maker has charged no VAT on its sale to the final consumer, because he or she is outside the UK. But there has still been £20 VAT collected in the supply chain. That’s the wrong result – and the answer is that the car maker can “recover” the £20 in the same way it did in the first example above.

Since it’s a sale to a US consumer, in some US states there would be sales tax on the final sale. It’s unaffected by the supply chain.

On the surface this looks like a subsidy of some kind for exports, but it really isn’t. The net result is exactly the same if it was a US car maker buying (hypothetically) British steel and selling to a US consumer:

There is no difference between the two cases.

Again, since it’s a sale to a US consumer, in some US states there would be sales tax on the final sale.

Does VAT encourage exports?

One more sophisticated argument sometimes made is that VAT is distortive because it encourages UK companies to export to non-VAT destinations (a kind of reverse export-subsidy).

There is a tax policy wonk response to this and an economist’s response to this.

The tax wonk answer is that this might be the case if the cost of VAT was borne by sellers, but when VAT is introduced (or increased), the price is added onto goods. It’s consumers who pay.⁹ So a seller will usually make the same profit selling into a VAT country than into a non-VAT country; and any small effects that may exist are swamped by other factors (shipping costs, marketing costs, tariffs, regulation, non-tariff barriers, contractual issues etc).

The economist’s argument is much more subtle, and concludes that VAT actually reduces exports.

Paul Krugman makes the point compellingly in this widely-cited paper. There are two separate effects, pushing in opposite directions.

First:
- Countries that adopt VAT have less income tax and corporate tax than they would otherwise have.
- VAT applies to most imports but not exports. Income tax and corporate tax apply to domestic production and exports, but (mostly) not imports.
- So higher income/corporate tax advantages imports and disadvantages exports.
- By instead having a VAT, countries like the UK are (relatively speaking) disadvantaging imports and advantaging exports.¹⁰
But a second effect goes in the opposite direction:
- The “policy wonk” position above assumes VAT applies to all products. In practice, it doesn’t.
- Major areas of expenditure aren’t subject to VAT – that means Jaffa Cakes and (somewhat more significantly) housing. So people will tend to spend more on housing and Jaffa Cakes (and other exempt and zero-rated items) and less on VATable goods and services.
- Housing is obviously not imported (nor are Jaffa Cakes). So VAT tends to reduce imports, as we buy more domestically-produced goods.
- Now the bit non-economists find counter-intuitive. The Lerner symmetry theorem (from this 1936 paper by Abba Lerner¹¹, a foundational element in trade theory) says that, if imports are reduced, then exports are also reduced. The reason is that if we buy fewer foreign products, then foreign businesses are receiving less GBP from British importers.¹² Since the world has less GBP, the value of GBP will rise, and the world will buy fewer UK products. UK exports therefore fall.¹³
The Krugman paper contains a rigorous analysis of both effects, and concludes that the second is stronger. Hence VAT in the real world discourages exports and imports. This is another reason why we’d all be richer if VAT applied to a wider range of products – like Jaffa Cakes.

VAT, once more, behaves nothing like a tariff.

Doesn’t VAT fund the NHS, which effectively subsidises companies?

The argument goes like this: VAT raises £170bn, which is very close to the cost of funding the NHS. In the US, with no Government funded national healthcare system, most of the cost of healthcare is paid by businesses. The fact UK businesses don’t have this cost gives them a significant advantage. Therefore the NHS, and the UK tax system generally, amounts to an export subsidy.¹⁴

The argument is, however, wrong. The US does have national funded healthcare systems (Medicare, Medicaid, and Military and VA Programs) and, whilst they don’t provide the same breadth of coverage as the NHS, they cost US taxpayers almost exactly the same (as a percent of GDP) as the NHS.

We can chart this using WHO data:

The blue bar is healthcare funded by taxation, and the UK and US (third and fourth from the left) figures are almost identical. The source for this is the World Health Organisation’s Global Health Expenditure Database.

So whilst it’s true that US companies bear much larger healthcare insurance costs than UK companies, the reason is not that the UK Government is subsidising healthcare more. The actual reasons are discussed here.

There’s an interactive version of the chart here, which lets you look at all countries (not just the OECD) and sort by total spending, as well as tax-funded spending. The “all country” chart has rather a large number countries, so to view country names you need to either zoom in or hover over a bar (and you’ll see the country name displayed).

There is an informative ONS article comparing UK healthcare spending with other countries.

The code that created the chart is available on our GitHub.

More technical arguments

There are a couple of more technical niggles.

The first is that paying import VAT is a hassle in a way that normal VAT isn’t. It’s a “non-tariff barrier”. This was a real concern during the Brexit discussions, particularly the three month delay in recovering input VAT. That led to a system of “postponed VAT accounting” which means that the cashflow cost of recovering input VAT becomes equivalent to the cost of recovering normal domestic VAT. There remain some bureaucratic annoyances with input VAT (and in countries like Italy and Spain they can be quite serious), but it’s just a small part of the overall “trade friction” – the hassle of importing goods.

Another argument goes as follows: VAT is applied to tariffs. Therefore if a US manufacturer sells a car to a UK consumer there’s a 10% tariff, and then 20% import VAT on top of that. Total VAT on the price plus the tariffs of 22%¹⁵. But a UK manufacturer selling to a UK consumer faces no tariffs – total VAT plus tariffs of 20%. Discrimination!

But on close inspection this doesn’t make much sense:
- Almost no US car manufacturer sells direct to a UK consumer. They’d sell to a UK distributor, and the distributor will recover its VAT – including the import VAT on the tariff. The same is true for most goods (and services aren’t subject to tariffs). So, in practice, non-refundable VAT applying to a tariff is a rarely seen complication.
- But even in theory, it’s not VAT that’s the problem here. VAT makes the effective rate of tariffs higher, like it makes everything higher. The problem is the tariff, not the VAT.
The United States is an outlier

Every large developed country, and most other countries, have adopted a VAT (full screen version here):¹⁶

The most recent convert was Brazil, which had a mess of national and local sales taxes. It finally adopted VAT in 2023.

That leaves just Hong Kong, Pakistan, a few small islands and tax havens… and the United States.

It’s often said the US is a lower tax country than the UK. That is true – and much of the difference is down to VAT:¹⁷ ¹⁸

There are two consequences from this.

First, no major economy could abandon VAT, as Trump seems to wish, and maintain its current level of spending. Income taxes would rise to unsustainable levels (in the UK, we’d pay, on average about 60% more income tax).

More entertainingly, it follows from Krugman’s paper that if the US kept the overall level of tax the same, but substituted VAT for some personal tax and corporate tax, and applied VAT to absolutely everything, then that would enhance the competitiveness of, and tend to increase, US exports.

I’m sure Mr Trump is working on this proposal as we speak.

Thanks to everyone whose questions online and offline sparked this article. Thanks to P and Z for their helpful discussions on trade policy and tariffs, K for VAT input, L for US State sales tax expertise, and C for an illuminating exchange on trade theory.

People occasionally ask why most of our contributors are thanked by initials, not names. It’s because they almost all work for barristers’ chambers, law firms, accounting firms or are retired HMRC officials. Whilst we’d never ask them to break any confidences, employers usually restrict public statements from their employees, and both employer and employee would sometimes be concerned about liability. So most (but not all) of our contributors choose an initial – not necessarily their actual initial.

If you have specialist tax, legal or economic expertise and would like to join our very informal panel of experts, do please get in touch.
Footnotes
1. The UK’s tariff website is a triumph of usability. The EU’s is awful, forcing you to read through a badly scanned capitalised page to work out the code for any particular good. ↩︎
2. The broad principle in all the different taxes/duties is the same, but the details are very different. That makes life complicated for an international beer company – dealing with all the different rules makes it much harder and more expensive for them to export beer than to sell domestically. But these rules aren’t tariffs. This kind of complexity is inevitable as long as different countries have different tax rules. ↩︎
3. Often there are one or more additional levels of local sales taxes, sometimes applying on top of the State sales tax, sometimes applying to services that aren’t subject to State sales tax, and sometimes vice versa. ↩︎
4. Note that, whilst all US State sales taxes are destination-based when it comes to exports to outside the US, the position is more complex for sales from one State to another. Most US State taxes are pure “destination-based” taxes, meaning that (for example) New York State doesn’t impose sales tax on a sale by a New York business to a Texan consumer. Others, like Texas, are “origin-based”, meaning that they apply on sales by a Texan business to a New York consumer – but even origin-based sales taxes don’t apply to goods exported outside the US. ↩︎
5. A “goods and services tax” is just another name for a VAT; I’d love to know why Australia and other countries thought it would be a good idea to create a different name for what in essence is the same tax. ↩︎
6. There is, however, frustratingly little evidence of the actual rate of evasion of state sales taxes, and the 5-16% figures sometimes referred to appear to be little more than informed guesses. ↩︎
7. That’s not quite right, but a good approximation. ↩︎
8. Another, shared by two US trade lawyer friends, is that Trump just loves tariffs and has no interest whatsoever in VAT. It’s a handy ex post facto justification for something he always wanted to do. ↩︎
9. The converse doesn’t follow; consumers won’t always benefit from VAT cuts, particularly on individual products. ↩︎
10. I hesitate to disagree with a Nobel laureate, but I am not convinced by this. For the reasons discussed above, VAT is actually a cost for the consumer. But let’s assume I’m dead wrong here, or missing something, and Krugman is right. ↩︎
11. Ironically, Lerner was a socialist, albeit a member of a now-endangered species: a market socialist. ↩︎
12. This also works if the goods are bought in foreign currency. The UK importer swaps GBP into that currency, and the counterparty will (often) be swapping it within someone who needs GBP, e.g. to buy British products. GBP is still leaving the country, through a more circuitous route, and reduced imports again means people outside the UK have less GBP. ↩︎
13. For this and other reasons, tariffs reduce exports as well as imports. ↩︎
14. The same broad claim is sometimes used to make another argument: that the UK and European economies can afford their national healthcare systems because their defence spending is so much smaller than US defence spending. ↩︎
15. i.e. 20% of £110. ↩︎
16. Source for the data is this table from the IMF. ↩︎
17. State sales tax is on the chart; it’s the dark red bar. ↩︎
18. Incidentally, don’t be tempted to compare the blue bars (personal tax on income) and conclude that the US level of personal taxation is about the same as the UK’s. Many US businesses, particularly small businesses, are “S Corps” – meaning that they don’t pay tax; instead, their owners pay tax as if they received the income themselves. So US corporate tax revenue appears less than it “should” be (if we could add in S Corps), and US personal income taxes appear more than they should be (if we could deduct S Corp income). A common mistake is to look at the figures for US corporate tax receipts and marvel at the low level of corporate taxation. There’s certainly truth in the proposition that US corporate tax is low, but the figures can’t be eyeballed like that. ↩︎
2 April 2025
Untaxing – The Laffer curve, and the napkin that changed the world
Art Laffer drew a curve on a napkin in 1974 that he said proved that tax cuts would pay for themselves. This is sometimes right, and sometimes wrong – and it’s a mistake to just assume the answer without looking at the evidence.

This article, written to accompany the first episode of Untaxing, looks at what the Laffer curve tells us about the Thatcher tax cuts of the early 80s, and the Scottish tax rises of recent years.

(This is an updated version of an article on the Thatcher tax cuts I wrote last year.)

Art Laffer

In 1974, Art Laffer scribbled this curve on a napkin:

It’s often popularised like this, from the US Foundation for Economic Freedom.

The concept is simple: at a tax rate of 0%, obviously no tax revenue is collected. At a tax rate of 100%, obviously nobody would perform any taxable work, and so no tax revenue is collected. Between these rates, some tax is collected. We can therefore draw a smooth curve. Logically, this will have a “maximum” – the tax rate at which the maximum revenue is collected. As you approach that point, you experience diminishing returns, with each % of tax increase collecting less and less revenue. Eventually, once you reach the peak, increasing rate rates actually loses revenue.

We can quibble with these assumptions.

A few people pay tax voluntarily (although not very many). Rather more people work for no pay – a good example is the voluntary sector, a less good example are the old communist economies. So the two ends of the curve will collect more than zero revenue.

It’s also very unlikely the curve would be this smooth – a variety of practical and psychological reasons, as well as fundamental mathematics, will make it more complex than that. Martin Gardner’s 1981 satire makes this point, but goes too far:

The basic point, however, is surely correct. There will be a “revenue maximising point”. As tax rates approach it, there will be diminishing returns. As tax rates pass it, revenues will fall.

The problem is that ascertaining that point is hard. It will vary from country to country, tax to tax, and will often change over time. It’s a mistake to assume (as Laffer himself seems to nowadays) that we are always approaching or beyond the peak of the curve, and so tax cuts will pay for themselves. But it’s also a mistake to take as an article of faith that tax cuts can never pay for themselves.

What does the evidence tell us?

When tax cuts probably paid for themselves

Margaret Thatcher and Geoffrey Howe cut tax dramatically in 1979.

aqw

In Howe’s first Budget, the rate was cut to 60%.

Wearing our 2024 spectacles, 83% to 60% isn’t a hugely generous tax cut. But think about what it means in cash terms. £10,000 taxed at 83% leaves you with £1,700. £10,000 taxed at 60% leaves you with £4,000. That’s a 135% increase in your after-tax income (“change in net of tax rate”, in the jargon).

This is a much more dramatic change than for the tax cuts we see discussed in 2024. There is literally no tax cut that could have this kind of impact today. Even cutting the top 45p tax rate all the way down to 1p would “only” increase after-tax income by 80%.

Intuitively, it feels plausible that more than doubling peoples’ after-tax income would have significant effects on peoples’ behaviour. But we can do better than “plausible” – let’s put some numbers on it.

A simple example

Economists talk about the “taxable income elasticity” – the TIE. That’s the degree to which people’s reported income increases as tax cuts leave them with more income after-tax. Why does it increase? Some mixture of incentive effects, reduced avoidance and reduced tax evasion.

Let’s say the TIE in 1979 for people paying the 83% rate was 1. This figure is almost certainly wrong, but it makes the maths easy, and we’ll come back to the true figure later.

And, whilst TIEs are usually applied to the aggregate tax base, i.e. the whole economy, let’s make our calculation simpler by assuming the economy consists of one taxpayer, who has £10k of earnings in the top tax band.¹

Applying the hypothetical TIE of 1, then that Thatcher tax cut, with a 135% increase in after-tax income, would result in reported incomes increasing by 135%.

Instead of our one taxpayer earning £10k and paying £8,300 tax, they’d be earning £23,529. Perhaps they work more hours, perhaps they work harder, perhaps they stop avoiding tax or under-declaring income.² Either way, they are earning more, retaining more after-tax and paying more tax:

Everybody wins. It’s that rarest thing in economics – a free lunch.

You can download this example spreadsheet here. The “base case” is before the tax cut. The “static” column is with the tax cut, but ignoring elasticities. The “dynamic” column includes the TIE effect (but not other dynamic effects, e.g. economic growth – see below for that).

It’s important to stress that this calculation was purely illustrative – I pulled a taxable income elasticity of 1 out of the air, just because it made the calculation easier.

What would the TIE actually be?

A more realistic example

The problem is that estimating the TIE is hard. It varies between countries, changes over time, and is different for people earning different incomes, and even for people of different ages.³

There’s an even more important factor: the TIE varies depending on tax policy.⁴ Let’s say I can pay £50 for a tax avoidance scheme that magically reduces my tax rate from 83% to 60%. The TIE on the Howe tax cut would be enormously high, because all the people previously buying the scheme will now just declare their income.⁵

The TIE has to be inferred from natural experiments created by tax reforms and “kinks” in the tax system. For example, sometimes we see more taxpayers than expected “bunching” at a particular income point, just before a higher marginal rate kicks in (but estimating the TIE from these kind of effects is difficult).

A TIE of 1 is extremely high.⁶ We tend to see elasticities like that only for people on very high incomes – think the top 1% – and in very exceptional circumstances.⁷ It is possible that those circumstances applied to the UK 83% rate – I don’t know (and I’m not aware of any evidence on this).

We do, however, have some recent evidence from the UK’s more recent introduction and then repeal of the 50p top rate.⁸ HMRC used the resulting data to estimate a TIE of 0.48, but others have come to very different conclusions. ⁹

Here’s a table from the Scottish Fiscal Commission showing the TIE they expect at different income levels, based on the HMRC 50p data and a review of the literature:

So, given we can’t be sure what elasticity applied in 1979, let’s ask the question the other way round. What elasticity would be needed for the Thatcher tax cut to pay for itself, on our modelled £10k of income?¹⁰

A TIE of only 0.28.

I should stress again that modelling one taxpayer in this way is an extremely simplified approach, but that the numbers are so stark that we can still say it looks very plausible that the Thatcher top-rate tax cuts paid for themselves.

This was, however, an exceptional case for two reasons. First, the effect of the tax cut was very significant (with that dramatic 135% increase in after-tax income). Second, the tax rate, even after the cut, was very high – so a good chunk of the additional income that the tax cut incentivised into existence would itself be paid in tax.

When tax cuts won’t pay for themselves

What if the UK scraps its current 45p top rate?

This would have a much less dramatic effect than Thatcher’s tax cut. A tax cut from 45p to 40p is the difference between retaining £55,000 and £60,000 from a £100k slice of gross income above £125k.¹¹ That’s not nothing, but it’s only a 9.1% increase in after-tax income.

We therefore need an exceptionally high elasticity for this tax cut to “pay for itself”. Even an (unrealistic) elasticity of 1 doesn’t cut it:¹²

Let’s do something more exciting. What if we adopted a “flat tax”, with everyone paying a 20p rate? So the marginal rate on a £100k slice of gross income above £125k drops from 45p all the way to 20p.

Again, let’s assume an unrealistic elasticity of 1:

The flat tax isn’t even close to paying for itself. Why is that, given the sizeable 45% change in after tax income?

Partly because 45% is still a lot less than 135%. But also because that £45,000 of new income we’ve incentivised into existence is only taxed at 20%. It’s much, much harder for this tax cut to pay for itself than when the rate, even after the tax cut, was 60%.

I should repeat the caveat that it’s woefully simplistic to think of the economy as just one taxpayer but (as before) the numbers are clear enough to make the point.

So the depressing conclusion from this is that what was plausibly true in the 70s and early 80s probably isn’t true today – we shouldn’t expect income tax cuts to pay for themselves in the short/medium term.

There’s no free lunch in 2024.

Is the answer different in the long term?

Perhaps. Whether tax cuts pay for themselves in the long term is a different question, and one that’s highly contested.

Some economists believe the evidence shows that tax cuts in the US led to higher GDP and lower unemployment, with faster effects when the tax cuts benefit those on high incomes. Other economists have found no evidence that tax cuts for those on high income increases growth; conversely, others have found that tax cuts targeted at people on low income can increase growth.

There is also a view that funded and carefully implemented tax cuts may create growth, but unfunded/deficit-funded tax cuts will not.

I’m not an economist and so don’t have a position on these questions. However I would tentatively suggest that the lesson of the Truss/Kwarteng mini-Budget is that either the bond markets don’t believe unfunded tax cuts deliver growth, or they’re not patient enough to wait.¹³

What does the TIE tell us about raising taxes?

The simple spreadsheets above show the position for hypothetical individual taxpayers. They don’t attempt to model the impact across all taxpayers.

You can, however, use the TIE in a more sophisticated calculation to find the “revenue maximising tax rate” – the top income tax rate that will raise the highest amount of tax, based upon assumptions as to the shape of the income distribution.¹⁴

So, let’s forget tax cuts for the moment, and answer a different question: can we raise more revenue by increasing tax on those on the highest incomes?

One influential paper estimated that, if the TIE is 0.46, then the revenue-maximising tax rate on the highest earners would be 56.5% (see page 102).

An employed¹⁵ high earner in England today pays a top income tax rate of 45%, plus 2% employee national insurance – and their gross wages are subject to 15% employer national insurance.¹⁶ That’s a total effective rate of 55% – rather close to the revenue-maximising rate.¹⁷ More if we take indirect tax into account.¹⁸

There are a large number of uncertainties – the TIE itself, as well as the assumed shape of the income distribution. So the 56.5% figure should not be taken as a policy absolute – but it does suggest that we should be cautious about assuming that increasing the 45p rate will raise more tax.

The Scottish experiment

The Scottish government is kindly conducting a controlled trial into what happens if you do go higher than 45p.

In last year’s Scottish Budget, the top rate went up to 48p (from 47p). Here’s the Scottish Fiscal Commission’s figures on how much that will raise:¹⁹

Almost all (85%) of the potential revenue from the 48p rate vanishes in “behavioural responses”. The £53m of theoretical revenue turns into a mere £8m.

This is an extremely inefficient tax increase.

These figures are estimates, not measurements. They are based on the best available research on taxable income elasticities, but the margin of error is wide. The tax increase could raise more than expected. Or, given how close the net revenue is to the break-even point, it wouldn’t take much for the behavioural response to exceed the static revenue. In other words, for the tax increase to lose money.

This is why the IFS says that the Scottish top rate of tax may reduce revenue.

There are two additional complications.

First, the actual marginal rates are higher than the headline (“statutory”) rates because of the silly gimmicks introduced by UK politicians to extract tax without raising rates: principally the clawback of child benefit between £60-80k and the tapering of the personal allowance between £100k and £125k. In most of the UK, that creates marginal rates like this, assuming a taxpayer with three children:

For Scotland, it’s significantly higher, with the personal allowance clawback taking the marginal rate to almost 70%.

There is also another anomalously high 50% marginal rate between £43.7k and £50k because Scottish 42% higher rate (42%) kicks in whilst an employee is still paying national insurance at the full primary rate (currently 8%).²⁰

All these effects combine to create a marginal rate that looks like this (again assuming a taxpayer with three children):

These high marginal rates may be a bigger issue in practice than the 48% top statutory rate (but I sadly didn’t have time to go into marginal raters on Untaxing). You can view our interactive marginal rate chart here.

The second complication is that we may well find that elasticities that are reasonable for the UK as a whole are not appropriate for Scotland. Scottish taxpayers have a magical tax planning solution available to them that UK taxpayers don’t. They can leave Scotland, or not return, or not arrive in the first place. ²¹ A more subtle effect: there will be people who spend a roughly equal amount of time in Scotland and time in England/Wales/Northern Ireland. They could make very minor changes to their life and switch residence – or indeed slightly stretch the truth without anyone noticing.²² This is a controversial point because it implies that any future independent Scotland would have a practical limit to its ability to diverge its tax policy from the rest of the UK – nevertheless, the logic seems to me to be hard to resist.

We should know the result of the Scottish experiment in a few years’ time.

I should add some disclosure: I’m a member of the Scottish Government’s Tax Advisory Group, but we were not involved in the decision to raise the top rate. It was entirely political.

Is it just about the numbers?

Of course some people believe high taxes on those on high incomes are justified for reasons other than tax revenue – for example to reduce inequality by reducing the after-tax incomes of people on high incomes.²³ Others believe that we shouldn’t be trying to maximise tax revenues, but rather maximise economic growth²⁴ or welfare. Some believe that high taxes are not very effective at reducing inequality. And of course some believe that high taxes are immoral per se.

My take is that, if you want to raise more tax from people on high incomes, you should not do so by raising the top rate of income tax, but focus on the base – for example capital gains tax. And if we want tax cuts, then at the present levels of income tax, we have to fund them.

Laffer Curve napkin image is the property of the Smithsonian and used here under their terms and for educational/non-commercial use consistent with the principles of fair use under Section 108 of the U.S. Copyright Act.
Footnotes
1. I’m ignoring another factor; Howe reduced the tax bands in real terms – that makes the tax cut even more effective than this simple model suggests. ↩︎
2. And in a real “whole economy” approach there would be other factors – increased net migration of high earners, deferred retirement, etc. And of course not all taxpayers paying the top rate of tax are the same – someone earning just a little more than £23,000 would have been very different from someone receiving millions. ↩︎
3. There’s a good discussion of these issues in this paper by Saez, Slemrod, and Giertz, see page 40. ↩︎
4. See the reference to “loopholes” on page 16 of Saez et al. ↩︎
5. This example is not that far away from some of the tax avoidance schemes that were common in the 1970s and early 1980s. ↩︎
6. Note that I am talking here solely about tax on income – elasticities for some other taxes can be much higher. Stamp duty land tax is an extreme example, given that a person’s decision whether or not to buy a house will in some cases be entirely affected by SDLT. ↩︎
7. There’s a good introductory Harvard lecture series on this – see here and here. ↩︎
8. There is an outstanding House of Commons Library briefing paper on the history of the 50p top rate. ↩︎
9. One might think the UK’s brief 50% top rate was a beautiful natural experiment, but the brevity of the rate means that income effects are dominated by people accelerating their income to before the rate went up, and then deferring it until after the rate went down – the linked IFS paper goes into detail on the attempts to reverse-out these effects. ↩︎
10. Obviously a different and much, much, easier question than “did the Thatcher tax cut pay for itself overall”. ↩︎
11. Important to remember that 45p is the marginal rate on this slice of income. The overall rate is much less – but it’s marginal rates that matter for incentives, and therefore for tax elasticity calculations. ↩︎
12. Although it comes quite close! See below re. Scotland. ↩︎
13. The outcome of the Truss/Kwarteng Budget tells us nothing about funded tax cuts, but it’s a rare politician these days who proposes to fund tax cuts with either other tax rises, or public spending cuts. Thatcher, by contrast, did fund her income tax cuts. Whilst the cut in the highest rate of income tax probably paid for itself, other income tax cuts (for example cutting the basic rate from 33% to 30%), did not – and they were much more expensive. So Howe’s Budget raised the rate of VAT from 8% to 15%; later tax cuts were partly funded by revenues from oil and gas taxation. ↩︎
14. If we assume income is flat, the revenue-maximising rate is simply 1 / (1 + TIE), but we shouldn’t assume income is flat. ↩︎
15. Employer’s national insurance means the marginal rate is much higher for an employee than someone who is genuinely self-employed, or an investor. ↩︎
16. That’s relevant because, in the long term, the burden of employer national insurance falls on employees. ↩︎
17. One might think the current effective rate is 62% (45% + 2% + 15%) but the employer NI is a % of the gross salary, and income tax and employee NI is a % of the same gross salary number. As an example: imagine a highly paid employee receiving a £100 pay rise. Employer national insurance applies at 15%. There is then 45% income tax and 2% employee national insurance – so employee taxes of £47. So the total tax is £62 (£47 plus £15) out of a total of £115 paid by the employer – a rate of 53.9%. (Apologies for the error in the original version of this article, which said the rate was 54.95%). ↩︎
18. Whether we should do that, and how we should do that, isn’t clear to me. Brewer et al uses a 52.7% figure (on page 91) that includes indirect tax, but doesn’t explain where it comes from. ↩︎
19. See figure 4.12 ↩︎
20. Thanks to Rebecca Benneyworth in the comments for making this point. ↩︎
21. These effects will be small, but they are real, and across an economy small effects can matter. And migration is a particularly bad effect for a tax rise to have, because you’re not just losing some marginal amount of a taxpayer’s income – you’re losing all of it. ↩︎
22. Strictly that is tax evasion, but the kind that is very hard for anyone to detect. ↩︎
23. There is also a deeply counter-intuitive view that higher taxes can encourage entrepreneurship. ↩︎
24. i.e. because when we are the Scottish point of (probably) increasing tax revenue but extremely diminishing returns, some of the tax revenues “lost” to behavioural effects represent real lost economic growth ↩︎
31 March 2025
Radical anti-avoidance measures hidden in the Spring Statement
It wasn’t mentioned in the Chancellor’s speech, but the Spring Statement papers contain a major suite of anti-tax avoidance proposals, probably the toughest ever introduced. If enacted this will, in effect, criminalise the tax avoidance industry. We welcome it.

There is a mini-industry of creating tax avoidance schemes which have no prospect of success. We don’t believe a single one has succeeded in court in the last twenty years. That hasn’t stopped promoters from collecting millions in fees. The long series of new laws introduced to stop them have been ignored.

The Government is getting serious – for the first time there is a proposal to criminalise the promoters’ activity. If the Government follows through, and HMRC uses these new powers, we could all be billions of pounds better off.

I was less than flattering about the Autumn Budget, particularly the national insurance increase, farming inheritance tax change, and general failure to include any tax reform measures. However the new anti-avoidance proposals are excellent, and should be welcomed by everyone who wishes to see the tax avoidance industry ended.

I’ve summarised the proposals below, with my initial thoughts. We’ll respond to the consultation when we’ve been through the proposals in more detail. If you have additional thoughts, do please get in touch.

Criminalising doomed schemes

HMRC has a power to issue a “stop notice” to the promoter of a tax scheme, making further promotion of that tax scheme a criminal offence.¹ The problem is that HMRC will issue a stop notice to one entity, and the promoter will simply move its business to another.²

The Government is proposing a “universal stop notice“. This would empower HMRC to issue a notice specifying a scheme; no person could then promote or enable that or any similar scheme. Anyone who did would commit a criminal offence, as would any person controlling or influencing them.

The proposals go further. The Government would be able to issue a “promoter action notice” to third parties who facilitate the scheme:

This is important; promoters have, for some time, been using offshore entities to make it harder for HMRC to take action against them. However any business targeting UK clients is inevitably going to rely on banks, social media etc in the UK – so it makes sense to enable HMRC to target.

I would, however, be a little concerned about overreach (and I sense the Government is too). I would personally suggest making these powers apply only where either the individual promoter or their entity is outside the UK. This should be a fallback option, not the first line of attack.

Criminalising breaches of DOTAS

One of HMRC’s most important weapons against tax avoidance is DOTAS – the rules requiring promoters of tax avoidance schemes to disclose the schemes to HMRC. That has two consequences:
- HMRC gets early warning of schemes, and can close them down.
- Anyone looking to use the scheme receives warning that it is classed as an avoidance scheme (because they have to put a DOTAS reference number on their tax return).
DOTAS is therefore a serious threat to promoters’ business, and promoters deal with this by simply ignoring it (often based upon frivolous legal arguments, typically followed by promoters simply letting their firms fail).

I believe that, of the many tax avoidance schemes we’ve reported on, not one was disclosed under DOTAS. They all should have been.

We have therefore called for failure to comply with DOTAS to become a criminal offence for the individuals responsible, with strong protections to prevent innocent mistakes being penalised. So I’m delighted to see that is what the consultation paper proposes (with a “reasonable excuse” defence, so that innocent people aren’t caught).

There isn’t much detail in the document (that’s typical at this stage). But we will be responding to the consultation proposing that the criminal offence apply to the company’s directors and shadow directors.

We will also ask for a clear statement that the criminal offence will never be used against normal advisers or commercial parties who made an innocent mistake. One way to differentiate the bad actors from normal advisers would be to make the criminal offence only apply where a scheme is mass-marketed, or there is a premium fee (i.e. reflecting more than an adviser’s usual hourly rate). Other approaches could be considered.

Expanding DOTAS

The Government is proposing a new DOTAS hallmark to more clearly target disguised remuneration schemes.

These schemes are rampant – often pushing people on modest or low earnings into complex avoidance schemes (which aren’t properly explained and are sometimes hidden). The result: loss of tax for HMRC, and often large liabilities for the (often unwitting) scheme users.

It’s our view that all the disguised remuneration schemes are already covered by DOTAS, but perhaps the intention is to make it easier to deploy the new criminal offence against them?

Increasing DOTAS penalties

Another problem with DOTAS: the penalties are too low.

The standard penalties are currently £600 per day, or up to £1m. This is determined not by HMRC but by a tax tribunal. That delays the day of reckoning for promoters; by the time the tribunal hears the case, the fees have often been made, and cash extracted from the promoter’s business.

The consultation proposes allowing HMRC to charge a penalty, with a right of appeal to a tribunal. That is a sensible step to speed things up.

But there are other problems: even £1m is an insufficient deterrent when a promoter can make millions of pounds of fees in a few months. And promoters typically don’t stick around to pay penalties. So we would suggest:
- The penalty should be geared to the fees received by the promoter (say 200% of fees) or, where a promoter does not adequately disclose the fees received, such amount as is just and reasonable under the circumstances.
- A promoter’s directors/owners should always be joint and severally liable for the penalties. Right now it’s too easy for them to walk away from their company.³
New information powers

HMRC has extensive powers to require information from taxpayers using “information notices”. Normal taxpayers take information notices extremely seriously. Tax avoidance scheme promoters typically ignore them, and HMRC often struggles to impose penalties, not least because of the opaque ownership structures used by the promoters.

So the consultation proposes the creation of new information powers, backed up by criminal offences.

Targeting legal professionals

Many tax avoidance schemes are facilitated by a small number of legal professionals (almost exclusively barristers). We have published a series of examples.

The barristers provide opinions that the schemes are lawful, and DOTAS disclosure is not required. The courts almost always conclude the opposite. But the role of the barrister was not really to provide correct advice; it was to facilitate the scheme. The promoters can then claim “we have a KC opinion”. When the opinion turns out to be wrong⁴, the end-users of the scheme cannot sue the KC, because they weren’t the client – the promoter was. And the promoter has done just fine.⁵

The opinion serves two purposes. It greatly helps marketing the scheme. And it gives the promoters a defence against penalties or criminal prosecution – after all, they received legal advice. The advice itself will almost always be privileged – HMRC cannot see it.

This is, in our view, corrupt. Jolyon Maugham KC wrote about the problem eleven years ago; nothing has been done. Ideally the Bar Standards Board would act.

The consultation contains a series of somewhat tentative proposals. Likely the most impactful are:
- Enabling HMRC to publish the names of lawyers who design tax avoidance schemes.
- Waiving legal privilege where a tax avoidance scheme is marketed as being supported by a legal opinion.
It seems HMRC and the Government also share our view that the professional regulators need to be more effective:

What else is required?

The most important element is simply resources. If these new rules are enacted and just added to HMRC’s toolbox, they will be rarely used.

HMRC should create a specialist team whose only role is pursuing civil and criminal penalties against tax avoidance scheme promoters. It would sometimes accept referrals from others within HMRC, and sometimes act on its own initiative. It would be staffed by a mixture of tax specialists, investigators and white-collar crime lawyers.⁶

There are additional minor and costless measures HMRC should adopt.
- Currently, when tax avoidance schemes and their promoters are publicly named by HMRC for promoting a DOTAS scheme, this is only for twelve months. After that, their name is taken off the list (although at least one excellent website preserves the listing forever). The one year expiry date should be ended. UPDATE: thanks to the people who let me know this isn’t the whole story. Those named because of DOTAS are indeed only listed for twelve months. However Finance Act 2022 gave HMRC a new power to publish the names of promoters which isn’t dependent on DOTAS. There is no expiry date on these names – and in practice HMRC now always names under the Finance Act 2022 power.
- Particularly egregious schemes are often considered by the General Anti-Abuse Rule Advisory Panel. The GAAR panel publishes its opinions; but the taxpayers and firms involved are not named. They should be, either in all cases or in the cases where the GAAR panel finds against the taxpayer (which it has thusfar in every single case).
- HMRC could be empowered to publish the names of people it prosecutes, and the charges against them. Right now this is only announced in some cases (the precise policy isn’t clear).
Footnotes
1. “Stop notices” were a new power granted to HMRC in 2021, with the rules now in section 236A Finance Act 2014. The effect of a stop notice is that the recipient of the stop notice mustn’t promote the specified arrangements, or anything similar to them. The stop notice also requires the recipient to provide HMRC with detailed information on its clients, and to pass details of the stop notice to those clients. ↩︎
2. In theory the existing rules should deal with that. The effect of a stop notice also applies to (amongst others) anyone who controls, or has significant influence, over the recipient of the stop notice. And if the recipient transfers its business to another person, then the stop notice applies to them too. All of this is in theory: in practice the entities tend to be offshore and highly opaque, and it is difficult or impossible for HMRC to prove the relationship between them. ↩︎
3. i.e. expanding HMRC’s existing powers by removing conditions B and D – HMRC should simply be able to pursue directors/participators as soon as a DOTAS penalty is issued. ↩︎
4. Either because frivolous legal positions were taken or indefensible assumptions of fact were made ↩︎
5. Interestingly this doesn’t seem to be the case for Setu Kamal’s opinions for the Arka Wealth scheme – he seems to really give opinions to end users. The scheme may be laughable, but at least the users get some legal recourse (although possibly Mr Kamal has little practical exposure given he’s based outside the UK). ↩︎
6. To be clear, this is not a job-creation scheme for me – I’m retired from full time work and, even if I wasn’t, I don’t have the right skillset for such a job. ↩︎
26 March 2025
Untaxing on Radio 4 and BBC Sounds

I’m presenting and co-writing a new short Radio 4 series, Untaxing.

It’s about how tax affects our lives: from the Laffer Curve, to the Beatles, to Jaffa Cakes, and modern day avoidance. 1.45pm on Radio 4, every day next week, from Monday 31 March. On BBC Sounds as each episode airs.

I’ll update this page with background material for each episode.

Episode 1 – The napkin that changed the world

You can listen to the episode on BBC Sounds here, and I’ve an article to accompany this episode here.

Episode 2 – the Beatles clause

You can listen to the episode here.

The best source on the history of the Beatles and Northern Songs, and how their tax wheeze worked, is Northern Songs: The True Story of the “Beatles” Publishing Empire by Brian Southall. It’s out of print, and second hand copies are expensive, but it’s widely available as an ebook. There’s also a wikipedia article, which is pretty good but doesn’t go into details of the tax scheme.

This is the Beatles Clause – still law today:

The tax tribunal decision in Rupert Grint v HMRC can be found here. And note that the Beatles avoided tax by actually selling their music rights to real investors. Mr Grint (in practice his father and their advisers) created an elaborate scheme whereby he sold his rights to his “residuals” from the Harry Potter movies to a company that Mr Grint owned. It was an attempt at a fiscal magic trick – a good/bad old fashioned tax avoidance scheme. It was always going to go down in flames once HMRC challenged it; the surprise was that they chose to attack it with the Beatles clause.

For details of the hair-raising tax rates prevailing in the 60s, see this Hansard report. An excellent history of income tax is here, from the Association of Tax Technicians.

And the Beatles were much better musicians than they were tax avoiders:

Episode 3 – Jaffa Cake – or Biscuit?

The episode is on BBC Sounds here.

I just wrote a long piece about VAT, and why it isn’t a tariff – and the answer is surprisingly linked to Jaffa Cakes.

As for the actual 1990 Jaffa Cakes decision, it’s not easy to read the judgment for yourself. This and many older tax cases aren’t freely available online (it’s United Biscuits v HM Customs & Excise LON/91/0160). There is a decent short summary of the case in the HMRC internal manual on VAT and food, but if that’s all you read then you’re missing the most of the flavour of the dispute.

You can, however, get some of that flavour if you’re at the Edinburgh Fringe this July – the Jaffa Cake musical will be returning. It’s excellent, and not to be confused with the fusion jazz band of the same name (who are neither a musical, a cake or a biscuit).

Episode 4 – The Porn Star Tax Lawyer

The episode is on BBC Sounds, here.

We wrote about Paul Baxendale-Walker last year, and HMRC’s inept attempt to hit him with a £14m penalty. That report is here.

At about the same time, HMRC issued a “stop notice” to prevent Minerva, an entity associated with Baxendale-Walker, from promoting one of his schemes. Unfortunately by the time the stop notice was issued, the entity no longer existed. The stop notice was a bust.

And we wrote about some of Baxendale-Walker’s recent schemes here – they’re of embarrassingly poor quality.

Episode 5 – the £10bn fridge

The episode is here, on BBC Sounds.

We’ve a full report on ZLX here.

Untaxing is all thanks to Craig Templeton-Smith at Tempo+Talker who came up with the idea and got it commissioned by the BBC.

We couldn’t have made it without producer and co-writer Tom Pooley and audio producer Rob Speight. Will Fitzpatrick produced the video.

I received a small fee for my involvement in the series which I donated to charity.

24 March 2025
How do promoters get rich from selling hopeless tax avoidance schemes?
OneE made £10 million selling doomed R&D tax schemes – leaving investors with nothing and taxpayers footing the bill. Here’s how they did it, and here’s how we would change the law to end the tax avoidance industry for good.

The scheme involved an attempt to use research and development tax relief to generate tax losses for investors far in excess of their actual investment. It was pure tax avoidance, and so technically hopeless that the promoters didn’t even try to defend its main feature in court. The judgment is LR R&D LLP v HMRC.

The continued existence of these tax avoidance schemes is an example of market failure. Investors get ripped off and (more importantly) the lost tax means that the rest of us end up paying more tax (or having worse services).

The scheme

OneE is a well known tax avoidance promoter. They’ve been doing this for years and made tens of millions of pounds of profit.

OneE wanted a scheme that let it sell tax relief to clients. The pitch was: invest £26k and, even if you lost everything, you could claim tax losses of £184k. Those losses would be worth £36.9k at the then-corporation tax rate of 20%.

How do you achieve such magic?
- Establish a UK limited liability partnership – an LLP. An LLP behaves a bit like a company, and a bit like a partnership. But the key thing is that it is usually tax “transparent”. If you own an LLP, and the LLP does something, you’re taxed just as if you did that thing.¹
- The client puts in £26k.²
- The LLP then borrows £74k from a company called “NPL FC Limited“. It’s a very strange loan, because it’s “limited recourse” – the LLP only has to repay the loan if it makes a return from its investments. No real loan would work like that.
- Where did NPL FC get that £74k? It borrowed it from OneE, the tax avoidance shop.
- The LLP now had £100k from the clients and the loan. It uses all of this to enter into a “framework agreement” with a company called NPL Subcontractor Limited to undertake R&D expenditure. NPL Subcontractor is a Cyprus incorporated company owned by OneE.
- Behind the scenes, NPL Subcontractor makes a £74k loan to NPL-FC, which repays OneE. So the weird £74k loan never really existed. The money just went in a big circle.
- What about the remaining £26k? £11k is paid in fees to OneE, and £15k is used for actual R&D expenditure.
It’s all set out in this diagram included in the judgment.

Let’s say for the moment that the entire investment failed (spoiler: that’s what happened). The LLP claims it has £100k of losses, and these are available for the client, as it’s a member of the LLP and the LLP is “tax transparent”.³

Usually £100k of losses would be worth £20k (as the relevant rate of corporation tax at the time was 20%). But R&D expenditure had a special tax regime, which magnified the losses to £184.5k – worth £36.9k.

So this is how the magic happens: you can invest £26k and get back £36.9k, thanks to the taxman.

And this reflects many previous failed schemes, which all shared the same basic pattern: claim tax relief through an LLP, and “juice it up” through debt. The debt, as with LR R&D LLP, doesn’t really exist, but supposedly means that investors can claim tax relief in excess of their actual investment. These schemes have all failed.

How it failed

The structure was a disaster for the investors. HMRC opened an enquiry and denied tax relief. OneE appealed this decision to a tax tribunal.

It was obvious that the £74k went around in a circle, and so wasn’t R&D expenditure at all. OneE didn’t even bother defending the point in their appeal. That alone meant the structure failed – without the debt “juicing up” the investment, the numbers don’t add up. The investors would now be investing £26k and (assuming the small actual R&D expenditure didn’t produce a return) generating only £48k of tax losses, worth under £10k.

It’s worth pausing to stress this point. The key element of the structure – the feature that made it attractive to investors – was indefensible in court.

That, however, would be the best case scenario. The LLP wasn’t in the best case scenario. The tax tribunal ruled that no tax relief was available at all, for two reasons:

First, tax relief was only available at all (even on the amount actually used as R&D) if the LLP was “trading” – a technical tax term which broadly means you’re just not sitting on a passive investment but actively pursuing profit. The LLP was just passively sitting on its investment, and wasn’t trading. The LLP gets no tax relief.

Second, even if it had been trading, the payments by the LLP were not made “wholly and exclusively” for the purposes of the trade, because they were so heavily motivated by tax considerations. So there would still be no tax relief.

Altogether, the investors in the LLP put in £2m. They lost it all.

There were ten other LLPs – we can track some of them through OneE’s ownership. The investors appear to have been small and medium sized companies. One of them, Pipework Northern (UK) Ltd, liked the scheme so much that it invested in seven LLPs.

A related court judgment suggests OneE’s clients put in £77m in total. All of that was lost.

How it succeeded

The structure was a great success for OneE. It made £906k in fees from this LLP. The figures in the related court judgment suggest OneE’s total fees were at least £10m.⁴

That wasn’t all kept by OneE. Clients are usually sold this kind of scheme by “introducers” – accountants and independent financial advisers who should know better. One of the reasons they don’t know better is the large introduction fees they receive – here that totalled £2.5m.

So OneE made millions selling an aggressive tax avoidance scheme that never had a chance of succeeding, and it didn’t even try to properly defend in court.

Two of the directors of OneE are Dominic Slattery and Bashir Timol.

The stolen scheme

The R&D scheme here wasn’t invented by OneE, Slattery or Timol. It was designed by an Irish adviser called Kieran Corrigan. He pitched the scheme to Dominic Slattery and another individual called Timothy Johnson, after they’d signed a non-disclosure agreement (NDA). Mr Timol wasn’t present at that meeting.

OneE later sold the scheme in breach of the NDA.

Corrigan’s company sued OneE and Messrs Slattery, Johnson and Timol personally for breach of confidence. OneE, Slattery and Johnson were found liable for breach of confidence and an “unlawful means conspiracy”.

Mr Timol was not, because he said he wasn’t aware of the NDA. Newly discovered documents called that into question and so Mr Corrigan won on appeal; Mr Timol’s liability will now be the subject of a separate trial.

The judgments in this side-dispute are illuminating, not least because they reveal this as yet another technically hopeless tax avoidance scheme facilitated by tax KC Robert Venables.

The history of dubious R&D claims

OneE has an associated firm that provides R&D tax credit advice – Diagnostax. It appears to be owned by Messrs Timol and Slattery’s wives (via another company called Protech Professional Ltd).

Diagnostax used to operate under the business name of “Radish”. In 2022, The Times caught Radish advising that a pub could claim £28k in tax relief for developing vegan and gluten-free menus.

At the time, Radish’s website included this quote from the pub’s owner:

“I actually didn’t think we’d have a claim, I still can’t believe it – we’re only a small restaurant & hotel! But having spoken to Tim, it’s down to all the hard work that goes into crafting our menus to cater for vegetarians, vegans and those with a gluten-free diet. It’s very difficult to get a menu that suits all tastes and needs, and we can’t have half a dozen different menus as it doesn’t make economic sense. Looking at a menu you don’t see the work that has gone into it, but we do it because we want to please everyone who walks through the door – that is R&D for The Coach House Inn.“

Needless to say, this is pure nonsense, and the defence which Diagnostax provided was risible.

Diagnostax is still making far-fetched claims: their website asserts that 50% of clients can claim R&D tax relief.

They’ve branched out: Diagnostax’s main offering is a “sustainable and profitable tax advice and consultancy service that integrates into your business”. In other words, they’re providing tax advisory services to small accounting firms that lack tax expertise. Given the history of Diagnostax and the people behind it, and their legacy of (at best) inexpert tax planning, we would be highly suspicious of this offering.

A peculiar pharma company

The R&D expenditure was carried out by Nemaura Pharma, which is described in the tribunal judgment as a private pharmaceutical company.

There are several oddities around Nemaura Pharma and its associated entities.

The delisted Nasdaq company

Here’s how the business was described in the tribunal judgment:

Nemaura Medical Inc was delisted from Nasdaq in January 2024 because its shares fell below $1 and it then failed to file an annual report and “terminated” its staff. The tribunal hearing was in November 2024; it’s unfortunate if the tribunal was given the false impression that Nemaura Medical Inc had any substance.

The tax-heavy pharma company

Another oddity: Nemaura Pharma Limited was jointly controlled by Dr Chowdhury and a Mr Bashir Timol, a director of OneE (whose main business is selling tax avoidance structures):

When Nemaura Medical Inc listed on Nasdaq, its six-man executive team consisted of Messrs Chowdhury and Timol, one opthalmic surgeon, one accountant and two chartered tax advisers.

Why would a startup pharma company care so much about tax?⁵

The unusual accounts

Nemaura Pharma Ltd’s accounts don’t look much like a pharmaceutical company’s accounts. Its accounts for 2015/16, when the largest R&D investment was made by the LLP, showed a company with £4.7m of cash but only £217k of intangible assets. It received significant income over the next few years, but by 2020 it had burnt through it all, without any increase in the value of its intangibles. This is odd for a pharmaceutical company – R&D expenditure is usually capitalised into intangibles.

In 2018, Nemaura Pharma spent £700k acquiring a company called Microneedle Technologies, owned by Messrs Chowdhury and Timol. By 2019 the company was worthless, and the £700k should have been written off. It wasn’t – so the auditors qualified the accounts. That wasn’t the only problem:

There is a web of related companies, often owned directly by Chowdhury and Timol rather than (as one would usually see) part of a corporate group. These companies also have oddities. For example, the LLPs all acquired an IP licence from an “affiliate” of Nemaura called NDM Technologies Ltd. But NDM’s accounts show no sign of this.

So what was going on?

These arrangements don’t make sense to us or the pharmaceutical industry contacts we spoke to. It’s possible that Nemaura was a normal pharma startup with an unusual focus on tax; it’s also possible that something else was going on.

A market failure

It is unusual to find a lawyer or accountant selling a tax scheme. We’d like to think that’s down to strong professional ethics, but there’s another important reason: if the scheme is duff (as it usually will be) then the accountants/lawyer will be sued. The market therefore provides a strong incentive for regulated professionals to provide sensible and prudent advice.

This doesn’t work for tax avoidance schemes like those sold by OneE.

Tax avoidance scheme promoters are in our opinion usually negligent – most tax advisers would say that their schemes have no reasonable prospect of success. However they typically operate through short-lived companies which are dumped by their owners after running the scheme. The main OneE vehicle, OneE Tax Limited, went bust in 2021 owing £70m to HMRC; the directors agreed to pay up £15m. So HMRC lost out twice – the tax lost on the schemes, and the tax lost by OneE’s own failures.

Most of the OneE and associated “pharma” entities have since failed to file Companies House annual returns and are in the process of being struck off.⁶ The website no longer exists and emails bounce.

So there’s little to be gained by suing a promoter. Nobody involved is regulated or insured, and they’ll just walk away and set up another company..

We said above that tax schemes are often sold by “introducers”: independent financial advisers or accountants who receive a large fee for the introduction. Accountants and IFAs are often regulated and insured, so in principle are attractive litigation targets. The problem is that, if the introducers are careful just to introduce the product (and receive their fee), and not to stand behind it, then they likely won’t have a “duty of care” and can’t be sued in negligence. Here’s an example where an accountant was sued for introducing a client to four doomed schemes, including the R&D scheme.⁷ There was found to be no duty of care.

And a further problem: tax disputes are very slow burning. It can be years between a client buying one of the schemes and discovering it doesn’t work. By the time it’s completely clear that the scheme failed, the limitation period for bringing a negligence claim will often have expired.

Needless to say, there is no prospect of suing the barrister who advised on the scheme (in this case, it seems, Robert Venables KC). He wasn’t advising the investors – he was advising OneE. We expect the investors were assured that an opinion exists, and they may even have been allowed to see it – but they can’t rely on it as a legal matter.

For these reasons, it is often hard in practice to sue anyone for the failure of these schemes, even though most tax professionals would agree that the schemes never had any realistic prospect of success.

This is a market failure. People are able to sell a duff product with no consequences from either HMRC or their own clients.

We all lose out as a result.

In principle these schemes should fail, with no tax lost. In practice, HMRC won’t always spot the schemes and challenge them, particularly if they’re not properly disclosed. Where HMRC does act, whilst it rarely if ever loses tax avoidance cases on substantive grounds, it fairly often has procedural losses (we’d estimate around 20% of the time). Sometimes that’s due to HMRC mistakes; sometimes that’s just the risk inherent in all litigation. And, where HMRC does challenge a scheme and win, it won’t always be able to recover the lost tax – the taxpayers may simply not have the money to pay it.

Fixing the market failure

One answer is for HMRC to pursue promoters. It does this to some degree, but resource and other constraints means that it hasn’t been able to stop the market in tax avoidance schemes.

An answer we’ve discussed before is criminalising the failure of tax avoidance promoters to disclose their schemes to HMRC, as required by law.

Another answer: ensure barristers are held to the same professional standards as solicitors and accountants, and end the likes of Mr Venables’ involvement in providing highly convenient but technically wrong opinions to people like OneE.

So here’s another solution: let’s fix the market failure. Create a market solution to tax avoidance by making it easier for clients to sue promoters:
- A new right of action should be created where someone is sold an aggressive tax avoidance scheme. How to define “aggressive tax avoidance scheme”? There are typically two signs. One is that the scheme should have been disclosed to HMRC, under the rules requiring disclosure of tax avoidance schemes, but wasn’t. Another is that the scheme falls foul of the general anti-abuse rule (GAAR), because it can’t be reasonably required as a reasonable course of action. Either of these should be enough to trigger a right of action.
- If HMRC then assesses the taxpayer for tax on the basis that the scheme doesn’t work⁸ then the taxpayer should have a right to recover their fees from the promoter and (where the promoter is a company) its human owners (“participators”). They should also be able to recover HMRC penalties.
- This will be a simple statutory indemnity rather than a new head of negligence.
- Where the taxpayer was introduced to the scheme by an accountant or IFA who received a commission, the taxpayer should have a right to recover that commission from the accountant/IFA. If the commission wasn’t disclosed, the taxpayer should also be able to recover any penalties.
- The limitation period for claims should be three years from the date of the HMRC assessment.
This would dramatically change the game. The prospect of personal liability will scare some promoters out of the business. A rational accountant/IFA should rethink mindlessly referring tax schemes to their clients (particularly if, as is likely, their insurers exclude this new liability from coverage).

It’s a private solution to a public policy problem, and which may just be able to achieve something HMRC has never managed – end mass-marketed tax avoidance schemes.

Many thanks to M for bringing this scheme to our attention, and for his initial analysis. Thanks to V and K for accounting analysis and to T and B for their pharma sector knowledge.
Footnotes
1. And if you hold 10% of the LLP you’d be taxed 10% of what you’d be taxed if you owned the whole thing. ↩︎
2. There were of course multiple clients, with £2m invested in the LLP and around ten separate LLPs, but the example will be easier to follow if I assume there was just one £26k client. ↩︎
3. These schemes no longer work for individuals because of the “sideways loss relief” rules, which stop an investor in LLP using its losses to shelter the investor’s other profits. However the rules (mostly) don’t apply to companies. ↩︎
4. We say “at least” because both the Corrigan and the LR R&D LLP judgment show 40% of the investments going in fees. The Corrigan judgment says total investments were £77m; and 40% of £77m is of course rather more than £10m. It’s not clear how these numbers reconcile. ↩︎
5. It’s good general advice for startups of all kinds to ignore tax and indeed most legal considerations until the business matures. Lawyers and advisers will just burn through cash and slow things down, and most mistakes are fixable. ↩︎
6. Tax avoidance scheme promoters tend to disregard company law. ↩︎
7. At the time of the judgment it was claimed HMRC hadn’t yet challenged the R&D scheme, so judgment was given on the basis of three failed schemes; that now looks incorrect. ↩︎
8. i.e. issues a “closure notice” ↩︎
24 March 2025
50,000 UK companies are unlawfully hiding their true owners
UK company law requires every UK company to disclose the individuals who control it – their “person with significant control” (PSC). But the rules are widely ignored. We’ve found that around 50,000¹ UK companies hide their true ownership by unlawfully listing a foreign company as their PSC – that’s not permitted. And we’re publishing an interactive map showing all 50,000.

Companies House initially enforced the PSC rules with prosecutions – there were 43 in 2016. But prosecutions dwindled over time, with none at all in 2022, and only four in the first quarter of 2023.

You can jump straight to the interactive map here, but please do read the limitations and caveats below – the map provides an accurate overall picture, but no conclusions should be drawn about an individual company without a manual review to check the position carefully.

UPDATED 24 March; significant updates – view the UK companies on the map, show links between companies, much better UI, more refined scope (excluding worldwide listed companies).

The PSC rules

Historically, Companies House showed who the shareholders of a company were, but stopped there. So if, for example, a company was owned by a tax haven holding company, you wouldn’t be able to ever find out who the ultimate shareholder was.

This all changed in 2016 – rules were put in place requiring companies to identify their “persons with significant control” – meaning the actual humans who were able to tell the company what to do.² Normally this would be the ultimate shareholder – but sometimes there would be someone who wasn’t a shareholder, but who nevertheless could ensure that the company always adopted the activities they desired. They too would be a “person with significant control”.

So, let’s say a secretive oligarch establishes a UK company with some local directors. The shares in the company are held by a Panamanian company, and that in turn is held by the oligarch’s personal chef. Pre-2016, any Companies House search stopped dead in Panama. But today, the company should register the oligarch (not the Panamanian company, and not the chef) as the “person with significant control”.

And that’s the whole point of the rules – to enhance corporate transparency and help stop the abuse of companies for nefarious purposes.

How are the rules ignored?

Some people, like Douglas Barrowman, arrange for their companies to report a false PSC – often an employee (i.e. analogous to the personal chef in the oligarch example).

Others simply fail to file a PSC at all.

But a common approach – sometimes an error, sometimes intentional, is to file a foreign company as the PSC. So, in the oligarch example, the Panama company would be listed as the PSC. This, however, clearly isn’t permitted. The PSC has to be an actual living breathing person. Listing a foreign company as a PSC breaks the whole purpose of the rules – that we should be able to find out who really owns a company.

There are a few exceptions:
- UK companies – they can be listed as a PSC… the idea is that you can then check the PSC for that company.
- Companies which are widely held, so that no one person has more than 25% of the shares or voting rights in the company.
- Companies listed on a stock exchange/regulated market.
There is a useful summary of the rules from law firm Clifford Chance LLP.

The map

Our map shows all the location of all the foreign companies that are listed as PSCs, hiding the true ownership of a UK company:

<p>Your browser can’t display this interactive content. <a href="https://taxpolicy.org.uk/wp-content/assets/pscs_map_v3.html" target="_blank" rel="noopener noreferrer">View it in a new tab</a>.</p>

You can view a full screen version here.

There are about 50,000. Not all will be illegitimate – we discuss the limitations of our approach below. However we believe the vast majority are breaking the law.

Each dot is a PSC for a UK company. The dot is:
- Green where the UK company is an active company
- Orange where the UK company files dormant accounts (in most cases it will really be dormant, but many fraudulent companies file as dormant to avoid scrutiny)
- Red where the UK company is listed by Companies House as being in default in some way – either it failed to file its accounts, mail sent to its registered office is being returned, or its registered office is being disputed (i.e. it is “squatting” at someone else’s address – often a sign of fraud).
- Grey where the foreign company has ceased to be a PSC. This could be because they realised their error and corrected the register.
- Black where the UK company is dissolved.³
Click on a company/dot to show its details.

Click on the coloured dots in the legend to enable/disable the different categories – when the map loads, dissolved companies and former PSCs are not initially shown, but you can click on them and change that. Or, for example, you can deselect the green and orange dots, and just show the red – companies which may be in default.

Search for companies using the search window at the top right. The code will search through both UK and foreign companies, and show you all the PSCs matching your text. Click on one and the map will jump straight to it.

Click “share” to generate a link that will take others to the company you’ve identified – it saves location and popup state.

Note that the app runs locally on your device, so any searches you make are only visible to you.⁴

An example

Douglas Barrowman has a reputation for hiding the ownership of his companies. His most well-known business is the “Knox” group. So let’s search for Knox (this link replicates my search):

Sure enough, Knox Capital Solutions (UK) Limited is listing an Isle of Man company as its PSC. We can’t see any lawful basis for this.

What are the limitations of the map?

To create the map we analysed Companies House PSC data to find all the PSCs that are foreign companies. We excluded listed companies⁵ and US stock exchanges. There’s no obvious source for global listed companies – we ended up using this.⁶ We then geolocated each PSC and UK company.

This is an imperfect approach:
- Companies list their addresses in many different ways; often they make mistakes (typos like “Enlgand”). We tried to deal with this, but weren’t completely successful. So we have accidentally included some UK PSCs which are not breaking the law; they just didn’t enter their address correctly. That’s why you see a handful of PSCs on the map in the UK.
- Whilst we’ve tried to exclude listed companies, the process is imperfect and some will have slipped through, e.g. because of differences in spelling between different lists, or because the named PSC is not itself the listed company.
- A company that’s widely held (with no person holding 25%) has no PSC. Some widely held UK companies incorrectly show their immediate foreign holding company – there is nothing untoward going on here, but they will show up on this map when they really shouldn’t. So, for example, the US company Chatham Financial Corporation is shown as the PSC for Chatham Financial Europe, Ltd. Chatham is employee owned – nobody has 25% ownership – and so the PSC entry should expressly say that there is no PSC. Hence Chatham’s entry is technically wrong, but clearly not a case where someone is hiding ownership… it doesn’t really deserve to be on the map.
- The map includes dissolved UK companies. That is intentional, because people shouldn’t be able to walk away from a company and leave breaches of company law unfixed (although, rather unsatisfactorily, there is no way to correct entries for dissolved companies, and Companies House currently makes no effort to correct them). But dissolved companies, and former PSCs, are switched off when the map loads – you can enable them by clicking on the legend.⁷
- The geolocation won’t always be accurate, particularly when (as is often the case) companies provide incomplete or incorrect addresses.
- With this large number of companies there’s no possibility for reviewing the entries manually – so it’s all dependent on the code, and that can easily make mistakes. Nobody should make any firm conclusion about any individual company listed without checking it out carefully.
However the vast majority of the 50,000 companies on the map don’t fall in any of these categories.

Are criminal offences being committed?

We should be forgiving in many cases. Companies House lets companies submit any old nonsense in their PSC filings. Many people just don’t understand the rules. The Companies House systems should pop up a warning if a company tries to enter a foreign company as the PSC.⁸

Nevertheless, most of the dots on the map represent a criminal offence. There’s a specific requirement that, where someone knows they control a company, but they haven’t received a notice from the company requiring them to provide information, then they have to tell the company that they do in fact control it. If they don’t do this, then they commit an offence – with up to two years’ imprisonment, and an unlimited fine.

There is also a general offence of filing false documents with Companies House; if the documents were filed recklessly or intentionally then it’s punishable by up to two years in jail.

We wouldn’t suggest that there should be 50,000 prosecutions, or even 1,000 – but the most serious cases, involving either actual fraud or substantial companies (who should know better) should not just be ignored.

One serious problem: these rules, like all UK company law, are essentially unenforceable against foreign directors. That should change. We should require companies with no UK directors to appoint a UK law firm or other regulated professional as their agent, responsible for their filings.

How many PSC breaches are prosecuted?

Almost none. We obtained data from the Crown Prosecution Service showing prosecutions for breaches of the PSC rules from 2016, the year the rules came into force:

The full FOIA response is here. We have written to request updated data.

The code

The underlying data, html, javascript and css files that create the webapp are all licensed under the usual Creative Commons BY-SA 4.0 licence (unless it says otherwise). In short, you may freely use any of this for any purpose, and adapt it how you wish, provided you attribute it to Tax Policy Associates Ltd.

The scripts that generated the data can be found on our GitHub.

Many thanks to J for the original idea, P for help with javascript, and R and A for feedback. Thanks most of all to the authors of the javascript libraries that power our map: jQuery, Leaflet and LZ-String.
Footnotes
1. The original version of the map showed 65,000. We’ve since refined the approach and excluded companies that we believe are likely to be compliant; that reduces the number to 50,000. ↩︎
2. The legislation starts here, and is fairly easy to read – there’s also useful (statutory) guidance ↩︎
3. This wasn’t in the first version for technical reasons; we’ve now added it. ↩︎
4. The app does save a cookie so you only see the tutorial once, but does nothing else with it. ↩︎
5. It’s easy to find all the companies listed on the UK stock exchange. An important point we missed in the original map is that some UK companies are owned by foreign companies which are listed on a UK stock exchange. This isn’t a small effect – there are about 600. They were wrongly included in our original map and are now excluded. Our apologies. ↩︎
6. Some of these won’t be on regulated exchanges, but as a practical matter we think that the great majority will be widely held in any event. ↩︎
7. Thanks to those who suggested this approach ↩︎
8. Perhaps along the lines of “you should not do this unless you have obtained legal advice. The consequences of getting this wrong could include prosecution. Type ‘I understand and accept this’ to continue.” ↩︎
19 March 2025
TikTok tax avoidance from Arka Wealth: why the Government and the Bar should act
A firm called Arka Wealth have widely promoted a tax scheme which they claim avoids all corporate tax, income tax, capital gains tax and inheritance tax – not just in the UK but across Europe. They work with a barrister called Setu Kamal, who they say is “one of Europe’s leading tax barristers”.

Arka Wealth’s claims on TikTok and elsewhere are nonsense. Mr Kamal’s arguments have been repeatedly rejected by the courts. In our view, anyone using the scheme will fail to save tax and instead incur large up-front tax liabilities. Nobody should be going near this scheme, and nobody should hire unqualified and unregulated firms like Arka Wealth and their related company Benedictus Global.

We believe closing down schemes like this should be a policy imperative, to protect the public purse – but also to protect the public from buying hopeless tax schemes.

We make specific policy proposals at the end of this report:
- The law should change to make life much more difficult for the promoters profiting from the schemes. That means imposing personal civil liability and – in some cases – criminal liability.
- The schemes are enabled by a small number of barristers. Chartered accountants, chartered tax advisers and solicitors are prohibited from facilitating abusive tax avoidance schemes. Barristers are not. The Bar Standards Board should bring the Bar in line with the ethical standards of the rest of the legal profession.
Arka Wealth’s promises

Here’s one of the almost 200 videos promoting the scheme (originally found on TikTok:¹

The scheme is explained in more detail on their website ² and in this webinar (with a transcript³ here).

The idea is:
1. Your company transfers all its intellectual property to a Cyprus trust.
2. When your company trades, it’s using the trust’s intellectual property, so it pays over the company’s profits over to the trust.
3. Your company is therefore “broke on paper” and has no taxable profits. You are, they claim, now “working for your trust“.
4. Or you can put other assets – your house, cryptocurrency, etc – into the trust, leaving you personally “broke on paper”.
5. When you want to purchase a sizeable asset (house, car, etc) the trust buys it for you and lets you use it.
6. For everyday living expenses you take a loan or investment from the trust.
7. The trust is then exempt from all tax, and you and your company don’t own anything, so aren’t taxed.
They promise 0% corporation tax, income tax, capital gains tax and inheritance tax.⁴ And they say their legal protection acts as an insurance policy, so you are fully legally protected.

The webinar makes a succession of other outlandish claims – including that Angela Merkel has an offshore trust⁵

The structure is widely promoted across social media: LinkedIn, Facebook, YouTube and Instagram, as well as TikTok (where they have made an impact, and have over 220,000 followers).

The UK tax reality

We discussed the structure with our usual panel of experts, and several other leading tax lawyers. The immediate response of James Quarmby, one of the UK’s leading private client tax and trusts lawyers, was: “it’s nuts”. A tax KC with expertise in trusts taxation told us that the claims made were “legally illiterate”. Another senior tax/trusts barrister told us simply: “it stinks”.

It’s hard to know where to start, but here’s our incomplete list of the technical problems with the structure:
- There are rules requiring people selling tax tax avoidance schemes to disclose them to HMRC. We understand this scheme wasn’t disclosed. Arka Wealth will likely have incurred penalties of up to £1m.⁶ And a very bad consequence for their clients: the usual HMRC time limits are extended, so HMRC has 20 years in which to pursue the tax.
- Arka Wealth says that a UK trust is subject to inheritance tax, but a Cypriot trust is not.⁷ That’s incorrect: there is an immediate 20% “chargeable lifetime transfer” if a UK domiciled individual puts property into an offshore trust⁸, and then an ongoing 6% charge every ten years or on exit. So the transfer of the intellectual property into the trust will create an immediate inheritance tax charge.
- Arka Wealth say the trust is not subject to capital gains tax.⁹ That’s incorrect: if you put property into an offshore trust then you are personally taxed on the trust’s capital gains.
- Arka Wealth also believe that, unlike UK trusts, Cypriot trusts don’t pay income tax.¹⁰ That’s again incorrect. The trust will be taxed at 45% on its UK source income. The client will also be directly taxed on the trust’s income under the “settlements” rules or the “transfer of assets abroad” rules.¹¹
- The claim is that the client will “own nothing, control everything”¹². It therefore may not even be a trust from a UK tax perspective.¹³ This is likely the best outcome for a user of the scheme because, whilst they’d fail to obtain any tax benefit, they’d also probably escape up-front tax liabilities caused by the structure.
- The company’s payments to the trust for the use of the IP will be subject to 20% royalty withholding tax.¹⁴
- The company will likely not be able to deduct the royalty payment to the trust.¹⁵
- The company will likely be subject to corporation tax on the capital gain from its disposal of the intellectual property into the trust, with the sale price deemed to be its market value.
- There are potential additional problems, and complex interactions, with the benefits in kind and disguised remuneration rules, plus the potential for a market value stamp duty land tax charge and ATED on any real estate moved into the trust.
- The claim that a barrister’s insurance provides clients with full protection is often made by tax avoidance scheme promoters. The problem is that the barrister may be insured, but that’s for his protection, not his clients. If his advice is negligent, you will have to sue him and/or Arka Wealth – and win. The insurers will then typically take over the defence; only if you win do they pay out. And the cover could be as low as £500,000.
This is a tax disaster.¹⁶ Like other schemes we’ve investigated, it won’t just fail to obtain any tax benefit for the clients. It will likely trigger large up-front tax liabilities.

The courts have struck down almost every¹⁷ tax avoidance scheme they’ve seen in the last 25 years. A sign of the consistent failure of such schemes is that a “general anti-abuse rule” was created in 2013 to counter avoidance schemes. The courts haven’t needed to use it even once; all the schemes considered since it was enacted have failed under normal taxation principles. No reputable adviser would let their client go near a scheme like this.

However the non-tax consequences could be worse. The scheme results in all of a client’s assets moving into a complex Cypriot trust arrangement. Arka Wealth assure clients everything remains under their control but, given their poor understanding of tax law, it would be optimistic to assume their understanding of Cypriot trust law is any better. One scenario is that assets are trapped in an expensive structure (as has happened with other trust structures). The worst-case scenario is that the assets become stranded, or even disappear.

The European reality

Arka Wealth claim the structure works in 30 European countries as well as the UK.¹⁸

This is an implausible claim on its face: even the most innocuous commercial structure will usually have different tax consequences in different countries. A tax avoidance scheme is an extreme case.

We spoke to French, German and Italian tax lawyers, none of whom thought the scheme would work, and all of whom thought it would likely result in a criminal investigation.¹⁹ We also spoke to a Polish tax adviser, who said the structure looked like a sham but, if not, would be countered by the Polish GAAR. The structure will also likely be disclosable to many tax authorities across the EU under the rules often called “DAC 6“.²⁰

Who is behind Arka Wealth?

Arka Wealth is an Estonian company.²¹ – its CEO of Arka Wealth is James Verite-Shephard; the Chief Operating Officer and “Wealth Specialist” is Jeremy Vaughan. Mr Verite-Shephard also owns the company. Neither appears to have any legal, tax or accounting qualifications, or indeed any experience with trusts or the private wealth sector.

The same two individuals are also CEO and COO and owners of another unregulated wealth manager called Benedictus Global.

Given that Benedictus Global and Arka Wealth appear to be run by people with no qualifications or experience, and who make transparently false claims, we would suggest that anyone looking for tax advice goes elsewhere.

We put our criticisms to Arka Wealth and asked them for comment. They didn’t respond to any of our specific points, but said they would now be conducting a review of their materials and how they presented their marketing. We responded that the priority should be to comply with UK and EU tax avoidance scheme disclosure laws. We didn’t hear back. The email thread is here.

Messrs Verite-Shephard, Vaughan and two junior employees of Arka Wealth are members of a UK limited liability partnership called Fair Share Legal LLP. The other member is a barrister called Setu Kamal, who also controls that LLP.

Mr Kamal is listed as the legal adviser for Arka Wealth and Benedictus Global as their “legal adviser”.²²

Setu Kamal

Arka Wealth refer extensively to their reliance on the advice of tax barrister Setu Kamal. They host videos in which Mr Kamal recommends that business owners set up a trust, and says that every Arka Wealth client receives a legal opinion from him.

Mr Kamal tells us that his opinions for non-UK clients are based on arguments that EU law prevents the structure being taxed.²³ He says he doesn’t use this argument for UK clients post-2023.

Mr Kamal was promoted on Arka Wealth’s website as having a 100% win record, with the claim that “neither HMRC or ECJ have disagreed with his analysis, or been successful in challenging it.”:

Mr Kamal’s actual win rate is closer to 20%, and probably 0% on substantive tax points.²⁴ ²⁵ As far as we are aware, Mr Kamal has never appeared before the CJEU.²⁶. We pointed this out to Arka Wealth – they didn’t change their website. Update 27 March: one month after we published our report, we reminded Arka Wealth that they were making false claims. They then corrected this page.

A barrister’s win rate is a crude measure of their ability, because some excellent barristers take on very difficult cases. However in Mr Kamal’s case, we believe that most of the cases relate to tax avoidance schemes that he helped devise. His win rate is an accurate reflection of the success of these structures (indeed it flatters it, because his wins were on valuation and procedural points; we don’t believe he’s ever won a substantive tax point before a court or tribunal).

Whilst the Arka Wealth scheme is targeted at wealthy individuals, many of the other schemes Mr Kamal has advised on are “contractor schemes”, targeted at people on modest or low earnings. They think they are signing up for normal agency work, but (thanks to complex documents they are asked to sign without advice) end up participating in complex and contrived tax avoidance schemes. Scheme users typically have no idea of the nature of the scheme they are signing up to, and often end up with large tax liabilities as a result. The risks are very high, but rarely if ever disclosed. There’s a good Computer Weekly article on these schemes here.

Three of the contractor schemes that we believe were created with Mr Kamal’s help have been listed by HMRC as tax avoidance schemes and, we expect, will in due course either lose in front of a tribunal, or vanish before HMRC can pursue them. The Advertising Standards Agency ruled that the same three schemes misled people.

In defending these and other schemes in court, Mr Kamal has a history of pursuing arguments that we regard as hopeless. This culminated in him being referred by the High Court to the Bar Standards Board for a disciplinary hearing.

A short summary:
- In June 2023, Mr Kamal acted for two tax avoidance schemes called Vision HR and Veqta. HMRC planned to list the schemes on its website; the promoters sought judicial review to stop that. Mr Kamal ran the surprising argument that EU law overrode domestic UK law even after Brexit. The court described this as “unarguable” – we believe almost all EU law and constitutional law advisers would agree. Three other of his arguments were held to be “unarguable”. Mr Kamal also failed to answer the Judge’s questions as to how the scheme worked (although, having devised the scheme, we expect that he knew the answers). The promoters were found to have breached the “duty of candour”. Judicial review was refused.
- A month later, Mr Kamal acted for another tax avoidance scheme, Apricot, on very similar facts; and Mr Kamal made almost identical legal arguments. His application referred to another similar legal challenge “underway in the case of Veqta“. However he failed to disclose that the Veqta challenge had failed, and his arguments had been rejected. The Judge said this prima facie constituted a breach of a barrister’s duty to the court, and made a “Hamid” referral to the High Court to consider whether Bar disciplinary proceedings should be brought against Mr Kamal.
- The Hamid referral was heard by the High Court in March 2024. The judgment indicates that Mr Kamal made no apology for his omissions, nor any acknowledgment that he failed to comply with his obligations to the court (although he said he had been “flustered“). He failed to attend the hearing, initially claiming he had made an application to attend remotely, but then admitting he hadn’t done so. The Court found that Mr Kamal had breached his duty to the court, and referred the matter to the Bar Standards Board. Mr Kamal has told us that the investigation by the Bar Standards Board concluded on 5 March 2025, he was fined £650, and no further disciplinary action was taken against him, but he has so far refused to provide evidence that the BSB did in fact reach this conclusion.
- Soon after the Hamid hearing, in April 2024, Mr Kamal acted in another judicial review, Oculus, against HMRC’s decision to force disclosure a promoter who hadn’t disclosed their avoidance scheme under DOTAS. He again ran EU law, GDPR and ECHR arguments which the court found to be “unarguable”.
- In August 2024, Mr Kamal acted on a failed attempt to challenge the loan charge as contrary to EU law (very far-fetched, particularly post-Brexit) and contrary to the ECHR (which the Court of Appeal had already ruled against). Mr Kamal made an application in which he claimed that two judges were biased and there was an appearance of “institutional corruption”. The court rejected the application, saying it was “frankly scurrilous” and “lacking in any merit”. ²⁷ ²⁸
Mr Kamal appears to honestly believe the eccentric legal positions which he takes. Arka Wealth’s staff probably don’t understand them. We expect, however, that may other promoters know these arguments will fail; their aim is to slow down HMRC, and let the promoters extract more money from their clients/victims before their schemes are (inevitably) closed down. In the case of Oculus, that meant that workers continued for a further year before being notified that they were participating in a tax avoidance scheme (we expect they were low-paid and had no idea what was going on) .

Despite the claim in the webinar (at 00:31:29) that Arka Wealth “use the foremost tax chambers within the UK”, Mr Kamal is no longer a member of a Chambers.

We wrote to Mr Kamal giving him an opportunity to comment on the Arka Wealth structure. He declined to respond unless we gave him “access to our subscriber base” – when we said this didn’t make sense, he stopped responding. The email thread is here (read from the bottom up):

We had previously written to Mr Kamal last year, following his referral to the Bar Standards Board. For reasons which aren’t clear, he copied his response into two twitter posts. In short he accused us of a “medieval witchhunt”, and provided more detail of his legal positions (which we regard as highly eccentric).

The policy implications

HMRC should investigate and close down Arka Wealth.²⁹

However, Arka Wealth are just one small player in a sizeable industry of tax avoidance scheme promoters. Government action is required.

1. DOTAS needs to be strengthened, with civil and criminal penalties for the people promoting undisclosed schemes

Every tax avoidance scheme we’ve investigated has two things in common. It should have been reported to HMRC under DOTAS, the rules requiring up-front disclosure of tax avoidance schemes. But it wasn’t.

Arka Wealth’s scheme follows the same pattern.

The reason is simple: having to market a scheme that’s been disclosed to HMRC as a tax avoidance scheme is hard.³⁰

So DOTAS is widely ignored. Often, promoters obtain an opinion from a tax barrister which takes implausible, but highly convenient, positions. An example of such an opinion, and a tribunal’s dismissive attitude to it, can be found in the recent Asset House case. Nevertheless, it’s often the case that the fact an opinion was obtained means that penalties can’t be charged (and Setu Kamal has advocated for precisely this result).

We suggest two responses.
- DOTAS penalties should be increased³¹ and a promoter’s directors/owners should always be joint and severally liable for the penalties. Right now it’s too easy for them to walk away from their company.³²
- Breach of DOTAS should be a criminal offence for the individuals responsible³³ with strong protections to prevent innocent mistakes being penalised.³⁴
2. It should be an offence for an unregulated person to advise on or promote a tax avoidance scheme

The last Government consulted on regulating the tax profession, but only for advisers who act as agents for taxpayers in their dealings with HMRC. Most tax avoidance scheme promoters do not do this – they provide advice behind the scenes.

We are therefore pleased to see that the present Government’s response to the consultation states that there will be proposals issued soon dealing specifically with cases where an adviser facilitates a taxpayer’s non-compliance.

We would suggest this brings within the scope of regulation anyone who provides tax advice for an arrangement which has a main benefit of obtaining a tax advantage.

3. The Bar Standards Board should bring barristers up to the same standards as solicitors and accountants

A solicitor, chartered accountant or chartered tax adviser is bound by the rules of the Professional Conduct in Relation to Taxation (PCIRT). These rules include:

This protects the public, because any tax structures falling within this paragraph are very unlikely to work.

However there is no such restriction on barristers – they are free to create and promote aggressive and abusive tax avoidance schemes which have no realistic prospect of their success. What’s worse is that such barristers usually act for scheme promoters, not the end-users of the scheme. So when – inevitably – the scheme goes wrong, the end-users were not the client, and will not be able to sue the barrister for negligence.

This is nothing to do with the “cab rank” rule, which obliges a barrister to take on any appropriate case with a paying client. It would be unfair and unreasonable to criticise a barrister for (for example) defending a person accused of tax avoidance or tax evasion. However that is very different from the case where a barrister devises and/or promotes an aggressive tax avoidance scheme. That was the barrister’s choice and, in our view, an indefensible one.

Thanks to the PCIRT, few of the schemes we have investigated involve a solicitor or accountant; but many of them have involved barristers. A small number of barristers are actively damaging the integrity of the tax system – and everyone in the tax world knows who those barristers are.

It is over ten years since Jolyon Maugham wrote an article about the problems caused by barristers issuing impossible opinions without consequence. Nothing has changed.

We will be asking the Bar Standards Board to reconsider its position, and make the PCIRT binding on barristers.

Thanks to James Quarmby, C, K, T and L for their UK tax technical input, to P, J, D and H for the French, German, Italian and Polish tax commentary, and to T and G for the international arbitration advice. Thanks, most of all, to A for the original tip.

Videos and other content are © Arka Wealth and reproduced here in the public interest and for purposes of criticism and review.
Footnotes
1. We have also archived a copy of Arka Wealth’s TikTok channel, which as at 25 February contained 186 videos. If the channel goes down, please get in touch if you would like access to them. ↩︎
2. The website went offline in sometime around August 2025 ↩︎
3. AI generated, so not necessarily accurate ↩︎
4. See 00:13:35 in the webinar. ↩︎
5. See 00:28:43. The whole video is well worth watching. Amongst the other claims: that European Union company law is based on trust law (00:40:10), that you can avoid rental withholding tax using a UK holding company (01:13:50), that they work with barristers in the “EU” (00:17:18). For fairness, we should add that a minority of our panel agreed with the claim (at 00:29:33) that “a barrister is always considered an expert in law where a lawyer or a solicitor is not”. And their many other videos make other wild claims, including that billionaires use this structure (we would be surprised if any do; billionaires are generally (but not always) very well advised). ↩︎
6. Because the main benefits of the structure include obtaining a tax advantage, Arka Wealth is making it available for implementation, and the scheme will (we expect) use standardised documentation. We also expect there will be a premium fee. The references in the webinar to not wanting to disclose their “secret sauce” suggests the confidentiality hallmark applies as well. ↩︎
7. See 11:54 in the webinar. ↩︎
8. Or a non-dom settles UK situs assets. In either case, only to the extent the property exceeds the nil rate band ↩︎
9. See 20:55 in the webinar. ↩︎
10. See 11:54 in the webinar. ↩︎
11. With a credit for income tax paid by the trust. ↩︎
12. See 01:10:29 in the webinar ↩︎
13. Either on general principles (it’s just not a trust) or under the sham doctrine (see e.g. paragraphs 72 and 73 of the Northwood case) ↩︎
14. Arka Wealth seem to think the UK/Cyprus treaty will help. They’re wrong: a non-taxable trust can’t be resident in Cyprus for treaty purposes (and the trust in practice is probably resident in the UK anyway). The trustee may be a company resident in Cyprus, but a trustee isn’t the beneficial owner of the trust property. Even if the trust were taxable in Cyprus, treaty relief likely still wouldn’t be available. ↩︎
15. Either on the basis that it is not “wholly and exclusively” for the purposes of the company’s trade, or on the basis that it was undertaken solely for fiscal purposes and so has been “denatured“. Note that the likely clients are small companies, and so transfer pricing and the diverted profits tax probably won’t apply. ↩︎
16. We of course do not know the details of how the structure works. The webinar refers to Arka Wealth’s “secret sauce”, which we expect means likely additional steps designed to disguise the nature of the arrangement (see 01:05:17). We discussed these kinds of structures in our previous article on the Minerva structure. However, all of the trust tax specialists we spoke to regarded the claims made as essentially impossible to achieve. It’s been a long time since artificially inserted steps were able to save a tax avoidance scheme. ↩︎
17. The exceptions: the SHIPS 2 case, essentially because the legislation in question was such a mess that the Court of Appeal didn’t feel able to apply a purposive construction, and D’Arcy, where two anti-avoidance rules accidentally created a loophole. The GAAR was in large part created to prevent cases like SHIPS 2. ↩︎
18. The full list is: Austria, Belgium, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Norway, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, Switzerland, and the UK. ↩︎
19. The Italian tax authorities tend to treat all tax avoidance, and even many technical tax disputes, as criminal tax evasion – so this response will not surprise many tax practitioners. The French and German responses are less usual. ↩︎
20. i.e. under the A2 tax-geared fee, A3 standardised documentation or C1 deductible/non-taxable payment hallmarks. ↩︎
21. As an aside, the Estonian company registry is in our view the best in the world in its openness, and user interface. ↩︎
22. Mr Kamal says he is advising the “BW Network” and notorious tax avoidance scheme promoter Paul Baxendale-Walker. The similarity between the Arka Wealth structure and the Baxendale-Walker/Minerva structures may not be a coincidence. ↩︎
23. We believe this is incorrect. EU law never protected wholly artificial tax avoidance structures like those promoted by Arka Wealth (even before the recent CJEU movement towards applying a much weaker standard than “wholly artificial”). ↩︎
24. We conducted a quick review of decided tax cases where Mr Kamal acted for the taxpayer. We found 14 tax judgments – of which he won one (Bower, a valuation case), won in part in another (Elphysic, losing on the main point), and lost the remaining 12 (Apricot, Cajdler, Conegate, England, Kondrat-Wilk, Labeikis, Oculus, Opus Bestpay, Phizackerley, Rapid Brickwork, Veqta/Vision HR, Whight). Mr Kamal also won a tax-related insolvency case. ↩︎
25. The Telegraph suggested Mr Kamal was involved in SDLT avoidance schemes. These schemes have a dismal record of failure in the courts, but we are unaware of any specific reported cases where Mr Kamal acted. ↩︎
26. The name changed from “European Court of Justice” to “Court of Justice of the European Union” in 2009, following the Lisbon Treaty. ↩︎
27. Mr Kamal now says he’s seeking ways of challenging the loan charge via an international arbitration. None of the international arbitration lawyers we spoke to believed such a challenge would be possible. ↩︎
28. Mr Kamal acted for similar claimants in a parallel judicial review, which appears to be unreported, but is mentioned in passing in the Labeikis case. One of the claimants is the Trustees of the Setu Kamal Action Man Trust 2022, so it appears Mr Kamal has himself used a loan/trust tax avoidance structure of some kind. ↩︎
29. Likely a stop notice can be issued because the scheme is similar in form and effect to others which have been the subject of DOTAS disclosure, and it is more likely than not that Arka Wealth’s structure will not provide the promised tax advantage. ↩︎
30. Promoters have lied about this in the past; some claiming that DOTAS is a sign of HMRC approval; others that it was a normal process for investigating novel structures. ↩︎
31. Currently they are £600 per day or (if that is insufficient), £1m. This is an insufficient deterrent when a promoter can make millions of pounds of fees in a few months. The penalty should instead be geared to the fees received by the promoter (say 200% of fees) or, where a promoter does not adequately disclosure the fees received, such amount as is just and reasonable under the circumstances. ↩︎
32. i.e. expanding HMRC’s existing powers by removing conditions B and D – HMRC should simply be able to pursue directors/participators as soon as a DOTAS penalty is issued. ↩︎
33. This should be a different test from the usual “directors, shadow directors and participators” formulation, so that directors with no knowledge of the activity are not liable, but an employee who was directing the activity is responsible. ↩︎
34. We would adopt the approach in the GAAR: the offence should only apply if the failure to comply with DOTAS cannot reasonably be regarded as a reasonable course of action. Merely obtaining legal advice should not be sufficient for a person to taken to be acting reasonably; we’ve seen in Asset House and other cases that some barristers take unreasonable positions. Everyone in the tax world knows who these barristers are. A consequence of criminalising DOTAS is that a rational person looking to protect their position will instruct a barrister whose opinions haven’t repeatedly been contradicted by courts and tribunals. ↩︎
26 February 2025
How criminals use “muppets” to commit corporate fraud – and how to stop them
Many fraudulent companies at Companies House are run by entirely fake directors – non-existent people with fabricated identities. But many others are fronted by “muppet” directors: real individuals, often recruited through Facebook, who lend their names to companies they don’t actually control. The true masterminds behind the fraud remain in the shadows.

From next month, we’re likely to see a surge in muppet directors. Companies House is introducing ID verification rules, making it much harder for fraudsters to register fake identities. The fraudsters’ likely response? Recruit more muppets.

Companies House needs to act to end muppet directors – and we have a simple proposal.

Donna

Meet Donna:¹

Donna seems a nice person, but has a tendency to promote “get rich quick” internet promotions to her friends:

Those posts didn’t get much attention, and nobody commented.

This one is different:

Dozens of people responded – not surprisingly, given the offer of £1,800 of free money.

But what is this thing that you can do up to four times, but not if you’re Scottish, and if you’ve done one then you can’t do another?

Donna’s companies

Here’s what happened to one of Donna’s companies:

Four months after becoming a director, Donna resigned, and was replaced by Josefina – a resident of the Philippines:

Not long after, the company was struck off.

And this happened 23 times. Usually Donna is a director for a few months, then replaced by a Philippine resident individual, and then the company is dissolved:²

Kelly

Kelly responded to that Facebook comment thread on 15 March:

And, a few weeks later, she became the director of a series of companies, later resigning and being replaced by a Filipino individual:

These companies are still active.

What’s going on?

Donna and Kelly’s companies were used as part of what’s called “mini umbrella company” fraud – thousands of small companies created to claim tax incentives they’re not entitled to. We published a four part report into these frauds in 2023. HMRC’s view of these frauds is set out here.

HMRC initial response to the frauds was to ensure the tax incentives could only be claimed by companies with UK directors. That’s why Donna and Kelly were hired. But once the fraud has started, they’re not needed – better to use directors who can be paid less, and are much harder for HMRC to track down. The Philippines is an ideal location.

Is it a crime?

Donna and Kelly surely know nothing about the tax fraud that is these companies’ ultimate goal. But they both incorporated a company and clicked a box that says they control it – that they’re the “person with significant control”:

This isn’t true. Donna and Kelly aren’t in control of these companies – they’re doing what someone tells them. They provided false information to Companies House, and if they did so recklessly or intentionally then that’s a criminal offence.

The muppet explosion

As of today, muppets are a minority of the fraudulent companies at Companies House. Fraudsters are more likely to use completely non-existent people as directors – it’s easier and cheaper. The people hiring muppets probably did so because they wanted the veneer of legality.

But muppets are about to become much more common.

Companies House will have new identification procedures starting in March 2025 – this will make it much harder for criminals to establish companies using fake names. The obvious response from fraudsters? Hire more muppets. The muppets are real people – so would have no problem providing genuine identification documents.

We can therefore expect a large increase in muppet directors.

The Low Incomes Tax Reform Group issued a press release in 2023 warning people not to get involved in these “director” schemes. This was the right thing to do, but we fear it will not reach many of the people drawn to the schemes.

We have two suggestions:³
- Companies House’s incorporation website should add prominent warnings of penalties and criminal liability for people acting as “nominee” directors – i.e. agreeing to be a director on paper and follow someone else’s instructions. With the warning not merely a tick-box, but requiring new directors to type that they understand the warning.⁴
- Harsh as it may sound, we need widely publicised prosecutions of people like Donna. People will only stop being muppets if they know they face serious consequences.
An obvious response from the fraudsters would be to exclusively hire muppet directors from outside the UK, who are less likely to understand any warnings, and much less likely to have seen any prosecutions of previous muppets. That will, however, be less attractive to the fraudsters – if a company is trying to present itself as a real UK company (either to HMRC or other potential fraud victims) then foreign directors are a red flag. But if we’re wrong about this, and Companies House sees an explosion in foreign muppets, then we may need a radical solution, like requiring all foreign directors of UK companies to appoint a UK agent covered by money laundering rules.

We hope Companies House are ready to act.

Thanks to Simon Goodley at the Guardian for his original reporting on the MUC tax fraud, and Richard Smith and Gillian Schonrock for their amazing investigative work tracking down the scheme companies. If you haven’t read our original report, and how a tax KC blessed the fraudulent scheme, it’s available here.

Thanks to CompanyWatch for giving Tax Policy Associates access to their excellent software for free (there was no quid pro quo; they didn’t even ask to be credited).

Image by DALL-E 3: “a photorealistic image of a muppet committing fraud”
Footnotes
1. We are masking the name and identifying details of the individuals caught up in this scheme because it would be unfair for them to attract random abuse on social media. We expect researchers will be able to identify them without too much difficulty (and we’re happy to assist any researchers/government agencies who need more information). ↩︎
2. The software that extracts this data from Companies House is CompanyWatch – it’s much more sophisticated than the Companies House website, which often shows one person (even with a unique name) as multiple people, making it hard to see all the companies they’re involved with. CompanyWatch has kindly given us a free licence to use their software free. ↩︎
3. Another solution would be for Facebook to use its immense resources and knowhow to block people from promoting “get rich quick” scams. There is, however, little sign of this. ↩︎
4. For example typing something like: “I understand that if I act as a director on behalf of someone else without registering them as a PSC then I could be liable for large financial penalties and even imprisonment”. ↩︎
13 February 2025
Who is Michail Roerich, and why did he build the world’s most convincing fake companies?
A mining giant claiming £4bn in revenue, certified by a fake auditor on 128 pages of meticulously detailed fake accounts. A bank with a login page that can’t log anyone in. A trust holding $327bn in Tsarist gold that never existed. Even endorsements from the Duke and Duchess of Cambridge, Nadhim Zahawi, and Baroness Mone – all fabricated. And, incredibly, an entirely fake country.

Behind all these elaborate deceptions is a real person – Michail Roerich – and a very real attempt to seize a gold mine in Ukraine. Who is Roerich, and what exactly is he trying to achieve?

This follows our previous reports on companies filing fake accounts, the large number of fake banks filing fake accounts, and the tool we built to identify companies with fraudulent accounts.

The Observer’s report is here.

The mining company

Here are the 128 pages of Gofer Mining plc’s 2019 report and accounts.

The accounts look¹ like the accounts of a global mining giant, which is what Gofer’s website says it is. 4,000 staff, operating in 21 countries, and expecting to post £4bn of revenue in 2022. It’s listed on Dun & Bradstreet and headquartered in One Canada Square.

These accounts were filed in 2021 – and Gofer Mining never filed accounts again. Its website also seems to be frozen in 2021. A reader who didn’t know this would be hard-pushed to see anything wrong with the accounts. They are a world away from the fake accounts we have recently investigated, which are full of accounting impossibilities, typographical errors and copy/paste errors.

A careful reader might, however, wonder why there was so little detail, particularly compared with annual reports from other comparable mining companies. If they then made some enquiries, they’d realise something strange was going on. Anyone who knew Canary Wharf would say that there’s never been a mining group headquarters at One Canada Square. Anyone in the mining industry would say the claim to be the only gold miner in Greece and Ukraine is false – and they would have never heard of Gofer. A minerals expert would note that some of the resource figures are out by a factor of at least 1,000², and that no new mine can be brought into production within a year. A forensic accountant would say the level of growth recorded in the accounts, and lack of detail, is highly suspicious. A capital markets lawyer would be puzzled by the claim to have raised more than £300m from shareholders, without any sign of any capital markets transactions. A mining lawyer would wonder about the lack of any reference to licences or regulatory filings. A banker would know that Barclays would never make a ten year unsecured loan to a new mining company at a 0.5% rate of interest. And nobody would have heard of its Chairman, Sergey Kolpidi, its CFO, Michail Roerich (here calling himself “Michail Sergios Kolpidis“), or indeed any of its board.³

None of this is conclusive; there might just about be explanations for each oddity. And the accounts were audited – whilst isn’t a guarantee of accuracy, but gives us assurance that someone independent has checked that the document is a fair reflection of the business.

So who was the auditor who signed off on the report? Dr James Whitelaw, of Smith Barclay LLP. Here’s one of the partners of Smith Barclay LLP, showing off their client list:

That partner is Michail Roerich. The Michail Roerich who was the CFO of Gofer Mining plc – he was also a director and ultimate owner of Smith Barclay LLP.

That’s just the start of the problem. Neither Smith Barclay LLP nor James Whitelaw ever had an audit licence. There’s no evidence Whitelaw ever existed.

The audit report was a forgery.

And there is almost no evidence that Gofer Mining plc existed at all, outside its Companies House filings and its website. No employees ⁴, no premises, nothing. The document presents 2019 calendar year accounts, and mentions the 2018 balance sheet, but the company was only incorporated on 12 April 2019, and gofermining.com was created one week before that.

Someone went to a great deal of effort to create the Gofer Mining plc report and accounts⁵ – they’re easily the most impressive fake accounts we’ve seen. We do not know who was responsible, but we can say two things for sure.

First: Michail Roerich is real – although he goes by several names. He’s the central figure in this report.

Second: whilst Gofer Mining plc didn’t exist in any real sense, that didn’t prevent it from trying to control a very real Ukrainian gold mine.

The Ukrainian mine

Almost immediately after it was incorporated, Gofer Mining plc made a serious attempt to seize control of a Ukrainian gold mine. A deal had been signed for the mine to be sold by the Ukrainian Government to Avellana Gold, a real mining company. Gofer Mining plc tried to stop this.

On 16 April 2019, a small advertisement was placed in The Times’ “business to business” classified section. It claimed that Gofer Mining plc had been established by “Barclays PLC and its affiliated companies”:⁶

Two months later, according to a reputable Ukrainian journalist’s blog, this letter was sent by Gofer to a village council near the mine (Google Translate version to the right, verified by a Ukrainian speaker):

The claims made in the letter go even further than the classified advertisement, including:
- The company is part of the “Barclays plc conglomerate”.
- Its shares are owned by more than 50,000 British citizens
- Shareholders also include Barclays Bank and a firm called Grosvenor Barclay LLP.
- Grosvenor Barclay LLP is owned by Robert Barclay (of the Barclay family that founded Barclays Bank), the Grosvenor Estate and Baroness Mone.
All the claims here were false. Barclays Bank plc had no involvement; neither did the Grosvenor Estate or the Mone family. Grosvenor Barclay LLP was incorporated a month after Gofer Mining plc. Its members certainly included “Robert Barclay” and “James Grosvenor” – but Robert Barclay died in 1690, and there is no prominent “James” in the Grosvenor family. Another registered member, outrageously, was Baroness Mone’s teenage daughter.

On the back of these false claims, Gofer Mining plc obtained a court judgment, blocking the sale to Avellana.⁷ This was widely covered in Ukrainian media at the time. The dispute ended when a commercial court and then the Ukrainian Supreme Court ruled in favour of Avellana and against Gofer (although the Ukrainian courts do not appear to have appreciated the fictitious nature of Gofer).

Avellana have a statement on their website and a video from their CEO, Brian Savage. He says Gofer were an “experienced group of criminal corporate raiders”. He added that they had “no mining expertise” and their claim to be backed by a UK bank was a “lie”.⁸ Savage’s claims are extraordinary, but consistent with our findings. If Barclays credit line wasn’t real, and the accounts weren’t real, then their attempt to control a mine cannot have been real either – or, if real, cannot have been legitimate.

There was at least one other occasion when Gofer Mining plc interacted with the real world. We understand from another mining company that Gofer Mining plc approached them for a deal (unconnected to Ukraine), but couldn’t demonstrate it had funding, and the deal went nowhere.

There may have been more. Gofer Mining plc won The Business Concept’s “Most Innovative International Precious Mining Company 2023”. A meaningless paid award – but evidence that Gofer Mining plc was still active in some sense in 2023.

The listed holding company

Gofer Mining says it’s owned by Gofer Wealth plc. The website is now down, but between 2020 and 2023 Gofer Wealth said it was “the financial services arm of the British conglomerate Gofer Group”. Its incorporation documents show Barclays plc as the sole shareholder. Subsequent Companies House filings claimed it was listed on an EU stock exchange/regulated market. Its accounts show it having £1.7bn of assets.

None of this is true. Barclays plc had no involvement. Gofer Wealth was never listed on any stock exchange. Its accounts show £1.7bn in cash on its balance sheet for five years straight, with no other balance sheet entries. That is, in practice, impossible. Nobody sits on £1.7bn in cash, earning no return and accruing no expenses. And there is no sign at all in its accounts of its ownership of Gofer Mining plc.

The company filed as dormant – which meant it had no transactions. That was again impossible – transactions are an inevitable result of holding £1.7bn cash.

Gofer Wealth’s registered office was 17 Hanover Square, in Mayfair. It’s a serviced office block – but it seems Gofer Wealth was not a paying client. The owners of 17 Hanover Square complained about their unwanted visitor, and so Companies House used its new powers to force Gofer Wealth into a temporary registered office at Companies House itself.⁹

On the board we again see Michail Roerich – but now he’s calling himself “Michail Sergios Roerich, His Grace the Duke of Commonwealth”.¹⁰ More on the “Commonwealth” later.

The magnetic technology company

Magnetic Technologies Group plc’s website ¹¹ says it develops and invests into the field of “Magnitology”, and it’s active in 50 countries, with a presence in 25. It says its shares are AIM listed, that it is audited by Grant Thornton, and its European headquarters are in Slough.

None of this is true. There is no evidence of the company’s existence. It’s not AIM listed. Grant Thornton told us they’re not the auditor, and have no relationship with the company. Magnetic Technologies Group plc’s “European headquarters” is actually a co-working office space. The company’s accounts show £5m in the bank, and nothing else – and the lack of any change in the figure implies that there is no money here at all.

Again on the board we see Sergey Kolpidi and Michail Roerich, “the Duke of Commonwealth”.

The Gofer group

There are so many related companies that listing them here would take up pages and pages. The oldest is a shipping business that was incorporated in 2006, filed superficially convincing “audited” accounts ¹² in 2014, and was dissolved three years later. There’s a charitable foundation, and a company run by Lord Troubach (who does not exist). Perhaps the highlight is Gofer Energy Ltd, which was claimed to be part-owned by Barclays Bank plc, and part by the Royal Foundation of the Duke and Duchess of Cambridge.

It is most unlikely the group is the sole creation of Michail Roerich, given the amount of work involved, and the variety of expertise required to fake the Gofer Mininc report and accounts. Mr Roerich was only 14 or 15 when the first company, Sunlight Maritime Limited (I), was formed. And its 2007 accounts are extremely strange, with the surface appearance of real accounts (including a presumably fake letter from accounting firm Moore Stephens), but then tiny numbers perhaps 10,000 times smaller than they should be. Why would anyone do this? Or was this Roerich’s first attempt at faking a company?¹³

If others were involved – who Sergey Kolpidi is listed as a director of nine of the companies; Larisa Kolpidou as a director or secretary of no fewer than thirteen. We believe that Sergey and Larisa are Michail Roerich’s parents. In 2004, a Polish news website published an article in which Sergey Kolpidi was identified as having previously been called Sergei Gavrilov, a Russian businessman whose wife was called Larisa and who had been involved in a Polish banking scandal in the late-1990s, following which he was expelled from Poland.¹⁴

The timeline starts in 2006, but most of companies are short-lived. There is a flurry of activity when Gofer Mining plc is created in 2019.¹⁵ This chart illustrates the timeline – click on a bar for company details and Companies House links. Landscape mode recommended on mobile devices; fullscreen version here.

You can explore the connections between the companies in more detail with this interactive chart – click on a company for its full details/links. You can move companies/individuals around, and zoom in and out, to focus on points of interest. Fullscreen version here (recommended particularly for mobile users):

We’ve also put this data in a Google spreadsheet.

We would caution that it is prudent to generally assume that that no director or shareholder (individual or company) mentioned on this chart, or in these companies’ filings, agreed to participate in the companies. In many cases we doubt they exist at all. ¹⁶ The sole exception is Michail Roerich, where we are confident that he both exists and was involved.

The fake country and the Ponzi fraud

At this point the story takes a very strange turn.

Mr Roerich has founded the Union State of British Commonwealth – the “sovereign political form of union and alliance of the people of 60 member nations”. Its members include Australia, the UK, Russia and the “Commonwealth of British Ukraine”. Its sovereign is His Serene Highness Michail Roerich-Kolpidis (Duke of Commonwealth). It is supported by a variety of luminaries, including Nadhim Zahawi, a former member of its Financial Group.

It is hardly necessary to add that no country recognises the Union State of British Commonwealth or (so far as we can tell) is even aware of it. Mr Zahawi has no involvement and had never heard of the Union State; likely the same is true for the other named individuals.¹⁷

The Union State has a central bank – The Bank of Commonwealth, which claims it is based in Montserrat and is covered by the UK Financial Ombudsman Service (FOS). The Montserrat authorities say there is no such bank in Montserrat. The bank (if it exists at all) is not covered by the FOS.¹⁸ It does, however, have a client login page.¹⁹

Roerich makes a variety of eccentric claims linked to the Union State, including:
- Roerich controls a trust holding gold bullion that was owned by the Russian Imperial Romanov family in 1916, from which he has given more than three thousand metric tonnes of gold to the Greek and Norwegian people. That’s worth about $330bn²⁰ – comparable to the US Federal Reserve’s entire gold reserves.
- In addition, Roerich has gifted a total of £292bn to the public. This appears connected to another fake UK company – the Commonwealth Foundation, which has a balance sheet claiming £59m of assets.
- Roerich is involved with a “British Office for Ukraine” which claims to be an “independent non-ministerial” department of the British Government. It has a press secretary, a permanent under-secretary for development, and a Twitter account. It creates official-looking documents using the Royal Coat of Arms (potentially a criminal offence).
- That he established an electronic currency (through one of the fake UK companies, Electronic Money Issuer Limited) which is used by half a million Greeks.
- Roerich chairs the “Global Britain Panel” which included (in 2021) the Prince and Princess of Wales and the Duke of Westminster.
These are all very tall tales, but essentially harmless. However the activities of the “central bank” appear rather less innocent.

The Bank of Commonwealth’s Chief Strategy Officer is a man called Shaun Cohen. This is the same Shaun Cohen ²¹ who ran a real estate Ponzi scheme in Texas, defrauding investors out of $135m. The SEC sued and Cohen consented to judgment against him. ²²

Mr Cohen is listed as a consultant to a Florida firm called ClearThink Capital, and responded to an email sent to ClearThink Capital confirming his involvement in the Bank of Commonwealth. One of his colleagues at ClearThink, Richard Whitbeck, is listed as Chief Operations Officer of the Bank of Commonwealth.²³

Once again, what starts off looking odd but harmless ends up looking rather more concerning. And, perhaps not coincidentally, there is some evidence that the “Commonwealth” is being used for dubious and potentially illegal purposes:
- The Bank of Commonwealth used to be known as the British Technology Bank, which it said was 10% owned by the Bank of England.²⁴. In 2023, the Financial Conduct Authority issued a warning that the British Technology Bank was an unregulated bank targeting people in the UK. We have seen a letter Roerich sent to the FCA complaining about this warning in which he said that, as a central bank, the British Technology Bank was not required to be regulated. The letter also repeated the claim that the Bank of England held 10% of the BTB.
- Roerich’s website promotes “Commonwealth Pay“. The concept is that merchants (such as online retailers) can redirect their payments to Commonwealth Pay, and then will pay only 3% tax on their income “with no further taxes due thanks to the double taxation convention“. There is no such convention. It is not at all clear to us if this is a real product, but if it is then it is likely tax evasion, in the UK and any other country where it is sold.
- And there is a “depositary receipt” which can help you “get financing” or “invest money, risk-free”. And a related “investment bank“²⁵ with a very plausible-looking website offering a variety of financial products. It is, again, not clear if this is a real product or a fantasy – but if real, it looks highly suspicious (and for an unauthorised firm to promote these products into the UK or the EU would in many cases be an offence).
Who is Michail Roerich?

Very little described in this report has real existence, with one exception: a person calling himself Michail Roerich certainly exists.

We know very little about him. Mr Roerich has a Twitter account, a Quora account and a LinkedIn account ²⁶ but otherwise, aside from his many web pages and company filings, there is little evidence of his existence.

We can be reasonably confident he physically exists: here he was, three months ago, promoting registration on the “ROERICH marketplace”. It has 29 views:

And one month before that, promoting the “ROERICH Youth Programme for Ukraine” (56 views):

We corresponded with Mr Roerich earlier this week, and asked him why he was involved with so many fake companies.

His response was, in short:
- Roerich is adamant that Gofer Mining plc and the other companies are real. He says that the Gofer group was a victim of political persecution and theft in Ukraine and certain African countries (connected to Russia). He sent us a letter making wild and implausible accusations of involvement by Hillary Clinton and Joe Biden.²⁷
- Mr Roerich admits that he knew Gofer Mining plc’s auditor, Smith Barclay LLP didn’t have an audit licence and was owned by him.²⁸ In our view this is an admission of two criminal offences. He did not explain why, if Gofer Mining plc was a real company, he established a fake auditor for it.
- Mr Roerich also admits that Gofer Wealth plc was never listed.
- When we pointed out that the accounts of most of the companies were crudely faked, Roerich replied that “even if I were to accept and agree that the accounts were improperly created/recorded etc. according to XYZ law, it does not automatically mean they represent fake numbers”. That is a very unpersuasive answer.
- Roerich claims that the cash is real, but can’t be accessed because it is in Ukraine. This is very unlikely to be true. Nobody would hold that much Sterling²⁹ in a Ukrainian bank and, if they did, it would be held via a correspondent banking arrangement with a UK bank.
- Mr Roerich knows Shaun Cohen was accused of running a Ponzi scheme, but seems to believe he was hard done by. It is not clear why he has come to that view, or why he thinks Shaun Cohen is an appropriate person to help run a central bank, even an imaginary one.
- He insists that his many other claims are true, but without providing any extrinsic evidence, or indeed anything beyond vague assertions.³⁰
Our correspondence with Mr Roerich is set out in full here:

The criminal offences

A large number of criminal offences appear to have been committed by Mr Roerich and his (as yet unidentified) associates – all of which have the potential for unlimited fines and imprisonment:
- Knowingly or recklessly providing false information to Companies House is a criminal offence under section 1250(1) of the Companies Act 2006.
- Knowingly or recklessly including false material in an auditor’s report is a criminal offence under section 507 of the Companies Act.
- Failing to file accounts is itself an offence under section 451 of the Companies Act.
- Falsely claiming you are a registered auditor is a criminal offence under section 1250(2) of the Companies Act.
- Dishonestly falsifying accounts with the intent to gain for himself is “false accounting” – an offence under section 17 of the Theft Act 1968.
The first four of these are reasonably straightforward offences to prosecute: there is no need to prove any “dishonesty” or other state of mind beyond the fact that the person knew the accounts were false. Mr Roerich’s admission that he knew the “auditor” of the Gofer Mining plc accounts was unqualified leaves little more to be established. And, whatever he says now, Mr Roerich surely knew the many accounts he filed were false.

What is going on?

It seems reasonably clear that Gofer Mining plc had a real purpose. It attempted to steal a Ukrainian gold mine. We’re also aware of one other attempted mining project.

To some extent this fits in with the pattern of transactions and attempted transactions we’ve seen from other entities with fraudulent accounts. But they usually look to take the money and run – not engaged in protracted court battles.

The other difference between those cases and this one is the high quality of the accounts created for Gofer Mining plc. This likely involved a small team of people, at least one of whom was a native English speaker and at least one of whom had a familiarity with accounting. An adequate website was created (rather less persuasive than the accounts). A fake auditor was established.³¹ Other companies, such as Grosvenor Barclay LLP, Gofer Corporation and Gofer Wealth plc, were incorporated to support the existence of Gofer Mining plc (but much less effort was taken with those companies).

The supposed financial offerings of Mr Roerich’s “central bank” and “investment bank” could be frauds – we don’t know. The involvement of Shaun Cohen is hard to explain if they are just fantasy, and concerning if they are not.

We have, however, no explanation for the sprawling conglomerate that the Gofer group became – at least 60 companies. We certainly can’t explain the Union State of Commonwealth.

The only person who knows is Michail Roerich, and he isn’t telling.

Why does it matter?

The Gofer network of fraudulent companies has continued for two decades because of well-known failings by Companies House:
- Gofer Mining plc and others failed to file accounts for years. Every company on our list made multiple breaches of company law, but they were treated no more seriously than the late return of a library book. In one case, a document was removed from the registry because of forgery; but the company was permitted to just continue as if nothing had happened. No action was taken against the directors.
- Gofer Wealth plc and others in the group filed impossible accounts claiming huge amounts of cash in the bank, whilst still being dormant and small companies. Companies House could easily create systems to identify false accounts of this type. It doesn’t.
- Gofer Wealth plc used someone else’s premises as its registered office, without their consent. It’s a form of fraud itself but – more seriously – a sign that something untoward is going. However, Companies House again treated it as no more than an administrative slip-up.
- Most seriously, we understand that during the attempt to seize the Ukrainian mine, the British Ukraine Chamber of Commerce wrote to Companies House begging for something to be done about an obviously fraudulent company. No action was taken.
The Gofer Mining plc accounts, on the other hand, present a new and much more difficult challenge to the integrity of Companies House. Companies House can’t be expected to identify that kind of sophisticated fraud (and, by the time the accounts were filed with Companies House, the activity in Ukraine was long over). Assurance should be provided by the audit; but it is trivially easy to forge an audit report.

We’ve spoken to auditors who believe this is a growing problem: real auditors’ names being fraudulently signed onto companies they’ve never heard of, and fake auditors’ names being fraudulently signed onto others. The rise of ChatGPT and other easily available LLMs mean that creating plausible fake accounts and reports is now much, much easier than when Gofer Mining plc’s documents were prepared.

In 1844, when modern auditing began, it was reasonable to trust an auditor’s signature. Today, it isn’t – but given there are straightforward ways to electronically sign and verify documents, we believe Companies House needs to reconsider its approach.

It wouldn’t be hard to create a system where audited accounts have to be submitted by a licensed auditor. Otherwise, in the era of ChatGPT, we are going to see more fake companies like Gofer plc committing fraud, using the credibility that Companies House has given them.

Companies House should act to give the world assurance that “audited accounts” are actually audited accounts.

There are many open questions. Is Roerich’s father really Sergei Gavrilov, a Russian businessman who ran a bank accused of money-laundering? What were the other real-world activities of the Gofer group, aside from the Ukrainian gold mine? What is the connection with Shaun Cohen and ClearThink? What is going on with the British Commonwealth Bank, and why does it have such a sophisticated website? These go beyond the resources and expertise of Tax Policy Associates; we hope others will investigate.

Thanks most of all to K1 for the research on this – almost all the detailed work was undertaken by them. Thanks also to J1 and P for the accounting expertise, T for Companies Act assistance, D for mining knowhow, K2 for practical corporate finance input, VH for the correction regarding the bank javascript, and MS for assistance with Ukrainian language documents. Thanks to J2 for his invaluable review of an early draft, and to JG for his review of a late draft. And thanks to Tom Church of OSINT Industries for additional research.

And many thanks to Michael Savage at the Guardian for all of his contributions to this report, and finding evidence and documents that we would never have tracked down on our own.
Footnotes
1. Note that the PDF in the viewer is the version of the accounts on Gofer’s website. The copy filed with Companies House is a poor quality scanned image – this is a common fate for pretty accounts that get posted to Companies House. This happens to real listed companies as well as Gofer. However what is unusual here is that the two documents are slightly different. Some pages are rearranged; there may be other more substantive changes. The (pretty) website version was created, according to PDF metadata, in February 2020, but nothing was filed with Companies House until November 2021. ↩︎
2. See this chart from the Gofer Mining plc report. Gold is measured in grammes per tonne, or parts per million, because it’s valuable enough to be economically mined at grades that low. Lithium is mined at much higher concentrates – typically low single figure percentages of lithium oxide. The chart is probably wrong even if “ppm” is replaced with “%”. It’s an error no mining company would make. ↩︎
3. This is a small selection of the oddities in the 2019 report and accounts; there are many more. That’s not to mention the website, with its breathless list of corporate and mining deals – which other parties involve deny ever happened, and which aren’t reflected in registries. ↩︎
4. It is inconceivable that a company can have thousands of employees, but not one can be found on LinkedIn or Facebook, or anywhere outside Gofer Mining’s own website ↩︎
5. It was prior to the widespread availability of ChatGPT and other LLMs. ↩︎
6. For context, the full page of the Times is here. ↩︎
7. Some reports suggest Gofer was ultimately backed by Russia. We have no idea if this is correct. However, Avellana have put the blame on elements of the Ukrainian government; we would also note that Roerich’s own Twitter account appears generally hostile to the Russian Government and its invasion of Ukraine. ↩︎
8. A short transcript of his video: “Gofer Mining and several other affiliated companies, also recently formed in the UK, are simply an experienced group of criminal corporate raiders and have been supported in their efforts to damage Avellana by corrupt Ukrainian judges and government officials.
  
  They know nothing about the mining business and have no ability to develop, much less operate a mine.
  
  Gofer Mining claims to have a major UK bank [he means Barclays] prepared to fund £250m to develop the project, yet there isn’t any news about the bank’s mining experts visiting the site.
  
  To prove their claim, Gofer Mining paid for a classified advertisement in a London newspaper, fraudulently using the bank’s name and implying they are involved in the project.
  
  If the bank really was involved in financing this size, it would certainly be covered by all of the international news organisations and mining journals, not to mention that one of my many industry friends would have called me and asked about it. ↩︎
9. Interestingly nobody seems to have notified Gofer Mining plc’s presumably equally false claim that it’s registered at One Canada Square. ↩︎
10. It’s clearly the same person – see here and here. ↩︎
11. No longer maintained, so the security certificate is out of date. You can visit the archived version here. The website is much less plausible than Gofer Mining plc’s. ↩︎
12. James Whitelaw, of Smith Barclay LLP, was again the auditor. ↩︎
13. The later Sunlight Maritime accounts show much larger and more realistic sums, but have numerous other oddities, not least a P&L which makes very little sense. One particularly weird paragraph says that the company is exempt from the requirement to produce consolidated accounts because its accounts are consolidated in its parent, Sunlight Maritime, company 05726487. But these are the accounts of Sunlight Maritime, company 05726487. We are at a loss for any explanation as to why someone would go to the trouble of fabricating reasonably realistic accounts, and then make this kind of error. ↩︎
14. The small images of Gavrilov on the Polish website look very similar to the photo of “Sergey Roerich” here. ↩︎
15. There also appear significant bursts of incorporations in 2012 and 2016; we do not know why that is. ↩︎
16. The chart shows most recent shareholdings and directorships only. Where a company was dissolved, the chart shows shareholdings as at the date of dissolution. ↩︎
17. The Union State of British Commonwealth also has a Supreme Court, said to be chaired by Chief Justice The Rt. Hon. The Lord Tupitskiy MCC. The name and photo match Oleksandr Tupytskyi, a Ukrainian judge who is not a Lord – we understand he was the judge who initially ruled in favour of Gofer Mining plc. MCC appears to stand for “Member of Commonwealth Congress“. We don’t know if Mr Tupitskiy is aware of his role, and we weren’t able to contact him. ↩︎
18. It appears Mr Roerich has had some real world meetings in this capacity; he entered the Bank of Commonwealth in France’s lobbyist register, causing some bemusement. ↩︎
19. We originally said the login page was fake, and you couldn’t actually login. VH has made a convincing case to us this is not right – it’s an unusual approach, and the hosting doesn’t look like a bank, but it may log in. Our apologies for the error. ↩︎
20. At the current gold price of $2,832 per ounce. ↩︎
21. Given the significance of the point, we will set out the evidence demonstrating that this is the same Shaun Cohen, and the evidence of his background.
  
  Cohen’s profile page identifies him as an alumnus of St John’s College (from 1996 to 2000) and George Mason University (with a MA/ADB in Economics) between 2006 and 2009; his experience includes working for an unidentified private equity fund in Plano, Texas (of which he was the founder and co-CEO) between 2008 and 2018.
  
  Cohen’s LinkedIn profile contains matching biographical information and adds that, in his role as the founder and co-CEO of a private equity fund between 2009 and 2018 Mr Cohen had “self-funded and launched one of the nation’s largest private real estate investment companies” and had built a portfolio of US$250m in assets under management. Once again the name of the private equity fund is not revealed.
  
  Public documents show that Cohen worked for a company called EquityBuild, Inc. whilst based in Plano, Texas.
  
  Submissions filed by the receiver in the same US District Court proceedings record that Shaun Cohen had graduated from St John’s College in Annapolis, Maryland with a BA degree in 2000 and had received a Masters’ Degree in Economics from George Mason University in 2009, became Vice-President of EquityBuild Inc in 2009 and served as EquityBuild Finance LLC from 2010. Unless two different people with the name Shaun Cohen had graduated from St John’s College and George Mason University in 2000 and 2009 respectively, and both working in Plano at the same time, we conclude that the Shaun Cohen described in the receiver’s submissions is the same Shaun Cohen described in the profile page on the Bank of Commonwealth website. Finally, it is reasonably clear that the Shaun Cohen in contemporaneous EquityBuild videos is the same man as in the recent profile images. ↩︎
22. In August 2018, the US Securities and Exchange Commission brought proceedings in the US District Court for the Northern District of Illinois (Eastern Division) against EquityBuild Inc, EquityBuild Finance LLC, Jerome H. Cohen and Shaun D. Cohen “to halt an ongoing Ponzi scheme”. The SEC’s complaint recorded that the defendants “recently started coming clean about their financial distress and inability to repay investors through revenue-producing real estate [but] limited these disclosures only to earlier investors whose interest payments Defendants could no longer afford to make [and] continue to raise funds from new investors by concealing their dire financial condition while promising “guaranteed” returns and annual interest payments as high as 17%”.In a May 2024 judgment (concerning priority over the proceeds of the liquidation of various properties), the United States Court of Appeals for the Seventh Circuit described the Cohen’s Ponzi scheme as follows:
  
  “Jerome and Shaun Cohen ran a Ponzi scheme through their real estate companies EquityBuild, Inc. and EquityBuild Finance, LLC (“EBF”) from at least 2010 to 2018. The scheme began with the Cohens, through EquityBuild, selling promissory notes to investors, each note representing a fractional interest in a speciﬁc real estate property. They promised interest rates ranging from 12% to 20%. A mortgage on the respective properties, mostly located in underdeveloped areas of Chicago, secured each of the notes.
  
  …
  
  By overvaluing the properties involved in the scheme, the Cohens generated money that they pocketed as undisclosed fees and used to pay earlier investments. The overvaluation also meant that, contrary to representations, the investments were not fully secured.
  
  As it became more diﬃcult for the Cohens to sustain making interest payments to investors, they found ways to put oﬀ those payments and continue their scheme. That mischief resulted in a new business model in 2017. Instead of oﬀering investors promissory notes, the Cohens began oﬀering opportunities to invest in real estate funds. As before, they told investors that EquityBuild would pool investments to buy and renovate properties at exceptional rates of return. The Cohens apparently used much of these later investments to make payments to earlier investors.“
  
  A receiver was duly appointed for the estate of companies called EquityBuild Inc, EquityBuild Finance LLC, their affiliates and the affiliates of Jerome Cohen and Shaun Cohen. ↩︎
23. Our original draft said that Whitbeck has also confirmed his involvement; this was a misunderstanding between our team; our apologies. ↩︎
24. For the record, the Bank of England confirmed to us this is not the case. ↩︎
25. Which, its privacy policy, gives its contact address as 10 Downing Street. ↩︎
26. Which claims he’s a CIPFA-qualified chartered accountant; that doesn’t appear to be true. ↩︎
27. We won’t publish it; the letter is ludicrous but also highly defamatory, and we’ve no wish to put such a document into circulation. ↩︎
28. Roerich says in his defence that he held the LLP as a nominee. That is irrelevant even if it’s true (and it contradicts Companies House filings). ↩︎
29. The figures cannot be FX conversions from hryvnia into Sterling, as the figures are round and do not change year-to-year. ↩︎
30. One exception: as evidence of Gofer Mining plc’s reality he sent us a copy of a draft PwC structure paper for the construction of a solar power facility near Zagreb, involving companies and individuals which appear to have no connection to Gofer Mining plc. The document seems irrelevant and is stated to be confidential – so we will not be publishing it. ↩︎
31. This is hard to explain – it would surely have been more effective to use the name of a well-known real auditor; likely nobody would have spotted this. ↩︎
8 February 2025
Two clicks to uncover fake companies on Companies House
We’ve been reporting on the shockingly brazen accounting frauds that slip through Companies House. Our new web-based fraud-finding tool takes just a few clicks to expose suspicious companies. We hope it’s useful to everyone interested in uncovering fraud, and helps illustrate how easy it would be for Companies House to do a better job of ensuring the integrity of its records.

The webapp was created in February 2025 and has not been updated since

Here’s the tool itself – just below that are step-by-step instructions and a quick tutorial video. For an app-like experience you can go here on mobile, and on iPhone if you “save to desktop” it should behave like an app.
Fake account finder – interactive

Dormant only High cash only

Please select a report from the list above.

Dormant only High cash only

Please select a report from the list above.

Tutorial video

In this short video I demonstrate how to use the tool, and find a plausibly fraudulent company in two clicks:

Instructions

This website does one simple thing: it identifies companies filing accounts showing enormous asset values that are highly improbable and may be fraudulent. A quick guide:

Categories
- The main list displays business categories (SICs – “standard industrial classification” codes).
- The number on the right shows how many “high balance sheet” companies fall under each category.
Finding categories
- Type keywords into the search box (e.g., “bank”, “charities”, “real estate”) to find relevant categories quickly.
- Or scroll to see all categories, which you can also sort by the number of suspect companies, or alphabetically.
- There is one special category: “all SIC codes”, which includes all UK companies (subject to the limitations mentioned below).
Investigate companies
- Click on a category to see a table of high-balance-sheet companies in that group.
- Narrow your results using these checkboxes:
  - “Dormant only” – only lists companies that say they’re dormant (i.e. inactive) but also claim to have large asset holdings.
  - “High cash only” – shows lists companies claiming large cash holdings (over £10m), excluding companies who just have other large balance sheet items in their accounts.
- Combining both can quickly reveal dormant companies claiming millions of idle cash. This is the easiest way to identify false accounts, as it’s most unlikely a real company will be dormant and sit on millions of pounds of cash.
- The lists automatically exclude companies that are regulated by the FCA.
Check the details
- The table shows a company’s reported cash balance, together with other sizeable balance-sheet items.
- Click the company number to open its Companies House entry and inspect the actual accounts.
The table shows the cash balance for each company and then lists other high balance sheet items. At this point it’s easiest to click on the company number in the table – you’ll then go straight to the Companies House entry where you can look at the accounts.

Advanced options

For more advanced options, including searching by registered office address, the full version of the tool, is available on our GitHub here. But this route requires some command line experience, and it takes some time to download the very large Companies House snapshot files.

Caveats

See our previous report for details on the methodology and limitations.

As a rough guide:
- Dormant companies with high cash balances have likely filed false accounts. If those balances remain the same year-after-year then they are almost certainly have filed false accounts.
- Dormant companies with other high (non-cash) balance sheet entries may have filed false accounts.
- Non-dormant companies may of course be perfectly normal companies. It’s expected for a successful large company to have large balance sheet items; in some sectors they will also have large cash holdings. Spotting the frauds in such cases will usually require accounting expertise. But you should be suspicious if there are large numbers on the balance sheets that don’t change from year to year.
Of course there may be exceptions. And accounts being false doesn’t necessarily mean fraud: someone may have made a mistake, or just be playing a silly game of some kind.

Users of this website and the tool should be very careful about making any allegations of fraud. It’s prudent to always review the accounts and to seek input from someone with appropriate qualifications.

Conversely, there are many, many ways in which accounts can be wrong or fraudulent that this tool will not detect. This is a simple tool that does one thing.

And there are the limitations we mentioned in the original article: the tool can only search through accounts filed electronically last year. Companies that didn’t file last year won’t be visible. Nor will companies that filed accounts by post – most real, large, complex companies have to file by post because of Companies House limitations.

Image by DALL-E 3: prompt was “A high-tech digital investigation scene with a magnifying glass hovering over a financial document on a computer screen, revealing a red ‘FRAUD’ stamp. The background shows financial data, charts, and a blurred Companies House logo. The image has a modern, investigative tone with dark blue and red highlights, suggesting urgency and exposure of fraud. Perfect for an article about uncovering fraudulent companies.”
2 February 2025
How criminals are setting up fake banks on Companies House
Anyone can set up a company on Companies House, and say it’s a bank. We’ve written an automated tool that smokes them out. In three minutes, it identified sixteen “banks” with fake assets.

Today we’re publishing our analysis of the sixteen fake banks, together with full instructions on how to use our tool to find companies with fake accounts.

The trick here is a simple one: you need permission from the Financial Conduct Authority to have the word “bank” in your company’s name, but you don’t need permission to categorise the company as a bank on Companies House.

And fraudsters are taking advantage of this “trick” – creating companies, categorising them as “banks”, and filing fake balance sheets that make the companies look hugely valuable.

These aren’t just accounting anomalies. Fake banks can be used to launder illicit funds, deceive investors, and give credibility to fraudulent schemes. We have evidence that some of the firms we’ve identified have done just that; the likelihood is that others are doing it as well – they just haven’t been caught yet.

This follows our previous reports: the fake £59bn balance sheet of Avis Capital Limited, and fake venture capital companies including the UK’s largest (and fakest) company, the £100 trillion Novateur International Ltd.

Finding fake banks

Our search tool is conceptually simple. It searches for companies by their standard industrial classification (“SIC”) code, and then looks for anomalously large balance sheets.

We’ve made the tool freely available here, with full installation and usage instructions. You will need some command line experience, and a reasonably powerful PC.

In this video, the tool is used to find companies who categorise themselves as “banks”, have large balance sheets, but aren’t FCA-regulated. That ought to be impossible. Turns out, it isn’t:

And here’s the output from that session. Sixteen companies who list themselves as a “bank” or “central bank” but aren’t FCA regulated, and claim to hold £10m in cash, or have other balance sheet items over £100m.

(You can view the table fullscreen here or download here.)

The fake banks we found

1. Islamic World Economic Cooperation Organization Ltd¹

The company claims to have £499.5bn of cash in the bank, which would make it three times as valuable as AstraZeneca. It says its activities include central banking, banking, being an open-ended investment company and being a fund manager. There’s an active proposal to strike it off. It claims to be controlled by a Professor Ali Ehteshami, who lives in Iran.

Ehteshami seems to exist, but isn’t a professor – he has a business selling fake degrees in Iran, as part of which he makes an array of patently false claims about his background. Ehteshami sold the degrees from a “college” that was a UK company, until the company was dissolved last year.

It’s unclear what the purpose of the “Islamic World Economic Cooperation Organisation” is, but it certainly doesn’t own $499.5bn.

2 and 3. Avis Capital Ltd and Avis Global Green Energy Fund.

As discussed in our recent report, these seem to be part of an international fraud.

4. Good Luck Grant Ltd

This claims to be a bank and a central bank. It files accounts as a dormant company with £9.2bn of cash in the bank and £80bn of unpaid share capital. Its website says it is “a UK group SPV registered legally within the United Kingdom with HMRC for gold transactions under Central Banking Registration Number 64110”. There is, of course, no such registration.

This looks very much like a scam.

5. Credit London Ltd

The company claims in its accounts to have had £648m of liquid assets, mostly in German government bonds which it acquired in exchange for shares in 2022. But if that was true, there would be balance sheet changes reflecting the return on the bonds. The company would have income, and it would have to be audited.

The sole director is an Italian, Damiano de Iuliis. The company is said to be owned by an Italian, Ciro Liccardi, but most of the shares in the company are said to be held by “D&G International Law Firm Sh.p.k.”. We’re not sure it exists (the letters at the end are the initials for an Albanian LLC).

We can’t see evidence of the company’s existence outside the Companies House filings, but the peculiar list of shareholders suggests there is something untoward going on.

Note that this is one of the more uncommon “fake account” companies that doesn’t file accounts as a dormant company. That feels sensible if you want to fool people – filing “dormant” accounts might raise questions.

6. Savings UK Ltd

Its website and LinkedIn and Facebook pages say it’s a “leading investment banking company” and is regulated. It has the credible address of 40 Bank Street in Canary Wharf.

But the company is entirely unregulated, and has for five years filed accounts showing that it’s dormant but somehow nevertheless holds £100m in the bank (on which it receives no income).

The company is owned by a Pakistani “investment expert”, Dr Hassan Khan, who claims to have personally funded the £100m. There are a number of other UK directors, but we would query if they actually exist.

This has every sign of being an investment fraud.

7. Terra Nova Holding Group Ltd

The accounts claim the company is sitting on £95m cash, although there’s no sign of any income. It filed only one set of accounts in four years.

There are a number of businesses called “Terra Nova”, most of which appear legitimate, and none of which trace to this company – so the purpose of the company is unclear.

8. Crown FMB Ltd

Its accounts for 2020 and 2021 showed £80m of fixed assets. In the 2022 accounts this magically changed to £80m of cash, retrospectively rewriting the 2021 accounts.

The company’s registered office was originally 20-22 Wenlock Road, London, a well-known virtual office address. This apparently wasn’t authorised, so last year Companies House used its new powers to change the registered address to the default address of Companies House itself. The company promptly changed it back to 20-22 Wenlock Road, London. And did this twice, for some reason.

The company has one director – Dr Adalberto Caccavelli, an Italian living in France. Mr Caccavelli owns the company, and is also company secretary, but there are two additional current company secretaries, something that our team has never seen before.

Again, it’s not clear what the purpose of the company is.

9. EULERM Ltd

This is, according to its website, the global market leader in credit insurance. Our contacts in that market have never heard of it.

The company seems more than a vanity website/plaything, because in 2020 it applied for and obtained a Legal Entity Identification Number – something that’s required for a company to enter into regulated transactions.

EULERM Ltd was incorporated in 2020 by a Cuban resident, Imara Frometa Matos, who claimed to pay EUR72m for her shares. The 2021 accounts claimed the company was just sitting on the cash. It was still sitting on the cash in 2022, according to the accounts, but had magically changed to sterling – £72m.

We assume this is a scam of some kind.

10. Ban Credit Ltd

This is a dormant company whose accounts claims it’s had £30m of cash in the bank for every year since 2011. No interest, no expenses. It has one director, Ihor Karpau, a Belarusian resident in the UK, and one owner, Alena Khaletskaya, also a Belarusian resident in the UK.

We can find no other trace of this company.

11. GB Morgan Ltd

According to its website, GB Morgan “was established in 2018 as a result of co-operation and merging in between a group of companies and field expertise as a new era of digital offshore investment banking, money markets, FX and cryptocurrencies investment”.

In reality, it’s a dormant company established in 2020 with (supposedly) $10m of cash, which has just been sitting in the bank ever since. Its most recent accounts show $26.5m of cash, and no other balance sheet items.

The similarity of the company’s name to JPMorgan may not be an accident.

The company’s sole director and owner is Ismail Shaikhoun, an Egyptian living in Turkey who says he’s an “arbitration counsellor”.

Rather brilliantly, the company’s majority shareholder is itself, which is unlawful.²

The website’s certificate is invalid, so – if this is a fraud – it may have ended, or have been aborted.

12. Goldbank UK Limited

The company claims to be a “central bank”.

It was incorporated with £2 of shares. It issued 12 million unpaid shares in 2011, and properly accounted for them as not paid for the next few years. Then, from 2015, it started accounting for the £12m as if it was actual cash in the bank. The company has always been dormant, and given the lack of any balance sheet changes, the company is most unlikely to actually have £12m cash.

We don’t know if this is an accounting error or fraud. But one thing is clear: Goldbank UK Limited is not a central bank.

13. 1 Stallion Ltd

This one is more complicated and sophisticated.

1 Stallion Ltd doesn’t file as dormant – in fact it’s filed audited accounts showing £4bn of assets, a £12.5bn turnover and offices on four continents. Its registered office is in a terraced house in Bolton, and its website is very basic, and under construction. ³ ⁴

The accounts have the surface appearance of normal audited accounts. But they contain numerous oddities⁵, not least a reported audit fee of £888m.⁶

The companies’ claimed activities vary wildly between website, page 5 of the accounts and page 9 of the accounts.⁷

So who audited these transparently fake accounts?

Nobody. The accounts name an individual auditor and an audit firm, but it’s a lie: neither ever saw these accounts, and the named individual never even worked at the named audit firm.⁸

The company claims to be owned by a Mrs Marrine Isaq, who lives in the UK. She holds £4bn of shares, but it’s not clear where they come from – there are no records of shares being issued.⁹

The accounts say the company is owned by “BCGI International Group LLC” which claims to be incorporated in Abu Dhabi, but isn’t. BCGI has a fake website, and claims to own four more companies:
- At the same address as 1 Stallion Ltd is Avantulo SA Ltd, another vague oil/gas company but an even larger one: £26bn turnover, £12.5n share capital. We’ve spoken to someone who received a business proposition from this company (which they wisely turned down).
- Also at that address, e-bank Ltd. Despite the name, it’s not regulated by the FCA. This appears to be its website. It claims to make £952m of turnover – all from the UAE – with nine employees. It has almost zero profit. To have the word “bank” in your company name, you need a “letter of non-objection” from the Financial Conduct Authority. Query how that happened in this case.
- And previously at that address, but now dissolved, Kinpro Holding GmbH Limited. The dissolution would have been a huge disappointment to BCGI (if they existed), as the documents claim they’d invested £8.5bn into it.
- Next door is “XYZ Investment Holdings Ltd“. The accounts claim it’s a financial business with a £15bn turnover and £5bn of net assets, but this is rather spoilt by other text which says “Our strategy is to create shareholder value through being a leading international supplier of components to the door and window industry”. Its previous name was “Stallion Holdings Ltd” and, under that name, it has its own fake website and a fake bank website. We called their phone number; it gives the option of “sales” or “customer services”, but both just go through to a maillbox. Surprisingly, the VAT number on the website really is registered to Stallion Holdings Ltd.
- And there is a BCGI International Group Ltd, whose balance sheet shows it’s worth £650m and has a turnover of £190m (but it still files unaudited accounts).
These companies all falsely claim to be audited by the same firm as 1 Stallion. They also all name that same firm as their company secretary – the firm tells us that’s not true (and we believe them).

These companies are connected to Stallion Financial Investments plc, which was incorporated in 2016, claimed a £12m balance sheet (we expect fraudulently), and applied to the FCA in 2017 for permission to carry on regulated business. This was refused because the company stopped responding to the FCA’s questions, and Stallion Financial Investments plc failed to file accounts and was dissolved soon after.

They responded by establishing a new company a year later, AR Worldwide Services Ltd which applied for, and obtained, FCA registration as a small payment institution. This is an area notorious for money laundering risk. We know AR Worldwide Services Ltd is connected, because its first director was Stallion Holdings Ltd¹⁰ It is worrying that the FCA did not notice that one of the directors of AR Worldwide was a company with obviously false accounts, and with a name very similar to that of a company whose application they had rejected in suspicious circumstances.

AR Worldwide Ltd’s Companies House entry shows its owner is a man called Ahmed Shah Rasooli. We would generally not trust any of the names listed on these companies to represent real people – but in this case it would seem likely that the FCA conducted at least some checks in 2019, and therefore that Mr Rasooli is really involved in the company.

The phone number on AR Worldwide’s website doesn’t work. Their regultory registration also covers “Prompt Remit”, who have their own (partly unbuilt) website. Both claim to operate out of this office in Harrow – there is certainly a payments business there, but we don’t know if it is actually connected to AR Worldwide.

Linked to all these companies is an individual called Ali Hassan, who gives his address as 102 Chorley Old Road, Bolton – the same address as most of the companies are registered too. Fake companies are often registered to addresses owned by completely unrelated people. However, in this case we can be reasonably confident the address is linked to Hassan, because he made a planning application for that address, in the name of Stallion Financial Holdings Ltd (which doesn’t appear to exist).

The first draft of this report said we didn’t know if these companies were created for fraud or as the product of someone’s fantasy. However the additional information we’ve received (the bank website, VAT registration, and the attempt to win business for Avantulo SA Ltd) makes reasonably clear this is a fraud. The domain records for the two Stallion Holdings websites suggest the fraud is ongoing.

14. ADCOF Exchange Limited

Another company claiming to be a central bank – it looks like it actually may be a scam cryptocurrency exchange.

The company was previously called “TDSL Finban UK Ltd” and was the subject of a warning from the FCA in December 2022. It almost immediately changed its name to “TSDL Financial Corporation UK Limited” and in 2024 changed its name again to ADCOF Exchange.

The website which says it is “Revolutionizing Global Monetary through blockchain for Digital Assets management First Exchange operates on cutting-edge robotic and AI systems”. But the website is mostly unbuilt – many of the links (e.g. “about us”) goes to a separate website with placeholders. It’s only really the homepage that works.

The odd style of wording on the website is repeated in the accounts. They look like accounts for a real company, but the grandiose descriptions of their activity is at odds with the small reported turnover of £1m. The high level of intangibles is not explained; nor are the references to “off-ledger funds” (odd for a non-bank). And the numbers in the balance sheet are all very round – not how real balance sheets look.

The website suggests the company is regulated – it is not.¹¹ Its consumer-facing activities, and the financial instrument-holdings described in its accounts, suggest that it should be.

The company may have falsely claimed to have had a banking licence.

ADCOF/TDSL is run and owned by a variety of individuals in Singapore, India and Dubai.

15. P&O Property Accounts Ltd

Finally we get to a real, non-fraudulent company. P&O Property Accounts Ltd is an administrative company in the P&O group, ultimately owned by Dubai World.

It appears in this list because, for unknown reasons (possibly a harmless mistake), it was incorporated with the SIC code for “bank”.

16. Bangko Maharlika Ltd

The website says it’s the “bank of humanity”, offering various crypto products, but with a strange lack of the legal, contact and privacy information you’d see on a real bank or crypto exchange.

The company filed bizarre accounts in October 2024 claiming that, as at 30 June 2023, it had £50m exactly of investments, £183m of current assets, and £239 of creditors. Not £239m, or £239k, but £239.

The company claimed to have lost £250m yet it somehow also claims to be a small company which doesn’t need to file audited accounts. That means turnover of no more than £10.2 million, and assets worth no more than £5.1 million. Needless to say, you cannot lose £250m on a turnover of less than £10.2m.

Then, two months later, it replaced these with amended accounts for the same period. Investments were now £5bn (exactly). Creditors were £4.95bn – unexplained, but conveniently cancelling out the increase in investments.

We spoke to one forensic accountant who said he’d never seen more obviously fraudulent accounts.

The company says it’s owned by a Filipino man called Paul Armand Infante Monozca. The directors are a variety of other individuals – but in reality query if any of these people exist.

The directors also run a company called Formula Green Corporation Ltd, which appears to have similarly fake accounts.

Update: the company has written to us complaining about this article. Their head of Public Affairs told us they’re not fraudulent, but she wasn’t able to explain the numbers in the accounts, the way the numbers changed so dramatically, or why they filed as a “small” company. We will keep an open mind as to whether this really is a fraud, or merely people with no understanding of law or accounting.

17. Genius Bank Ltd

This company has a billion shares, each with a value of £0.000001 each – so £1,000 in total. The high number of shares triggered our code to shortlist the company, but there are no signs of fraud. It is, however, an unusual arrangement, and it’s unclear how the company was permitted to incorporate with the word “bank”.

The company’s been dormant for the seven years since it was incorporated, and is owned by a French woman living in the UK.

We’re guessing it’s an aborted startup, and entirely legitimate.

18. Suria Global (L) UK Trusted Limited

This is another more complex and sophisticated arrangement.

The company’s website describes the business as providing “financial and high-level networking resources for large scale opportunities in South East and North Asia, Australia, New Zealand and Pacific Islands, Europe and ultimately in the United States of America”. This doesn’t mention the UK, but the title of the website is “Suria Global (L) UK Trusted Limited”, which is peculiar.

The UK business has a separate website which says it “maintains a strategic office” at 27 Old Gloucester Street London WC1. It’s not very strategic, because it’s a postal address, shared by (amongst others) House of Burlesque. The website is unusual for a bona fide business in what it lacks: the company legal name and registration number, any identifiable individuals, or a privacy policy.¹²

The websites are superficially plausible, much more so than the others in this report. But our contacts in the hedge fund and investment world thought the text was were deeply suspicious: not just the vague language, but the lack of any kind of sector focus. And none of them had heard of Suria.

The accounts of Suria Global (L) Trusted Limited present £100m of current assets, but this is illusory. The incorporation documents show that the £100m were shares issued to the sole shareholder/director, Omar Yassin Bin Abdullah, for nothing.¹³ And that explains why, year after year, the company reports £100m, with no income or expenses. The cash doesn’t exist.¹⁴

But this isn’t just a paper company.

Suria Global (L) Trusted Limited owns a Malaysian company called Suria Global (L) Ltd (although there’s no sign of this in the UK accounts). That Malaysian company previously owned an Australian company called Suria Global (L) Pty Ltd, which went into liquidation amidst accusations of fraud. Its sole director and shareholder was a John Ata Alan Lutui (we don’t know how that is consistent with Suria’s supposed ownership). Lutui failed to attend the court and an arrest warrant was issued; he promptly fled Australia for the US.

We’ve have heard from a reliable source that Suria has very recently been touting for business.

So our assumption is that this is an active fraud.

We wrote to Suria asking for comment, and didn’t hear back.

The limitations of our approach

The approach taken by our automated tool is exceedingly simple. It catches just one type of fraud: suspiciously large balance sheets. There are myriad other accounting frauds it can’t begin to identify.

Inevitably, our approach will also shortlist companies that (like P&O Accounts) are entirely innocuous. So please use the tool with care.

There are also two significant technical limitations.

First, the tool only searches accounts filed last year. If a company didn’t file last year, it won’t see its accounts. And the tool isn’t designed to deal with more than one year’s of accounts. It could be modified fairly easily to look across multiple years – at an obvious cost of storage and speed.

Second, and most importantly, the tool can only access accounts filed electronically. A more sophisticated approach would deal with accounts submitted by post¹⁵ – that’s as many as a third of all companies. There is, however, one benefit of this limitation – larger/complex companies tend to be unable to submit electronically and have to post their accounts to Companies House. So our approach means we are using a set of accounts that omits many legitimate large balance sheets. Of course, if this report becomes widely known, and Companies House doesn’t change its approach, then we may find fraudsters moving to posted accounts to avoid easy electronic scrutiny.

The response from Companies House

A spokesperson from Companies House told us:

“We take fraud against the register seriously and all allegations are fully investigated.

Companies are responsible for filing accounts that are compliant with the law. Where incorrect, suspicious, or fraudulent filings are made, we will take appropriate action. We proactively share information with other relevant government agencies and law enforcement.

“We are developing systems and processes to enable more checks to determine the accuracy of information delivered to us before it is placed on the register.”

How should the law change?

But we believe some of our findings in this report suggest the law should change.

First, companies should be prohibited from choosing the category of “bank”, “central bank” (or other SIC codes that relate to regulated business), without a letter from the Financial Conduct Authority (in the same way as a letter is already required if you want your company to have the word “bank” in its name). Falsely using the word “bank” is a criminal offence under section 24 of FSMA – certainly for the company and plausibly for Companies House as well.

Second, the current rules exempting small companies from audit are too generous. A company can have a balance sheet of any size at all – even £100 trillion – and , as long as it has fewer than 50 employees and a turnover no more than £5.2m, it’s a “small” company and doesn’t need audited accounts. That creates a loophole that’s being ruthlessly exploited to create fake companies that look like they’re worth a fortune. It’s easy to fix¹⁶ – amend the legislation so that a company with balance sheet assets over (say) £10m always has to file audited accounts, regardless of how recently this happened and regardless of turnover and number of employees.

Third, to prevent this new rule being subverted, Companies House should introduce verification that a named auditor has actually audited the company’s accounts. As we note above, there are signs that some companies are already faking audits. We’ll be writing more about this soon.

What should Companies House do?

Nobody expects Companies House to undertake a detailed audit of the millions of registered companies. But they should be able to use an approach similar to ours to identify companies with obviously suspect accounts.

Swift action can then be taken:
- The Companies Act imposes civil penalties where the accounts rules are not followed. A company that’s filed false accounts for years will have incurred multiple £3,000 penalties. These should be immediately charged.
- The directors have committed a criminal offence unless they can show they “took all reasonable steps” to comply with the rules. That defence seems unlikely to be available for companies with false billion pound balance sheets. The consequence is an unlimited fine and even potential imprisonment.
- Most important: Companies House has a duty to ensure the integrity of its records. It should use its powers to remove the false accounts from the register. People using the register will then be alerted to the fact the company has not filed accounts.
- It would be sensible for the false accounts to be still available for viewing, but with a health warning that they have been withdrawn.
The fraudulent use of UK companies will continue until there are clear adverse consequences for fraudsters.

There’s no excuse for inaction. Companies House has the data, the legal tools, and now the evidence. The question is: will they act?

Many thanks to the accountants and forensic accountants who assisted with this report, particularly P and J. Thanks also to J (a different J) for looking through an early draft. And thanks to yet another J who provided us with some important information. Thanks to S for the research on the fake Iranian professor.

Thanks again to Companies House and the Financial Conduct Authority for their commitment to public access and open data. It’s very possible that other countries have registers as full of frauds as Companies House; but Companies House’s openness means that we in the UK are unusual in being able to spot the frauds so easily.
Footnotes
1. A quick note: we provide links to websites for many of these companies. Please exercise extreme caution before clicking on them, given the risk they could contain malware – we would not recommend using a normal desktop browser. We use a dockerised Firefox browser through a VPN. All the website links are set to “no-follow” so we don’t boost their google rankings. ↩︎
2. Companies can buy their own shares for certain limited purposes, but at that point they must be cancelled (unless acquired out of distributable profits and held “in treasury”, which these clearly aren’t). ↩︎
3. The website gives an email address, but emails sent to it just bounced. ↩︎
4. There is a real “Stallion Group” – a West African manufacturer, but its website shows no UK operations and we don’t believe it has any connection to 1 Stallion Ltd. There’s also a Stallion Finance (which may or may not be connected, but also has suspicious accounts) and 1 Stallion Capital (which seems unrelated). ↩︎
5. Some examples:
  
  Profit of £190k on a turnover of £12.5bn is very unlikely, and would normally require some explanation. Turnover jumping from £811m to £12.5bn in a year is again very unlikely, and would usually be explained.
  
  The operations are outside the UK so ordinarily dividends would be received; there’s no sign of them – subsidiaries aren’t even mentioned.
  
  The accounts show £784m of tangible assets; £516m of capital allowances are claimed; there is an almost identical figure for non-deductible expenses. There is no sign of any return on investments of £583m. Share capital increased from £100m to £4bn with no explanation and no issuance of shares.
  
  The auditor is far too small for a company of this size. The registered office address is misspelt.
  
  The company lists numerous global offices and substantial operations in Africa, the Middle East, and beyond, but there’s no sign of this in the financials. The office locations change from page to page. The head office in Dubai does not appear to exist. There are numerous typos. The company claims to have 198 employees. We can’t locate any of them. The figure implies turnover per employee of around £63m. For context, Shell has turnover per employee of about £2m, and this is remarkably high. JPMorgan, about $500k. All in all, the accounts have every appearance of a forensic accounting examination question. ↩︎
6. That suggests to us that this section of the accounts was copied from real accounts with audit fees of £888,164; the fraudsters then added a ‘000’ so everything would be a thousand times more impressive, but forgot to dial down the audit fees. ↩︎
7. The business description on the website (a “financial intermediary dedicated to providing innovative solutions to meet your financial needs” is completely different from the description on page 5 of the accounts (“management, trade commission of oil & gas commodities, government securities derivatives and financial instruments”) and different again from that on page 9 (“exploration, procurement, and trade liaison activities”). ↩︎
8. The firm once provided tax advice for a related company, and presumably that’s when its identify was stolen – but sloppily: the accounts give the wrong address for the firm. We won’t name the firm or individual here – it seems unfair to associate either with a fraudulent use of their name. ↩︎
9. The company was incorporated with £1 of share capital. There are no records of further shares being issued. Mrs Isaq, lives in the UK and is registered as controlling the company. Until 2024, £3.9bn of shares were held by GCGI Group International LLC and £100m by Ali Hassan, a British citizen living in the UK. The accounts show the shares as fully paid up – Mrs Isaq is a very wealthy woman. ↩︎
10. Misspelt as Stallion Holding (without the “s”) Ltd in its registry entry, but the company numbers are the same. ↩︎
11. Compare, for example, with other crypto exchanges. ↩︎
12. Interestingly, even most of the fraudulent websites we see have a privacy policy; such is the fear of GDPR. ↩︎
13. A real person wouldn’t do this, save perhaps for a very short period, because it creates a large legal liability. Mr Abdullah owes £100m to the company – an exceedingly unwise thing for a normal person to do. Of course, he may not exist at all. ↩︎
14. It’s a breach of accounting rules to show unpaid shares as current assets. Under FRS 102, “current assets” are assets that a company could realise within a year. ↩︎
15. Which means interacting with the Companies House API, downloading a PDF and scraping it. Not that difficult, but much much slower. ↩︎
16. Potentially only requiring a Minister to put Regulations before the House of Commons ↩︎
1 February 2025
Companies House failed to spot a £100 trillion fake company
We’ve created an automated search tool that crawls Companies House data to find companies with fraudulent accounts. It’s found hundreds of dubious companies, the worst of which claims £100 trillion of assets.

Our findings suggest that Companies House is asleep at the wheel. But they also show that it would be straightforward to clean things up, and stop the widespread abuse of UK companies by international fraudsters.

We published a report on Saturday on Avis Capital Limited. It claims to be a “bank” and to have £58bn of net assets and 150,000 employees. But none of that is true; it filed fake accounts as part of what we believe was an international fraud.

Our search tool draws up a shortlist of suspicious companies by looking for characteristics similar to Avis Capital: companies that claim to be carrying on a regulated activity, aren’t in fact regulated, and claim vast – and unbelievable – cash holdings, whilst also claiming to be dormant.

There are a large number of such companies.

We’ll be publishing more lists of these companies in the next few days; we’ll then publish the search tool and full instructions so that others can use it.¹

40 fake venture capital companies

Here’s how to find companies with false accounts:
- Chose a category of business that’s attractive to a fraudster. Today we’ll pick venture capital: the business of raising funds from investors and using it to fund early-stage startups.
- Search every company registered with Companies House that has a venture capital standard industrial classification (“SIC”) code. (Companies can pick whatever SIC they like.)
- Look for “venture capital” companies that aren’t regulated by the Financial Conduct Authority. Fraudsters usually steer clear of the FCA.
- Of those, find the companies with accounts claiming they’re holding a large amount of cash, over £10m.²
- Finally, see which of the cash-rich unregulated “venture capital” companies claim to be inactive (or “dormant“). A company that really had £10m would have entries in its accounts: income on the £10m, tax, and fees and other expenses. And that means it wouldn’t be dormant.
The result is a list of 40 “venture capital” companies with impossible accounts:

(Click here to view fullscreen; you can download a spreadsheet version here. You can click on the company numbers to jump straight to the Companies House entry and see the full accounts.)

Top of the list: Novateur International Group Ltd. It claims to have £49 trillion cash, and net assets of £100 trillion. That makes it thirty times more valuable than Apple.

Novateur’s website says it’s “an emerging conglomerate providing innovative solutions to businesses and public sector organizations”. It’s owned by a Nigerian man called Kelvin Adejo.³

Two commentators below pointed out that the various “Bandenia” companies on the list were part of an substantial Italian/Spanish money laundering operation which was mostly shut down in 2022/23.

We can’t know at this point how many of the others are frauds. They might be mistakes (although it’s hard to see how). They could be people playing games, or even just showing off to friends. But when we see companies with names like “US Fidelity and Guaranty Financial Group Ltd” and “BBP Banqueros Privados Ltd“, with obviously false balance sheets claiming hundreds of £m in cash, it’s hard to see any purpose other thank to defraud people.

We know fraudsters create accounts like this deliberately, to fool people into thinking their companies are valuable. We’ve spoken to someone who lost a large sum of money to Avis Capital after being shown its UK accounts. Many people, particularly people outside the UK, assume that if accounts are on Companies House then they must be correct. In fact, Companies House applies no standards at all.

What should Companies House do?

Nobody expects Companies House to undertake a detailed audit of the millions of registered companies. But they should be able to use an approach similar to ours to identify companies with obviously false accounts.

Swift action can then be taken:
- The Companies Act imposes civil penalties where the accounts rules are not followed. A company that’s filed false accounts for years will have incurred multiple £3,000 penalties. These should be immediately charged.
- The directors have committed a criminal offence unless they can show they “took all reasonable steps” to comply with the rules. That defence seems unlikely to be available for companies with false billion pound balance sheets. The consequence is an unlimited fine, and potentially imprisonment.
- Most importantly: Companies House has a duty to ensure the integrity of its records. It should use its powers to remove the false accounts from the register.
- It would be sensible for the false accounts to be still available for viewing, but with a prominent health warning that they have been withdrawn.
- And, for the future, Companies House should flag companies with anomalously high balance sheets for manual review.
One thing is for sure: the fraudulent use of UK companies will continue until there are clear adverse consequences for fraudsters.

Many thanks to the accountants and forensic accountants who assisted with this report, particularly P and J.

And thanks to Companies House and the Financial Conduct Authority for their commitment to public access and open data. Companies House has a woeful history of policing its own register. But its technology is excellent, one of the best in the world, and the access it gives researchers (for free) is laudable.
Footnotes
1. It’s quite rough at the moment and not very usable; we hope to take it to the stage where anyone familiar with the Mac/Linux command line will be able to use it – it may or may not work on Windows as well. Unfortunately the amount of storage and processing power required means it would be too expensive for us to turn it into a web app. ↩︎
2. By this we mean “cash at hand and in bank” rather than share capital which is issued and unpaid. “Cash” for this purpose can include liquid securities like bonds. ↩︎
3. There are signs someone is trying to tidy up the company’s filings, for good reasons or bad. A recent application reduces its share capital to £1,000. However there has been no attempt to correct the historic accounts showing £100 trillion. ↩︎
31 January 2025
The £58bn company that doesn’t exist
Avis Capital Limited is one of the largest companies in the UK. It says it was spun out from Avis (the car hire company), is FCA-regulated and has £58bn of net assets. It promises investors a 31% return. But all of this is a lie.

Avis Capital’s accounts are a work of fiction. It’s completely unregulated, and the financial products it sells appear to be fraudulent. It has no connection to the real Avis group. All of this has been facilitated by Companies House accepting filings and accounts which are false on their face, and by accounting firms who failed to notice obvious signs of fraud.

Companies House’s failure to identify and act on this is a scandal. It could be taking simple steps to stop UK company law being used and abused by criminals. But it isn’t.

We are aware of even worse cases, and will be reporting on them shortly.

Avis Capital – the 13th wealthiest company in the UK

Here’s Avis‘ Capital‘s 2021 accounts – it made a £48bn profit on an initial £10bn, resulting in £58bn of net assets. That would make it the thirteenth biggest company on the FTSE.

The 2020 column to the right is cut off, but the numbers are almost the same.

The company then repeated this magic trick in 2022 and 2023: the accounts are identical, to the pound, for each year:

Trade debtors and creditors, fair value of investments… it’s all the same, every year.

All while showing no sign of paying any tax on its £48bn profit, and all while claiming the company is dormant.

Avis Capital is claiming that a multimillion pound business was in exactly the same financial position for three successive years (and almost exactly the same for the previous year). That is not possible – all that cash and other investments will yield a return, that will be taxable, the company will have expenses… all mean that the numbers will inevitably change from one year to another. One expert told us that, for any company with real activities, it was “essentially impossible” for every line on a balance sheet to be unchanged from one year to the next. That’s true for a coffee shop: it’s certainly true for a £58bn financial giant.

Avis Capital Limited applied Section 1A of FRS 102, simplified accounting standards for small companies. These are inapplicable to a large company like Avis Capital. More significantly, accounts for large companies are required to be audited. Avis Capital Limited filed unaudited accounts.¹

The accounting experts we spoke to were certain these accounts are fraudulent. ²

Avis Capital – in reality

We have extensive contacts in banking and finance, in the City and across the world. Nobody has heard of Avis Capital.

The company’s website says it has 150,000 employees. This is its registered office: an estate agent in Brixton:

Avis Capital has almost no internet presence aside from its own website,³ which is full of claims like this:

The website says Avis Capital was spun out of “the AVIS Car corporation” in 2005. There is no “AVIS Car corporation”; the well-known car-hire business is Avis Budget Group, and it has no connection to Avis Capital.⁴

There’s also a LinkedIn page boasting that it has “twelve digits of construction cash”…

The company has a YouTube channel, with 105 subscribers. The most recent video contains vague claims about a “quantum banking system” delivered by an AI generated voiceover…

Older videos promote financial services through “Avis Bank”:

And, from 2014, there’s a video promoting the “Avis Humanitarian Foundation”, complete with a music video covering Michael Jackson’s “We Are The World”.

Aside from Companies House filings and websites/YouTube, the only evidence we can find of Avis Capital’s existence is that on two occasions it was taken to a county court for not paying a debt, a judgment was issued against it, and it didn’t pay:

The Avis Group

There are a series of related Avis companies with similarly suspect accounts:
- Avis Global Green Energy Fund has £19bn of assets and £510m of net assets on its 2023 balance sheet. Its 2022 and 2021 balance sheets are identical.
- Avis Global Energy Ltd holds Avis Capital Limited and so should have at least £85bn of net assets; but its accounts instead show that its investors put in £5bn, and the company is now worth slightly less than that. Its balance sheets are duplicated from one year to another.
- Avis Congress Hotels plc is a dormant company with £1bn in cash, and identical balance sheets from 2018 to 2023.
- Avis Fintech PLC supposedly has £100m of cash, and has done every year since 2019, with no change in its balance sheet.
- Avis Global Group PLC supposedly has £8m cash in the bank, with its balance sheets never changing.
- Avis Magnetic Technologies PLC supposedly has £10m cash.
- Avis Logistic Ltd has £1m in unspecified current assets.
- Avis Atom Threads PLC has £2bn in “called up share capital not paid” – in other words, the shareholders acquired £2bn of shares but didn’t pay immediately. That is less obviously fraudulent than claiming to have £2bn in cash, but is still not very plausible (normal people don’t agree to acquire shares which means they owe large sums of money to a company).
- Avis Noage PLC, Avis Vortex Industries PLC, Avis Nuctron PLC – all have £1bn in “called up share capital not paid”.
Since we published this report, Ray Blake has noticed a 2024 incorporation from the same people:
- Join Asset Ltd was supposedly incorporated with £1bn paid up shares. It has a website with the same peculiar art style as Avis Capital, and similar vague business descriptions (“tokenised assets”). The website says their values are “honesty, integrity, and transparency”.
The fraud

Why would someone, or a group of people, create a ring of fake companies?

The most likely scenario is that these companies are part of an attempt to defraud investors.⁵.

We see two potential frauds here.

The first involves Avis Global Energy Ltd, the holding company of the supposedly extremely valuable Avis Capital. Its 2022 confirmation statement shows 70 shareholders, mostly small investors who’ve acquired shares from 2017 to 2022. If these investors paid money for their shares then that could be the fraud: create a fake company, and convince people to buy shares in it.

The second is more complex, and is revealed by legal documents listed on the Avis Capital website, all of which suggest it is selling sophisticated financial services. The documents are superficially plausible but contain mistakes and oddities. For example, the call option is headed “Institutional Acquicition” and says it is subject to “the laws of the State of United Kingdom”. ⁶

Most notably, there’s a detailed fund memorandum – the kind of document produced when a private fund is being marketed to investors. Here’s the full document, dated 2022:

The document refers throughout to UK financial services and tax legislation, and may therefore be targeted at UK investors. However it is also possible that the fraud is targeted at foreign investors, with the UK being used to add credibility to the business.

The key claim in the document is a promise of very high returns:

The high “gross equivalent” return is because Avis claim that their fund qualifies for a 30% tax relief “offered generally from governments”. This claim is false. Most governments do not offer relief for funds like this, investing in large, well-established companies.⁷

So, whilst the claim of a 17.1% return is (at best) highly optimistic, the claim that tax credits boost the gross return to over 30% is false.

We can be reasonably confident that the arrangement is fraudulent from this paragraph alone:

The Financial Services Authority ceased to exist in 2013, and was replaced by the Financial Conduct Authority and the Prudential Regulation Authority. None of the Avis companies are authorised by the FCA or the PRA. There is no such thing as a “registered financial management company”; interestingly, the websites using that term all appear to be scams.

Given that the Avis entities are not regulated, this paragraph is untrue:

The Financial Services Compensation Scheme does not apply to unregulated providers.

Many of the fund’s investments are into supposed nanoparticle production by Avis companies, and there’s a nanoparticle catalog on the website dating from 2017. On the left, below, is one page from that catalog. On the right is a page from a 2013 nanoparticle catalog published by Skyspring Nanomaterials, Inc.

It’s a crude copy. They didn’t even change the fonts or shading.

It therefore appears likely that the web of fictitious companies was created as part of an investor fraud..

We have not been able to determine if the fraud was successful. They applied for a LEI (the “legal entity identification” number a company needs to acquire securities). There are suggestions that those running this operation tried, and failed, to register as a bank in Zimbabwe (but we do not know how reliable those reports are). An archived website shows what looks like a fake portal for “Avis Bank”, and there is a discussion on an internet forum where someone says they considered signing up for services from Avis. An online website claims that the Avis entities and individuals are linked to a series of frauds – we cannot verify if the information on the website is correct, and our attempts to reach the authors of the website were unsuccessful.

From 2020 to 2023, Avis operated a website claiming to help victims of fraud recover their funds (the website is down; that’s an archive link). The style of the website is very different from Avis, but its email domain records were the same. So this appears to have been a separate “line of business” for Avis.

Avis Capital, and many of the other companies, have recently failed to file accounts and/or confirmation statements on time. This may be a sign that the fraud has ended (successfully or unsuccessfully; we do not know).

Who is behind Avis Capital?

The owners

The directors of Avis Capital and many of the other companies are Gerda Maria Koenig (an Austria resident), Jairo Restrepo Chavez (a UK resident), Alfred Schedler (an Austria resident) and Rosemarie Schell (Austria resident).

The links in the previous paragraph are to the individuals’ entries in the Paradise Papers, which show them to be owners of a Maltese company called Avis Global Energy Ltd. Ms Schell has a LinkedIn page describing her as “Director Controller & Ambassador of the Avis Global Green Energy Fund, Avis Global Energy & Avis Global Humanitarian Foundation”. Aside from that, we have no information on these individuals.

The “person with significant control” of Avis Capital Limited is said to be Ms Koenig, both directly and via Avis Global Energy Ltd.

We wrote to Avis Capital asking for comment and received this:

We then heard nothing further.

The facilitators

The registered office for Avis Capital and the other Avis companies is 102 Acre Lane in Brixton, which is an estate agent, Technoestates. One of the two directors of Technoestates Ltd is Andrew Restrepo Oviedo. Mr Oviedo is also a director of Avis Fintech PLC (the company with £100m of (likely) fictitious cash on its balance sheet), and a minority shareholder in Avis Capital’s parent company, Avis Global Energy Ltd.

Mr Oviedo owns a separate company called Tabono Corporation Limited. There are two directors: Andrew Restrepo Oviedo and Jairo Restrepo Chavez, who is a director of Avis Capital and most of the other Avis companies. Given the coincidence of names, and the Spanish custom of the father’s surname becoming a child’s first surname, it may be that Andrew Restrepo Oviedo is Jairo Restrepo Chavez’s son.⁸

We wrote to Mr Oviedo via Technoestates asking for comment; we didn’t hear back.

We don’t know how involved Mr Oviedo is in the Avis companies; at a minimum he is the director of a company which has filed false accounts, and has missed obvious signs of criminality in that company and the many others that use his office as a registered address. It is also possible he is a victim – particularly if he paid cash for the worthless Avis Global Energy Ltd shares.

An ICAEW-regulated accounting firm called RMR Partnership LLP provided company secretarial services, and a registered office, to Avis Capital (and other Avis companies) from 11 June 2020 to 24 August 2023 (either through the LLP or via one of their partners, Ragen Amin).⁹ It was during this period that Avis Capital Limited filed unaudited accounts claiming implausibly large asset holdings, and repeating balance sheet entries from one year to the next. An accounting firm should have realised these accounts were false, and that they should have been audited.

Mr Amin also appears to have acquired five million shares in Avis Capital’s parent company, Avis Global Energy Ltd. If he paid money for these shares, it may be that he is a victim of the fraud.

We wrote to RMR asking for comment; we didn’t hear back.

We don’t know how involved RMR and Mr Amin were in the Avis companies. At a minimum, an accounting firm was the company secretary of companies that filed obviously false accounts, missed obvious signs of criminality, and in acting for what appears to be a criminal enterprise, may have breached anti-money laundering rules.

Before RMR Partnership LLP’s involvement, the company secretary to Avis Capital and other Avis companies was Derek Williamson, a forensic accountant who runs Williamson Consultants Ltd. Mr Williamson was appointed in September 2018 and resigned in May 2020.

We asked Mr Williamson for comment – he sent us the following reply:

The statement that Avis Capital’s balance sheet was “merely issued share capital” is not correct. The accounts filed with Companies House in 2019 when Mr Williamson was company secretary, show £10bn of shares issued for £10bn cash. If Mr Williamson had checked the 2017 statement of capital, he would have seen that the shares were stated to be issued for cash. We would expect a forensic accountant to have understood this.

So again, an accountant appears to have missed obvious signs of criminality, and may have breached anti-money laundering rules. On Mr Williamson’s account, he has responded to subsequent signs of improper behaviour, although we are unconvinced that “chasing the company” is a sufficient professional response to the situation.

Mr Williamson didn’t reply to further enquiries from us; we therefore don’t know who the “accountant” was, or who “Mr H Konig” was. It may have been this individual: H K Koenig, “a pivotal member of the Board of the AVIS Umbrella”, who was jailed for fraud in Austria in the 2000s.

The PDF metadata for the fund memorandum shows the author as “Helmut Koenig”.

What offences have been committed?

The failure by Avis Capital to file audited accounts means the directors committed an offence under section 451 of the Companies Act. There’s a defence where the directors can show they took all reasonable steps to file accounts; that seems unlikely to be relevant in this case.

There is also a general offence of delivering false documents and/or making false statements to Companies House without reasonable excuse. The company itself and its directors are liable.

It is an offence under FSMA for a person to claim to be authorised by the FCA when they are not. It is also an offence to market regulated financial products when not authorised.

What should Companies House have done?

Avis Capital explicitly uses its Companies House entry as evidence that it is a substantial business. We expect many unsophisticated investors would take Companies House accounts at face value. That is why it’s so important that Companies House maintains the integrity of its records.

It has always been a criminal offence to knowingly file false accounts or other documents with Companies House. Historically, these rules were almost entirely unenforced. We are aware of only one successful prosecution; it involved someone making prominent politicians directors without their knowledge. This gives the unfortunate impression that company law breaches will only be prosecuted when they affect prominent individuals.¹⁰

Since last year, Companies House’s role has been expanded – its statutory objectives include ensuring the integrity of the register, and preventing companies from carrying on unlawful activities. Companies House now has wide powers to correct information and serve binding information requests on directors. It says it’s acted against 75,000 companies.

These powers should have been used in this case. Avis Capital and the related companies raise numerous red flags that should have triggered action:
- It is technically straightforward to automatically flag companies with anomalously large balance sheets, and submit them for manual review. Clearly Companies House doesn’t do this.
- It would also be straightforward to flag companies with large balance sheets and turnover which aren’t filing audited accounts.
- Avis Capital’s stated areas of business are: “banks”, “financial leasing”, “mortgage finance”, “securities dealing”. These would require a banking licence and/or regulatory authorisation – which Avis Capital doesn’t have. It would be straightforward for Companies House to flag companies whose stated activities conflict with their regulatory status. It would be equally straightforward for the FCA to scrape this information from the Companies House API (the interface that lets computers easily access the Companies House database).
- We identified Avis Capital by looking at our automated webpage showing PLCs that failed to file accounts on time. Companies House should be able to do this in a much more sophisticated and efficient manner.
But the most important failure is a failure to enforce the rules.

If blatant abuses like this were routinely identified and prosecuted, then we’d no longer see fraudsters (and worse) exploiting UK company law.

What should happen next?

We believe the information in this report provides enough basis for a criminal investigation into those behind Avis Capital. There have been flagrant breaches of company law and regulatory law. We hope the relevant authorities will take action.

If a case like this can’t be prosecuted, then the offences in the Companies Act may as well not exist.

Many thanks to the accountants and forensic accountants who assisted with this report, particularly P and J. Thanks to V for company law input and to K for research and review.
Footnotes
1. The accounts say the directors were satisfied the audit exemption in section 477 of the Companies Act applied. Section 477 provides an audit exemption for “small companies”. To be a small company you must satisfy two of the following three tests: fewer than 50 employees, turnover not more than £10.2m, balance sheet not more than £5.1m. Avis Capital Limited has balance sheet and turnover well in excess of these figures. It should have filed audited accounts. Indeed Avis Capital isn’t a “medium-sized company” either – to be a “medium-sized company” you must satisfy two of the following three tests: fewer than 250 employees, turnover not more than £36m, balance sheet not more than £18m. ↩︎
2. The accounts for previous years are also suspicious. Avis Capital Limited started out in 2017 with £10bn cash in the bank from its shareholders. The statement of capital filed by the directors shows 10 billion shares subscribed, for £1 each, with zero unpaid. It is very strange for a company to just put £10bn in the bank and do nothing with it.
  
  The company’s accounts were exactly the same in 2018. Even a 1% return would produce £100m each year; any commercial business would expect a much higher return than that. Yet there is no sign of any income at all, or any tax or expenses.
  
  There was an injection of £23.7bn of debt in 2019, but again the company just sat on the cash for two years, with no change in the balance sheet. The 2019 accounts also rewrote history so that the £10bn in previous years became an amount owed to the company. Perhaps they were claiming the £10bn of shares were not paid up, but the return of capital documents say that they were.
  
  And the “cut off” 2020 balance sheet columns in the 2021 accounts completely contradict the actual 2020 accounts. ↩︎
3. The Avis Capital homepage shows the same registered address as we see on Companies House, so there’s little doubt this is the same company. ↩︎
4. We asked the Avis Budget Group for comment; they have not responded. ↩︎
5. Some people we spoke to thought it might be money laundering. We don’t believe that’s likely. The aim of money laundering is to take “dirty” money and place it into the financial system in a way that ends up looking like “clean” money. So, for example, setting up what looks like a legitimate business, and intermingling the “dirty” money with the “clean” profits of the real business. The Avis companies don’t look like legitimate businesses and don’t appear to have any legitimate income. ↩︎
6. The call option also refers to “Central European Time (London Time)”. Other documents are said to be subject to “United Kingdom law” (which does not exist; the law of England and Wales is different from the law of Scotland or Northern Ireland) and refer to “state and federal courts located in the United Kingdom”. The fund memorandum refers throughout to a “tax treaty” without ever saying which treaty is means, or why it a tax treaty relevant. The document uses the term “tax treaty qualifying shares” (which is not a term of art) and says, very optimistically, “An investment in the Fund is expected to benefit from the tax advantages offered generally from governments”. There are many more oddities, all of which suggest the documents may have been plagiarised from real legal documents. ↩︎
7. In the UK, tax relief is available for “venture capital funds” investing in small companies; the Avis companies are (supposedly) much too large to benefit from this. ↩︎
8. This is a very obvious point, which we’re embarrassed to have missed in the first published version of this report. Thanks to the many people who wrote pointing it out. ↩︎
9. RMR’s registered office, Vyman House, is named in the fund memorandum and other documents on the website; it’s also listed in the “Avis Bank” YouTube video. ↩︎
10. A prosecution of Sanjeev Gupta was recently instigated; again, it seems only the highest profile cases are prosecuted. ↩︎
25 January 2025
How to stop IHT avoidance but protect farmers
New data suggests that one third of the farm estates affected by the Budget changes aren’t owned by farmers – they’re held by investors for tax planning purposes. This suggests the Budget proposal doesn’t go far enough to stop avoidance, but goes too far in how it applies to actual farms.

There’s a better approach which can achieve the Government’s aim to stopping avoidance whilst also protecting family farms.

We’ve calculated, on the basis of new data, that, if the Budget changes had been in place in 2021/22, fewer than 250 actual farm estates would have been charged inheritance tax in that year. That’s a surprisingly small number, and – given the planning that’s likely to be put in place – we wonder quite how much tax the Budget measure will raise.

At the same time, there’s a surprisingly large number of farm estates which are being held not by actual farmers, but for IHT planning purposes. In 2021/22 there were over 125 £1.5m+ estates in this category. Post-Budget, these would pay some IHT (but much less than a “normal” person). And there’s another 300+ smaller estates using farmland for IHT planning purposes – these would mostly escape the Budget changes, and remain IHT-free.

The Budget therefore risks missing the target:
- Overall, the revenue prospects don’t look very good, and the OBR’s forecast of 40% of revenues lost to tax planning looks optimistic.¹
- Some individual farmers won’t be able to plan, and will pay too much.
- People who aren’t farmers will keep using farmland as an IHT planning vehicle, comparatively unaffected by the Budget.
We can fix all these problems at once. Protect real farmers with a complete exemption from inheritance tax (subject to a very large cap, say £20m). At the same time, counter avoidance by clawing-back the exemption if a farmer’s heirs sell the farm. This could achieve the Government’s aims in a way that’s both fairer and more effective – and plausibly raise about the same amount of revenue.

The figures and charts in this article can be found in this spreadsheet.

Inheritance tax – the background

As of today, if someone dies then their estate is subject to inheritance tax (IHT) at 40% on all their assets over the £325k “nil rate band” (NRB). A married couple automatically share their nil rate bands, so only marital assets over £650k are taxed.

The “estate” here has a different meaning from the way the word is often used, e.g. “landed estate”. The “estate” is the legal fiction that springs up when someone dies – the executors manage the estate, and inheritance tax is charged on (usually) the estate.

The Cameron government introduced an unnecessarily complicated additional “residence nil rate band” (RNRB) where the main residence is passed to children. This is £175k per person, and again automatically shared between married couples. So for most married couples, only marital assets over £1m are taxed. The RNRB starts to be withdrawn (“tapers”) for assets over £2m (with planning, a married couple can keep the RNRB with join assets of over £2m²).

It’s different if you’re a farmer. Agricultural property relief (APR) completely exempts the agricultural value of your farmland, farm buildings and (usually) farmhouse (which HMRC tends to accept about 70% is agricultural). Business relief (BPR³) completely exempts machinery and (often) any development value of the land above its agricultural value.

Another important rule: transfers to spouses are usually completely exempt from inheritance tax.

A brief detour for advice for anyone concerned about the impact of inheritance tax on their children if they unexpectedly die young (because marital assets are over £1m or they’re single and assets are over £500k). If you’re relatively young then the answer isn’t elaborate tax planning, it’s making sure you have enough life insurance to cover the tax. That’s very inexpensive if, for example, you’re a banker in your 40s. It gets more expensive if you’re older, less well, or have a relatively dangerous job (which sometimes includes farming).

What changed in the Budget?

BPR and APR were given a combined cap of £1m per person.

Under the cap, the reliefs continue to provide a complete exemption. Beyond that, the reliefs provide only a 50% reduction in the rate, rather than a complete exemption. In other words, any estate past the cap is subject to inheritance tax at 20% instead of the usual 40%.

The changes to BPR have a much wider impact on privately held businesses; but in this article I’ll be talking only about agriculture.

How many people will be affected by the change to APR and BPR?

Let’s park “affected” for now (but return to it later) and ask the easier question: at what level of assets will IHT apply to a farmer?
- For a single farmer who has no material assets other than his or her farm and farmhouse, and plans to leave everything to their kids, the new APR/BPR cap plus the nil rate band plus the residence nil rate band comes to £2m.⁴. Given that most small/medium farmers live in the farmhouse (usually/mostly covered by APR) and typically don’t have significant other assets, it is the £2m figure which should be used, not the £1m figure for the APR cap.
- For a couple, with some reasonably simple planning, the first £4m will be exempt. But that planning won’t always be possible. The couple may want to keep their finances separate, or there may be complications with third parties (like lenders) who don’t agree to the land and business becoming jointly owned.
So the answer is: usually somewhere between £2m and £4m, depending on circumstances.

The next question is: how many farm estates have this level of assets?

Previously we only had APR data for farms, but now we have both APR and BPR data for years from 2018/19 to 2021/22.⁵ That gives us a “static” estimate of what the impact would have been, had the Budget changes been in place in that year. The data breaks estate value at £1.5m rather than £2m but, by happy accident, that difference broadly equates to asset price inflation since 2021/22. So the number of estates at £1.5m in 2021/22 should be broadly equal to the number of estates hitting the taxable £2m point in 2025/26.

Some data was published with the original Government announcement. Further more detailed data was published in a letter sent by Rachel Reeves to the Chair of the Treasury Select Committee this week.⁶

Here are the two key tables for 2021-22. I’ll focus on that year for now (but will return later to the question of whether other years are different).

This table shows estates claiming agricultural property relief (APR):

And this one shows estates claiming APR plus business property relief (BPR).

First point: it’s sensible not to pay too much attention to the large number of small estates. Some will be small farms. Some will be hobby farms. Some will be small fields held as an investment and rented out to a local farmer. Some will be parts of large estates (for example most of a large farm owned by parents but with a significant but <£1.5m portion owned by adult children). I’m particularly interested in the number of large estates.

Second point: on the face of it, a lot of BPR is being claimed – 17% of the total.⁷

One of the reasons for this is stated in the letter:

“AIM shares” are shares listed on the “alternative investment market” – the junior sibling to the FTSE, for small and medium-sized companies. AIM shares are often used for tax planning because (until the Budget) if you acquired AIM shares⁸, your holding would qualify for BPR after two years and become entirely exempt from IHT. Most normal investors, even sophisticated ones, don’t hold AIM shares, as the historic returns have not been very good.⁹

Farmers are very unlikely to hold AIM shares. They’re high risk, historically offer poor returns, and most farmers would invest in their own farms instead. The IHT benefit of AIM shares isn’t a planning strategy that’s very sensible for farmers. None of the advisers I’ve spoken to who work in this area have ever seen a farmer who holds AIM shares.

So we can safely assume that this quarter of all farm APR/BPR claims isn’t from farmers who happen to hold AIM shares. It’s from investors – people looking to shelter their assets from inheritance tax who have bought AIM shares as part of their portfolio, and farmland as another part. The AIM shares are a “signal” that what’s going on here is IHT planning.¹⁰

How many of these tax-driven AIM/farming holdings are small, and how many are large? We can calculate this from the information in the Rachel Reeves letter – and the answer is surprising. About 30% of the AIM/farming holdings are over £1.5m.¹¹ The other way to look at this is that, whilst the figures show 383 farming estates over £1.5m, we can be reasonably confident that about a third of these (32%) are just people engaging in tax planning, not actual farmers.

This will be an undercount of estates holding farmland as an IHT strategy, because the calculation only counts those IHT planning farm estates which revealed themselves by also containing AIM shares. There will be many that don’t.

So the true percentage of £1.5m+ agricultural estates which are held for IHT planning purposes will be more than one third.

So here’s the answer to the question of how many farming estates would have been subject to IHT had the Budget rules been in place in 2021/22. Depending on how many are held by single farmers vs couples, how many couples employ tax planning, and myriad other factors: fewer than 250 “real” farming estates.

IHT would also be charged (at 20%) on 125 estates of over £1.5m owning farmland as part of an IHT strategy. And there would be another 300 estates of under £1.5m owning farmland for IHT purposes, most of whom would (post-Budget) still escape IHT altogether.

Or in chart form:

What about other years?

It’s often a bad idea to look at one year in isolation. 2021/22 could have been unusual. Perhaps for a good reason – e.g. fewer deaths post-Covid.¹² Or perhaps just statistical fluke – when the numbers are this lowish, they can be dominated by one-off effects (e.g. the absence or presence of a small number of very wealthy estates can push the statistics meaningfully in one direction or another).

The data shows that 2021/22 didn’t have an unusually low level of farming IHT relief – it was a record high:

That was driven by a 50% increase in the number of APR claims. There was no such dramatic effect for BPR:¹³

This level of change is very surprising, and I don’t know what the explanation is.¹⁴

We don’t have AIM figures for other years, but it would be surprising to see a very different result.

Why do these figures show so few farm estates worth over £1.5m?

The NFU says that 75% of commercial family farms are above the £1m threshold. How can that be the case, if only a few hundred estates would be subject to IHT every year?

Because the number of estates is not the number of farms, and IHT applies to estates, not farms.
- Farmers, particularly those owning large farms, often give some or all of their property to their adult children when they retire. This can be for succession or tax planning reasons (because often APR/BPR does not provide a complete exemption). Tax rules make this relatively easy, and there normally isn’t a capital gains tax charge. So relatively few large farms end up in probate – the number of farm estates is always going to be less than the number of farms. (Those owning smaller/less profitable farms often financially aren’t able to do this.)
- Many farms are held by multiple people, e.g. a married couple and one or more of their children, owning the business together either in partnership or through a company. The NFU says, I’m sure correctly, that multiple ownership is unusual for small farms, but they concede that “multiple ownership might be more common in larger farms”. The farmers and advisers we spoke to believe it is indeed more common. So some (and perhaps many) of the <£1.5m estates will actually be interests in much larger farms.
There is no conflict in the data, and there conceptually shouldn’t be. If we want to know what the impact of the Budget changes would have been in 2021/22, the only data that’s relevant is the APR and BPR data for 2021/22.

The NFU are measuring the wrong thing.

Does this mean fewer than 300 farms will be affected?

That conclusion would be wrong.

The number of farms affected by the change will be larger than the number of estates subject to IHT each year. All farmers at, or approaching, the threshold will need to put planning in place. Those well over the threshold, or for whom planning isn’t appropriate, will worry about the consequences.
This can be for many reasons that are not a result of a failure to act on good advice, e.g. risk of divorce, restrictions on transfers due to banking requirements, financial or personal vulnerability of heirs, etc.

How many are in this category? That depends on how we define a generation, how long people will think the new IHT rules will remain in place, how worried we think people will be about events 25 years in the future, and what assumptions they’ll make about IHT rules in place at that time.¹⁵ It would be wrong to be more precise than “a few thousand” likely being affected. But that also means a larger number, probably low tens of thousands, are worrying about being affected. Farming tax advisers tell me they’re seeing an unprecedented level of demand.

What other adjustments do we need to make to the figures?

There are at least two factors which (of themselves) would make the number of farms affected in 2025/26 larger than the 2021/22 figures suggest:
- The value of farmland in 2025/26 will be higher than the value in 2021/22. There has been considerable asset-price inflation since 2021/22. Various sources say farmland has gone up somewhere between 4% and 8% each year. That suggests, by the time the new rules come in, valuations will be between 17% and 36% higher than those in the 2021/22 data. So the number of estates we found to be at the £1.5m point in 2021/22 will in fact be closer to £2m in 2025/26. By happy accident, £2m is the actual figure where IHT is likely to start applying… so asset inflation doesn’t end up changing our conclusions.
- The figures in the tables above include farms held by companies, but don’t include farms held on trust (or farms owned by companies owned by trusts). The rules for trusts are different: broadly speaking trusts aren’t subject to IHT when an individual dies; instead, there’s a 6% charge every ten years. APR and BPR used to provide a complete exemption from that charge. Trust assets over £1m will now be subject to a 3% charge every ten years. Some of the UK’s largest landowners hold property through trusts, as well as sophisticated individuals and some relatively small farms too (typically for current or historic succession planning reasons).
Set against this, there are three factors pushing in the other direction:
- The high number of farm purchases driven by IHT considerations means we can expect the IHT changes to reduce the value of farmland, particularly farmland over £1m. Exactly how much is hard to say, other than there will be an effect which is greater than zero, and less than 40%.¹⁶
- I took out estates including AIM shares from the figures above, because we can be reasonably confident they were engaged in tax planning rather than farming. But there will be additional estates in the figures where people acquired farmland for tax planning reasons but didn’t acquire AIM shares (e.g. because they viewed AIM shares as too risky). We don’t know how many such estates there are – perhaps dozens, perhaps over a hundred.
- Taxpayers will, as is always the case, change their behaviour to minimise the tax. The OBR estimates this will reduce revenue by about a third.¹⁷ There will be more use of the spouse exemption, and more gifting. Possibly also more use of trusts.
Why do the numbers matter?

Two reasons:
- The small number of actual farming estates affected tells us that the potential revenues are quite fragile. Any tax which collects relatively large amounts from a small number of people is likely to be subject to very significant planning. The advisers I speak to think that the OBR’s estimate of a one-third revenue loss from planning is optimistic.
- The surprisingly large number of IHT planning estates affected tells us that the proposal is failing to collect as much revenue as it should from the people it is actually aimed at. And, as noted above, the figures on this are an under-count because there will be IHT planning farm estates which don’t reveal themselves by also containing AIM shares.
Which raises the question as to whether the right approach is being taken here.

What would a fair policy look like?

Questions of “fairness” are very subjective, and we need to start with some principles.

First, if we accept the basic Budget approach, it should be made to work more fairly

Here there are some principles I think most people would agree with:
- Tax systems should treat people in a similar situation similarly. It’s unjust if two people in identical positions face radically different IHT results, depending on whether they obtained advice. All of inheritance tax used to work this way, with one spouse’s nil rate band “lost” unless simple planning was put in place. That changed in 2016, with the NRB now transferring automatically. It’s unclear why the APR/BPR cap doesn’t work the same way.
- It’s also unjust to make people spend time and money on tax planning to overcome shortcomings in legislation.
- If we are judging the fairness of the Budget based on a £1m cap as it applies today, then that cap should not be permitted to be eroded by asset price inflation. Recent experience has been that IHT thresholds don’t rise with inflation – the nil rate band hasn’t changed in fifteen years. So many farmers will rationally fear that asset inflation will bring their smaller farms within scope.
These are fairly easy to overcome:
- The £1m cap should automatically transfer between spouses, and (as was done for the residence nil rate band) retrospectively transfer for farmers whose spouse died in the last few years – becoming £2m in either case.
- The legislation should automatically raise the £1m cap in line with inflation (or some other fair measure of asset values).
- As the IFS suggests, the usual seven year gift rule should be relaxed for farmers. They (entirely reasonably) didn’t expect they’d ever have to plan for inheritance tax, and so some older farmers haven’t passed the farm to their children in the way they might have done if they’d thought about inheritance tax planning. Many will now be too late – and the rules could be relaxed to prevent what would otherwise be a significant unfairness.
Would these changes be sufficient?

Second, we should do a better job of targeting IHT planning/avoidance

Here some people will take the view that IHT itself is immoral, and all IHT planning is acceptable; even laudable. That’s not my view.

I would say:
- It’s wrong that one person can inherit a £3m house from their parents and sell it, with £800k inheritance tax, and another inherit £3m of farmland and sell it, with no inheritance tax.
- That’s a particularly unfair outcome if the situation was engineered (i.e. because their parents weren’t farmers, just wealthy people engaging in tax planning).
- And this tax planning has wider adverse consequences, creating artificial demand for farmland, boosting asset prices and hence reducing farmers’ return on capital.
The problem is that the Budget changes don’t stop tax planning very effectively. Acquiring farmland for IHT purposes remains a great strategy if you hold less than £1m (or £2m for a couple). And a pretty good strategy beyond that (20% IHT is better than 40%!).

I would instead refocus the changes to remove the IHT benefit for people who hold farmland for planning purposes. How to do this in practice?
- One approach: a “clawback” of all APR/BPR relief for a farm if those inheriting farmland sell it within a certain time. In other words, upon a sale, all the IHT that was previously exempt suddenly reappears and becomes charged. This isn’t a new concept. The UK already has similar clawback rules for other taxes. Ireland has a similar rule for its farming inheritance tax relief. The clawback period would have to be reasonably long (years not months) and should “taper” down gently to avoid a cliff-edge.¹⁸
- Or there’s a more radical solution which is being suggested by some – ending all IHT relief for owners of farmland who don’t occupy the land. That would certainly stop the use of farmland for tax planning. It would, however, have much wider effects. About half of all farmland is tenanted, and tenant farmers are concerned that their tenancies could be lost if the landowners sold part of their land to fund an IHT bill. I don’t know if that’s correct, but the point would need to be looked at very carefully. And then there is an additional complication – many farmers who own and operate their own farm will hold the land in a separate company. It would not always be easy for legislation to distinguish this case from a third party investor.
There may be other potential solutions. However the clawback route seems to me the most practicable.

Third, do we actually want to impose IHT on family farms?

Farmers owning farms which they believe are worth c£5m have told me their profit is currently so modest (under 1%)¹⁹ that the £400k inheritance tax bill they’d face under the proposed rules is unaffordable and couldn’t be paid up-front or financed – they would have to sell up.

How do we respond to this?

One approach is to say that a family farm yielding a 1% return²⁰ isn’t economically viable when far better and easier returns on capital could be obtained elsewhere. Someone inheriting a £5m farm post-Budget could sell it, pay the £500k inheritance tax, buy a nice £1m house and stick the rest of the money in an index tracker fund – they and their descendants could then live happily off the c£150k income for essentially ever. Presumably that’s not a result farmers want, or they’d have done it already. Is it a result we as a society want? Are the economic effects positive (larger, more efficient, farms) or negative (lots of smaller <£1.5m less efficient farms)? What about the social consequences? How would food security be affected?

But if we’re happy with this outcome then we’re done, and all that’s necessary is to to make the new rules a bit fairer in terms of automatic transfer and indexing the cap, and being less facilitative of avoidance.

If we’re not, we need to find a better solution.

A better solution?

One response would be to adjust the way the current proposal works. For example: have a series of different caps and progressive rates.

I’d suggest something simpler: raise the cap dramatically (say to £20m²¹ In practice this will probably almost all be to trusts, so a 6% charge every ten years.[/mfn]) so that only the largest and most sophisticated farm businesses become subject to IHT (which they can fund through finance or selling part of the business). For everyone else, keep APR/BPR for farmland exactly as it is today, but – critically – with the “clawback” rule I suggest above. The clawback period would be set long enough to make farm IHT planning unviable for non-farmers:²² ²³
- This would have no impact on a family farm succession planning, if the farmer’s heirs continue to own the farm.
- It would mean inheritance tax at 40% if some or all of the heirs cash out. But why shouldn’t it? If realistically they’re inheriting £5m cash then it’s only fair they’re taxed the same way as anyone else inheriting £5m of cash.
- And it would certainly mean inheritance tax at 40% for someone who buys farmland solely for IHT purposes (given that their children won’t be expecting to hold onto farmland forever, particularly at current yields).
We’d be taxing farmers a lot less, but IHT-exemption-chasing investors a lot more. My back-of-a-napkin calculations suggest that the revenue difference between this and the original Budget proposal is plausibly rather small, and could be positive.

Thanks to the farmers and farm tax/financial advisers who discussed the CenTax proposal with me. All opinions and any errors are my sole responsibility.

Photo by Jed Owen on Unsplash
Footnotes
1. See page 58 here. ↩︎
2. In principle the RNRB could be retained in full with joint assets up to £4m, but in practice change in asset values between deaths make this very unlikely. ↩︎
3. The relief used to be called “business property relief” and many HMRC/HMT publications still refer to that, and “BPR” is more commonly used than “BR”. ↩︎
4. I and some others initially said the figure here was £1.5m – the £1m cap plus NRB plus RNRB. But that’s wrong, because the 50% APR/BPR relief applies first. So a £2m estate completely covered by APR/BPR has £1m completely exempt, then £1m relieved at 50% to £500k. That £500k is then covered by the NRB/RNRB. ↩︎
5. The BPR data makes little difference to the number of estates that would be taxed, because BPR for the smaller farms is very limited (BPR of course applies to all private businesses, of which farms are a relatively small proportion). ↩︎
6. There is additional historic data in the HMRC “non-structural” tax relief statistics here. But these figures are out of date, and therefore the 2021/22 figures are too low. The enticing 2022/23 and 2023/24 figures in this data are just forecasts, so I wouldn’t read too much into them. ↩︎
7. This is surprising given that agriculture is a small percentage of overall UK private business, even if we adjust for the fact that farming makes up a larger proportion of UK private business assets than it does of UK private business GDP. I’d welcome thoughts on why the figure here is so high. ↩︎
8. Or at least the right AIM shares ↩︎
9. Important point of detail: the BPR exemption applies to all shares listed on exchanges which aren’t “recognised stock exchanges“. So it applies to AIM (but not the FTSE). It also applies to some quite significant foreign exchanges, like the National Stock Exchange of India. ↩︎
10. The forecast on page 5 of the letter projects the number of APR/BPR estates including AIM shares falling dramatically by 2026/27, presumably because of the restriction being introduced on AIM BPR in the Budget. ↩︎
11. We can find this using simple maths because we have two pieces of information. First, we know that the number of AIM estates is about 432 (25% of 1727). Then we know that if we take the number of AIM estates out of the figures, the proportion of <£1.5m estates rises slightly to 80%. Let P be proportion of AIM estates under £1.5m. The number of <£1.5m estates if we take out the AIM estates is then: 1344 – 432P. As the proportion of <£1.5m estates is 80%, that tells us that (1344-432P) / (1727 – 432) = 0.80. So P = 71%. ↩︎
12. Some have suggested there could have been underreporting that year due to Covid-era backlogs. That shouldn’t be the case – the figures are for deaths in 2021/22 not filings in that year. The deadlines for probate, IHT returns and HMRC responses mean that the data for 2021/22 should now be reasonably complete. ↩︎
13. There was a significant jump in high-value BPR claims in 2018/19, but that was likely just a few very high value estates. ↩︎
14. It shouldn’t be Covid, because the data is for deaths in the relevant year, not filings in that year (and any increase in death rate would impact the BPR figures as well as the APR figures). ↩︎
15. This is a problem that bedevils IHT planning. If you’re planning for events 30 years ahead, you have to assume IHT rules will change numerous times. Indeed the concept of complete exemption for farms is only 32 years old. ↩︎
16. This is something it should be possible to analyse after the event, by comparing the change in market value of farmland above and below the £1m and £2m points. ↩︎
17. See page 55 here. ↩︎
18. This approach would certainly bring complications. How long would the “clawback period” be? Too short, and people would just wait before they sold. Too long, and it becomes hard to enforce. And applying to trusts brings a further level of complication. “It’s all very complicated” is the usual response to all tax changes, but complication can’t always be avoided. ↩︎
19. I say “believe” because I confess I don’t understand how economically it’s possible to have an asset worth so much but yielding so little. APR only applies to the pure agricultural value of property (not development value, hope value etc). BPR can apply to exempt non-agricultural value from IHT, but it’s not always straightforward, and won’t apply at all for the 50% of farms that are tenanted. But this is an aside – farmers clearly believe that there is a massive disparity between asset value and return. ↩︎
20. Important to note that these “return on capital” figures usually deduct an amount for the farmer’s labour. That’s economically the correct approach, but means in cash terms the farmer is receiving more than 1%. ↩︎
21. I’m not wedded to any particular figure. The idea is that very large landowners, who realistically can afford the IHT, pay it. It also restores the original purpose of the old estate duty – to prevent vast tracts of land becoming permanently locked into huge estates. Beyond the £20m, IHT should apply in full.²¹It may also be worth revisiting the current qualification period. Currently this is seven years for passively held farm interests, and two years for active farmers. The two year period may need extending. ↩︎
22. It’s six years in Ireland – but I’d tentatively suggest we need a longer period to make IHT planning non-viable. There would undoubtedly be calls to make the clawback more flexible, e.g. an exception for a forced sale of the farmhouse of one kind or other. I would take great care before creating such exceptions, as they’d inevitably be exploited for avoidance purposes. Limit exceptions to cases that are hard to exploit, like compulsory purchase (if the purchase monies are used to acquire new farmland). ↩︎
23. If this proposal was enacted then the obvious step for someone previously using APR to avoid IHT would be to move into an AIM (or other unlisted share) portfolio given that, even post Budget, AIM shares still receive 50% relief. I would give serious consideration to restricting AIM relief further, or abolishing it. If you close one IHT planning strategy, people will move to others – you have to shut them all. ↩︎
24 November 2024
The Budget – a missed opportunity
Despite the Government’s stated commitment to growth, the Budget included no pro-growth tax reform, and its largest revenue raising measure is likely to reduce private sector employment and wages.

The Budget continued a sad trend of tax policy driven by realpolitik rather than long term strategic thinking. It’s to be hoped we see something more substantive in future Labour Budgets.

The need for tax reform

Some of the worst features of the UK tax system are the product of short term political expediency:
- The numerous high marginal income tax rates, often approaching 60% and sometimes over 100%, deter people at the £60k and £100k earning thresholds from working more hours. These rates are a product of “gimmicks” introduced into the tax system to raise more tax without incurring the political pain of increasing headline tax rates.
- Council tax is based on 1991 valuations. A £100m penthouse in Mayfair pays less council tax than a semi in Skegness. The unfairness and inefficiency of council tax is a consequence of a post-poll tax political fear of touching local government taxation.
- Stamp duty land tax reduces labour mobility, results in inefficient use of land, and plausibly holds back economic growth. There is a consensus amongst economists of Left and Right that an annual tax on land value would be fairer and more efficient. But there is a political fear of creating losers (and we are currently seeing how loud the complaints of a relatively small number of people can be, if they believe they’ve lost out from a tax change).
- The rate of capital gains tax is too low, enabling owners of private businesses to convert what is realistically labour income (which should be taxed at 45%) into capital gains (recently taxed at 20%; now rising to 24%). But the rate of capital gains tax is also too high, taxing investors on paper gains even if in real terms they have lost money. Both problems could be fixed at the same time, but that requires taking on vocal interest groups.
- The UK has the highest VAT threshold in the developed world. It deters small businesses from growing, and creates a competitive advantage for people who cheat.¹ HM Treasury certainly understand the problem, and many across the political spectrum agree that the threshold needs to come down. However politicians are reluctant to act, in large part because of a reluctance to take on the small business lobby (which in my experience doesn’t represent its members, many of whom are frustrated by the competitive distortions created by the current high VAT threshold).
- The UK has extensive VAT exemptions and special rates – more so than any other country with a VAT/GST system. They’re regressive and result in uncertainty and avoidance. We could restrict the special rates and raise significant revenue and/or cut the rate of VAT from 20%. But no politician feels able to explain this.
- The UK has one of the highest rates of inheritance tax in the world, but collects comparatively little tax. Why? Because of the many exemptions (or, if you like, “loopholes”) which make tax planning IHT away very easy for the wealthy and well-advised. Perhaps for these reasons, it’s a very unpopular tax. The answer: scrap the exemptions and cut the rate. The complaints of the few who lose out would be drowned by the applause of those who gain. Or go for more ambitious reform still, and replace the tax with something entirely different (capital gains at death, perhaps).
- The spiralling complexity in the tax system, and the fact that so few of the Office for Tax Simplification’s recommendations were implemented, is a product of a political failure to make tax simplification a priority. The state of corporation tax, in particular, is making the UK increasing uncompetitive, even compared to countries with significantly higher corporate tax rates than the UK.
And last but not least:
- Employer national insurance mean that we tax employment income much more than self employment income or investment income. That is economically damaging, and creates a huge amount of complexity, uncertainty, and tax avoidance and evasion. The tax has been irresistible to governments who want to raise tax on income in a way which is not very visible to most of the public. We should abolish employer national insurance (but working out exactly how is a very difficult problem).
All of these problems, and many more, create a real need for tax reform. A Government committed to improving the UK’s poor recent growth record should be looking at tax reform very seriously indeed.

The tax reforms in the Budget

There were no tax reform measures in the Budget.² Nor was there any tax simplification.³

All we saw were revenue-raising measures. That’s an important function of the tax system, but a Budget shouldn’t just be about raising tax.

The need for revenue-raising

Let’s look at the largest revenue raising-measure in the Budget, and the options that were available. I’ll proceed on the basis that the Government had to raise £10bn from somewhere, and ask what the most rational way to do that would be.⁴

What principles should have driven the decision as to which tax to raise? Particularly when it was a Labour government making that decision, and a Government which had said it was committed to growth?

Presumably something like:
- The tax increase should be disproportionately borne by people who are most able to pay it (the “broadest shoulders“).
- The tax increase shouldn’t have a negative effect on economic growth, for example by creating incentives on businesses to reduce employment.⁵
- The tax increase shouldn’t be distortive – i.e. create incentives to do things that are artificial and/or would make no sense if it wasn’t for the tax increase.
The simplest tax increase consistent with these principles would be to raise income tax – the Government could have raised about £10bn by increasing the rate of income tax by 1%.⁶ Those on very low incomes would have paid little or no additional tax (because income tax only starts at £12,570). The impact would have been greatest on those earning higher incomes. Employees, investors, landlords, pensioners – all would have shared the pain of the tax increase.

Here’s a chart of the percentage reduction to employee take-home pay that would follow from a 1% income tax rise:⁷ ⁸

Someone on minimum wage would see a reduction in after-tax pay of about 0.5%; someone on the median wage of about £37k the figure would see a reduction of 0.8%; for someone earning £150k the figure would be 1.65%. I’d think this would be the kind of gently progressive outcome that a Labour Government would be looking for from a tax increase.

Or if that was too politically tricky, there were plenty of alternatives, albeit more complicated. The Government could have reformed capital gains tax, or made numerous small changes to taxes that mostly impacted the wealthy, but wouldn’t reduce their incentive to invest in the UK.

The revenue-raising in the Budget

Labour instead chose to raise £10bn by increasing employer’s national insurance.

This fails all three tests above:
- Employer’s national insurance applies only to employment, and not to self employment or investment income. Many of those with the highest incomes are unaffected.
- For the same reason, employer’s national insurance creates distortions, and a powerful incentive to hire people as contractors rather than employees. There is a huge volume of anti-avoidance legislation that tries to prevent this, but when the lure is as great as a 15% saving, people will and do continue to try to avoid it. The OBR projects a £500m loss in tax from this.
- Employer’s national insurance is a tax on employment, and it’s axiomatic that if you tax something you get less of it.
The way Labour implemented the national insurance increase made it worse. There were two changes to employer’s national insurance in the Budget:
- the rate went up from 13.8% to 15%.
- The secondary national insurance threshold (from which the 15% rate applies) was cut from £9,100 to £5,000.
The cut in the threshold disproportionately impacts employers with mostly low-paid staff.

We can illustrate this by charting different wages levels against the increase in the total cost of employing someone at that wage.⁹ ¹⁰

That spike is for those earning around the current £9,100 employer national insurance threshold – the cost of employing someone in this position goes up by almost 7%.¹¹ The cost of employing a full time worker on minimum wage goes up by 3.5%; for a worker on the £37k median wage, the cost goes up by 2.5%. But the cost of employing someone on £150k goes up by only 1.5%.

Why should the Labour Party care if the cost of employing someone on low wages rises?

Because all the evidence shows that the economic impact falls on the employees, not the employer.

The evidence

There is extensive evidence that 60% to 80% of the economic cost of employer national insurance (and similar taxes) is borne by employees in the form of reduced wages. The rest of the cost is shared between reduced employment (again impacting employees, or people who don’t get to become employees), increased prices and reduced corporate profits. I set out some of the research on these effects here.

It’s important to note that this doesn’t mean that an increase in employer’s national insurance causes wages to be cut and people to be sacked. It means that businesses increase wages less than they otherwise would, take on new employees on low wages less than they otherwise would, and/or take on fewer employees.¹²

The Office for Budget Responsibility agree that most of the burden of the tax increase falls on employees. Here’s their assessment of the Budget:¹³

If we look at the 2027/28 figures, the “static analysis” of the employer’s national insurance increase shows it creating £24.7bn of revenue. “Static” means this is a simple multiplication of current employer national insurance revenues to reflect the increased rate.

The OBR then corrects the static figure to reflect behavioural changes. They project a loss in tax from reduced wages and reduced employment of £7.7bn, and a loss in tax from reduced corporate profits of £600m. Reversing-out these figures suggests that the OBR believes over 85% of the £24bn raised by the employer national insurance increase is coming from reduced wages and lost employment.¹⁴

And note the £5.6bn figure at the bottom – the cost to the Government and adult social care providers of covering the employer national insurance increase. This has two consequences. First, the £24bn static estimate of the revenue yield in fact ends up as under £10bn – it’s a remarkably inefficient tax increase. Second, whilst we can expect the private sector to mostly pass the cost of the tax increase to employees, the public sector mostly won’t.¹⁵

What’s happening in practice?

Most of the research suggests it takes a year or more for increases in employer national insurance to be passed-through to employees. However things seem to be moving faster than that. In the last week I’ve spoken to:
- A board member of a UK financial services business which had planned to increase wages by 5% for 2025; the increase will now be 3%. They will also be moving some jobs from the UK to Eastern Europe (“near-shoring”).
- The CEO of a large retailer that had planned to increase wages by 4% for 2025; the increase will now be 2%.
- A board member of a manufacturing company that had planned to increase wages by 5%; the increase will now be 2.5%.
- The CFO of a large services business which will now be “near-shoring” hundreds of jobs to Eastern Europe.
- A restaurant owner who has cancelled a plan to expand to a new site.
- A farmer who will be cutting the hourly wage he offers to seasonal farmworkers this coming Spring.
- The owner of a small business who had planned to take on a trainee; she now won’t be.
- The owner of a shop who had been planning to expand out-of-season hours, but now won’t be.
All of which suggests that the cost of the employer national insurance increase will be passed onto staff as soon as January 2025. Which is four months before the increase takes effect.

This is a much faster transfer of the cost of the tax increase to employees than I expected.¹⁶

The overall picture

Let’s assume 80% of the cost of the employer national insurance is 80% passed-through to private sector employees in the form of reduced wages. How does the reduction in their take-home pay compare with the effect of my hypothetical 1% income tax increase?

Everyone earning less than £100k from employment income is better off with an income tax increase.

How can this be? How can a 1p income tax increase raise the same revenue as a 1.2p employer national insurance increase, but have so much smaller an effect on most people?

Because of the people not shown on this chart. The self employed, pensioners, partners in professional firms, investors, landlords… they’ll see no impact from the Budget employer national insurance changes, for the simple reason that they’re not employed. But they all pay income tax, and would very much see an impact from a 1p income tax increase.

So why did Labour end up imposing a regressive tax increase?

Two weeks before the Budget, I wrote that increasing employer’s national insurance was one of the worst possible tax increases. I didn’t think it was likely, but added a footnote that I was not very good at political prediction. That footnote was correct.

The point remains: increasing employer’s national insurance as proposed in the Budget is worse in almost every respect than increasing income tax. It’s less progressive and more likely to reduce growth (because it reduces employment). So why do it?

The obvious answer is: politics.

Over the last two weeks, I’ve bemoaned the increase in employers national insurance to various people more politically astute than I am. Their response is that Labour had no choice. During the election campaign, Labour had to rule out increasing most taxes, or it would have risked losing the election. Employer national insurance was all that was left, and so it was employer national insurance that had to go up.

On this version, bad tax policy was the price of election victory. If that’s right, it’s a pretty depressing conclusion.

Why was there no tax reform in the Budget?

One explanation is simply: there was no time. Whilst Labour had done some thinking in Opposition, the lack of technical resources available to an Opposition (particularly after the loss of seats in 2019) meant that the real work preparing detailed tax policy proposals had to start after Labour moved into Government on 5 July 2024, and Ministers got their feet properly under the desk in mid-July. With the Budget on 30 October 2024, that appears to give plenty of time – but the OBR has to be given 7-9 weeks’ notice of Budget proposals.¹⁷ So the deadline for finalising Labour’s proposals was early September. Then add the effect of August, and civil service holidays, and Labour really only had a few weeks to come up with the Budget. Expecting Labour to prepare detailed tax reform proposals in that time was unrealistic.

I don’t really buy this. It’s hard to see there will ever be a better opportunity for tax reform than the first Budget of a new Government elected with a large majority. The Budget could have been later. Or there could have been a quick Budget implementing manifesto commitments, with a further “fiscal event” in March containing more detailed measures that weren’t in the manifesto. That’s exactly what we saw in 1997.

The other explanation is that Starmer and his team were too cautious to go near tax reform. If so, they may the reaction to the modest tax changes that were contained in the Budget may make them more cautious still.

My hope is that I am again completely wrong, and that we do see pro-growth tax reform in the next Budget.

Photo by Vicky Yu on Unsplash.
Footnotes
1. e.g. by splitting one business into several different companies. The rules don’t permit that, and it will often amount to (criminal) tax fraud – but it’s often hard for people to spot. ↩︎
2. A more generous person than me might classify the changes to agricultural property relief and business property relief as tax reform. But I don’t think that would be right – the changes are a partial restriction of existing reliefs rather than actual reform, and they feel more symbolic than substantive (and also could be better structured; I’ll be writing more about that soon). ↩︎
3. And a particularly generous person might say that the potential partial abolition of the UK-UK transfer pricing rules is “tax simplification”. But the details make it doubtful there will be much real effect, and in any cases the proposal was originally announced by the previous Government. ↩︎
4. It could certainly be argued that the Government should have cut spending instead (at least in real terms), but that was never a very likely route for a newly elected Labour Government. ↩︎
5. It is often said that all tax has a negative effect on economic growth. This is not correct – it depends both on the nature of the tax, and what the Government does with the revenue raised by the tax. This article from the National Institute of Economic and Social Research is an excellent discussion of both sides of this point. ↩︎
6. The Liberal Democrats for many years had a policy of increasing income tax by 1p to pay for additional education spending. At one point the Conservative Party carried out polling which showed that most people misunderstood this to mean actually paying one penny more tax, not a 1% increase in the rate, This sounds incredible, but I’ve heard the story first hand. ↩︎
7. For simplicity, this only shows part of the picture, because there would also have been an impact on pensioners and investors on high incomes. Both groups would have suffered a slightly higher decrease in take-home pay, because they don’t pay national insurance and so income tax changes have a slightly greater proportionate effect on them. ↩︎
8. The spreadsheet with the calculations generating this chart can be found here. ↩︎
9. The “total cost” here is the gross salary plus employer’s national insurance; I’m disregarding the apprenticeship levy in the chart because that only affects larger firms; it will very slightly reduce the % change. There will often be other costs, e.g. office space, pension, administration – these vary considerably between employers and so can’t realistically be included in the chart. ↩︎
10. Again, the spreadsheet for this chart is here. ↩︎
11. The minimum wage for a worker over 21 works out at an annual income of about £23,000 if they are working full time for the whole year. However some people working part time and/or for only part of the year can earn much less than that. ↩︎
12. Higher paid workers are more likely to see a reduction in pay increases; lower paid workers a reduction in employment. We may see a particularly strong impact on low paid employment, given the relatively high level of the UK minimum wage. i.e. because wages cannot be reduced for many lower paid workers without either breaking the law (if they are at the minimum wage) or squeezing differentials (for those just above the minimum wage. ↩︎
13. From page 55 of this document. ↩︎
14. My working for this: the mean annual wage (as opposed to the median) is about £37,000. Employer national insurance on that is about £5,500 and employee tax is about £6,800 – so tax on the average wage is 33%. The £7.1bn figure therefore implies a reduction in gross wages of about £21bn; the £0.6bn figure implies a further loss of £1.8bn of gross wages through reduction in employment. The OBR also projects a loss in tax from a reduction in profits of £0.9bn. Profits are subject to corporation tax at 20-25% and (in a different form) VAT; all implying a drop in profits of somewhere around £2-4bn. Hence over 85% of the overall hit is borne by employees in the form of reduced/lost wages, and only around 15% by employers in the form of reduced profit. These are back-of-the-envelope estimates so we shouldn’t be surprised that the figures total £28bn rather than £24bn – the overall picture is reasonably clear. ↩︎
15. Although that’s not necessarily the case in the long term. Public sector pay is impacted by private sector pay, both informally and (in many cases) formally given that that one of the key pieces of evidence considered by the Pay Review Bodies is the level of private sector pay. Hence public sector pay may well end up affected, in which case the RDEL compensation may prove too high, and the NICs increase may end up netting more than expected. ↩︎
16. When I first saw the OBR figures I was surprised they were showing such a high percentage of the employer’s national insurance increase being passed to employees so quickly. I had assumed (from the research on previous similar tax changes) that this would take several years to work through, and in the meantime the costs would be borne by shareholders (through lower profits) and customers (in higher prices). These conversations suggest that the OBR may be correct, and the incidence transfers to employees much faster than most of the historic research suggests (and possibly more complete). I don’t know why this is. ↩︎
17. See page five of this document, second paragraph. ↩︎
21 November 2024
The tax longlist – 35 ways Rachel Reeves could raise £22bn
Rachel Reeves has said there is a £22bn “black hole” in the public finances, and that she’ll have to raise tax to fill it. Labour are heavily constrained by their pre-election promises, and that makes raising £22bn a challenging endeavour. But certainly not impossible.¹

This is an updated version of my August article.

I’ve previously written about the case for tax reform, and argued for eight specific tax cuts. This article solely looks at potential tax-raising measures. I’m not an economist, and I won’t discuss the question of whether this level of tax increase at the present time is necessary or desirable.

The problem

How much room for manoeuvre does Rachel Reeves have?

Here’s how UK tax receipts looked in 2023/24 – about a trillion pounds in total:²

During the election campaign, Labour ruled out increasing income tax, national insurance, VAT or corporation tax. They’ve committed to reform business rates, so an increase there seems unlikely. The promise not to increase tax on “working people” probably rules out council tax and air passenger duty. Stamp taxes and bank taxes are already probably past the point where more can be raised. Customs duties are complicated by trade treaties. Raising insurance premium tax without raising VAT would be distortive. Raising alcohol duty would be unpopular out of all proportion to its significance. Labour have already planned an increase to oil/gas taxation.

What does this leave? About £100bn of taxes:

It’s hard and perhaps impossible to find £22bn there.

Two solutions we probably won’t see

One solution is to simply break the pre-election promises. It’s happened before. However the promises this time were repeated so often, and made so clearly, that breaking them feels (at least to me) out of the question.

Another solution: radical tax reform.

This could mean land tax reform – for example replacing business rates, stamp duty land tax and council tax with a land value tax. Most people would pay broadly the same tax as before, but those owning valuable land would pay a lot more. I wrote about that here. Sadly I don’t think this is likely to happen – the poll tax casts a long shadow over anything that affects local government taxation.

Another would be radical reform to personal taxation, ending the distortive, unfair and economically damaging gap between the tax treatment of employment income and the tax treatment of other kinds of income. Again, this would be politically challenging.

Tax reform would be welcome – and I’ll be writing more about it soon – but I fear we won’t see much of it in this Budget. And some would say (not unreasonably) that the Government has no mandate for radical changes to the tax system.

The solutions we probably will see

If Ms Reeves isn’t going to break pre-election promises, or opt for radical tax reform, then it’s a matter of scrabbling for relatively small tax increases here and there. Here are items I’d expect to be on the Chancellor’s longlist, in a roughly descending order of likeliness:³
- Fiscal drag – £7bn. The FT is reporting that Rachel Reeves is considering freezing tax thresholds until 2028. The idea is that inflation/earnings growth mean we’re all earning more in cash terms, but not in real terms – however tax thresholds stay the same. The result: more and more income, and more and more taxpayers, get dragged into higher rate tax bands. Fiscal drag was very successfully deployed by Blair/Brown (with limited resistance at the time), but then became less relevant as inflation fell. With the resurgence of inflation, and need to raise funding to pay for Covid, the Johnson and then Sunak Governments raised very large amounts with fiscal drag – over £29bn by 2027/28. This has only a limited effect on median earners, but significant tax increases for higher earners. It would be surprising if this new Government doesn’t do the same. Further fiscal drag feels so inevitable that it barely deserves to make this list.
- Pension tax relief – £3-15bn. Lots of people are predicting this. Right now, contributions to a pension are fully tax-deductible.⁴ If you’re a high earner, paying a 45% marginal rate⁵, you get 45% tax relief on your pension contributions. Some view this as unfair, and suggest limiting relief to 30%, or even the 20% basic rate. That could raise significant amounts – £3bn (if limited to 30%) or up to £15bn (if limited to 20%). But withdrawals from a pension, after the tax free lump sum, are taxable at your marginal rate at the time. Offering a 20% or 30% tax deduction for pension contributions, but taxing withdrawals at 40%, isn’t a great deal. High earners may shift their investments to other products. There could be complex second and third order effects. I’d say this is streets ahead of all other tax raising candidates given the large amounts that can be raised, and the ease of implementation. But there’s a catch – applying to defined benefit schemes (meaning, in practice, public sector pensions) is more complicated. And exempting defined benefit/public sector schemes from new rules would be widely – and correctly – seen as unfair. One alternative – fairer, but more complicated – would be to end or restrict the national insurance exemption for pension contributions⁶ – the IFS has written about this here and/or impose national insurance on pension drawdowns.
- End AIM IHT relief – c£100m. It’s daft that my estate would pay 40% inheritance tax on my share portfolio, but if I move it into AIM shares and live for two more years, there would be no inheritance tax at all. Commercial providers sell portfolios designed solely to take advantage of this. But it’s not just AIM shares – if, like Rishi Sunak’s wife, I hold shares in a foreign company that’s listed on an exchange that isn’t a “recognised stock exchange” then those shares would also be entirely exempt. It’s unclear how much tax would be raised by this; the £1bn figure sometimes quoted appears to be incorrect, as that’s looking solely at the total cost of business relief across all unlisted shares, which will include completely unlisted private companies (which we discuss below). A more accurate figure is likely around £100m.⁷ Some people are warning it would crash the market. The flipside: AIM yields are currently depressed by market valuations driven by the tax benefit, not fundamentals. This is an unhealthy state for any market to be in.
- Limit business and agricultural property relief – £1-2bn. Most private businesses – of any size – are exempt from inheritance tax. Protecting small businesses and farms makes sense, but why should the estate of the Duke of Westminster pay almost no tax?⁸ And why should we be creating a weird tax-driven market in woodland? There’s potential for £2bn or more here, for a measure that could fairly be presented as closing loopholes. Other reliefs, e.g. heritage relief, could also be looked at.
- Tax large gifts – £?. The problem with reducing inheritance tax reliefs is that people will rationally respond by giving property to their children. That’s hard for a moderately wealthy person to do with their house, because the “gifts with reservation of benefit” rules mean that you’d then struggle to still live in it. But a very wealthy person owning a large private business could pass it to their children and, provided they live for seven years, the business would completely escape inheritance tax. So, whilst there is already a lot of tax planning around gifts to children, that would explode if BPR/APR were curtailed. There’s also an exemption for gifts which classify as “normal expenditure out of income“, which in practice enables people with large amounts of investment income to make very large untaxed gifts. So those reforms are only rational if at the same time we tax lifetime gifts and cap the “normal expenditure” exemption. To prevent difficult compliance (and difficult politics!) this should only be for large gifts, say over £1m. It would raise additional sums, beyond closing any loophole in new APR/BPR restrictions… but how much is hard to say.
- Pensions inheritance tax reform – £100m to £2bn. If you inherit the pension of someone who died before age 75, it’s completely tax free. But if they died aged 75 or over, the pension provider deducts PAYE, which means up to 45% tax if the beneficiary takes a lump sum (or less if they drawdown the pension over time). This is a very odd result. Simply applying the usual 40% inheritance tax rules could raise about £2bn in the long term (and in some cases would be a small tax cut for beneficiaries of the over-75s).
- Increase capital gains tax – £6bn+. The Lib Dems proposed equalising the rate with income tax, and said it would raise £5bn. At the time I said that, on the basis of HMRC figures, this would cost around £3bn in lost tax.⁹ There is a better way, to cut the effective rate of CGT for investors putting capital at risk, but increase it for others. That could even be combined with an income tax cut, and still raise significant sums. I talk about it in detail here.
- Eliminate the stamp duty “loophole” for enveloped commercial property – £1bn+. It’s common for high value commercial property to be sold by selling the single-purpose company in which it’s held (or “enveloped”). So instead of stamp duty land tax at 5%, the buyer pays stamp duty reserve tax at 0.5% of the equity value or if (as is common) an offshore company is used, no stamp duty at all. This practice has been accepted by successive Governments for decades. It would be technically straightforward to apply 5% SDLT to such transactions, and this would raise a large amount – over £1bn.¹⁰
- Increase ATED – £200m+. The “annual tax on enveloped dwellings” is an obscure tax that was introduced to deter people from holding residential property in single purpose companies to avoid stamp duty. As we explain here, it’s currently failing because it’s been set too low, and raises a derisory £111m. There’s a case for tripling it.
- Increase inheritance tax on trusts – £500m. When UK domiciled individuals settle property on trust, the trust is subject to a 6% tax every ten years, and another 6% charge when property leaves the trust (broadly pro rata to the number of years since the last ten yearly charge). These taxes currently raise £1.3bn, on top of the 20% “entry charge” when property goes into trust. This all seems rather a good deal if we compare it to the 40% inheritance tax paid by estates on property that isn’t in trust. So there’s an argument for increasing the rate from 6% to 9% – and that should raise somewhere north of £500m.¹¹
- Reform R&D tax relief – £3bn. We’ve had series of tax reliefs designed to incentivise research and development. They now cost £7bn per year, but I fear most of this is wasted. R&D tax relief is highly complex – only the most sophisticated companies able to plan R&D with confidence that the relief will apply. And they have been widely abused, with perhaps as much as £10 billion wasted in wrong and fraudulent relief claims; HMRC’s response to that is now blocking legitimate claims. The people who could really do with the relief aren’t getting it. Rachel Reeves could solve all these problems at once. Focus the relief narrowly on significant projects aimed at science and development innovation, with harsh penalties for companies and advisors making indefensible claims. Create a simple and fast pre-clearance process to provide certainty. The aim should be to provide more generous relief for, e.g., bio science, engineering, and tech companies, and no relief for anybody else. Simultaneously promote growth and stop wasting taxpayer funds.
- Push the Bank of England to stop paying interest on some of the QE bonds it holds -c£5bn. This is somewhat esoteric and not strictly tax¹² – but it does represent a relatively pain-free to raise somewhere around £5bn each year (for the short to medium term). The Bank of England currently pays interest on the reserves that commercial banks place with it. In theory it could raise up to £23bn by dividing the reserves into “tiers”, ceasing to pay interest on one tier, and requiring the banks to continue to keep that tier with the. BoE. Reform UK thought that £35bn could be raised this way – but most observers believe that would destabilise the BoE’s control of interest rates, and somewhere around £5bn is more reasonable. I can’t do justice to this point – there’s a pair of excellent FT articles by Chris Giles and (in more detail) Toby Nangle. Rachel Reeves warned against some of the more maximalist variants of this policy, but has perhaps left the door open to a more minimal approach. What’s not clear is who would ultimately bear the economic cost of such a change (the “incidence” in tax wonk-speak). The banks’ shareholders? Or their customers?¹³
- Council tax increases for valuable property – £1-5bn. It’s indefensible that an average property in Blackpool pays more council tax than a £100m penthouse in Knightsbridge. The obvious answer is to “uncap” council tax so that it bears more relation to the value of the property – either by adding more bands, or applying say 0.5% to all property value over £2m. Depending on how it was done, this could raise several £1bn. The argument seems compelling for any Government, and particularly a Labour government. And whilst Labour promised not to change the council tax bands, that was in the context of revaluation, not adding more bands at the top.
- Introduce an exit tax – £unknown. There are two features of the UK capital gains tax system which practitioners take for granted, but which non-specialists often think are peculiar. First, if you arrive in the UK, become UK tax resident, and then immediately dispose of an asset, the UK taxes you on the entire lifetime gain of that asset (even if almost all of that gain accrued when you lived abroad). This is rather unfair and deters some entrepreneurs from moving to the UK. Second, if you spend years building up a business in the UK, then leave the UK and dispose of the business in the next tax year, then the UK taxes none of that gain (even if almost all of it accrued when you live here). It would be rational to end both anomalies, so that the UK fairly taxes UK gains. We should measure the gain from the point at which someone arrives in the UK¹⁴ and when someone leaves the UK, the gain they accrued here should still be taxable here as and when they sell.¹⁵ This would overall be a fairer system. It would also likely raise some tax, because entrepreneurs would no longer be able to escape UK CGT by moving to Monaco five minutes before selling their business.
- Abolish business asset disposal relief – £1.5bn. This is a capital gains tax relief supposedly for the benefit of entrepreneurs. But the Treasury officials forced to create it named it “BAD” for a reason. The benefit for genuine entrepreneurs is limited (a 10% rather than 20% rate). It’s widely exploited. Abolition would raise £1.5bn.¹⁶
- Increase vehicle excise duty – £200m+. VED currently applies at various rates for different vehicles, depending on the type of vehicle, registration date and engine sizes. The average for a car is about £200. A £5 increase would raise £200m, and raising £1bn wouldn’t be terribly challenging. However it would impact “working people“.
- Reverse the Tories’ cancellation of the fuel duty rise – £3bn. For years, Governments have been cancelling scheduled (and budgeted) rises in fuel duty. Most recently, the Conservative Government did that in March, forgoing £3n of revenue. There is an infamous OBR chart showing the effect of this. It would be easy to reverse that – but (unlike most of the other tax changes listed here) it would definitely affect “working people“.
- Review VAT exemptions – £1bn+. Many of the VAT exemptions/special rates make little sense and should be abolished. The 0% rate on children’s clothes should be first to go, with child benefit uprated by 10% so that people on low/moderate incomes don’t lose out. This change alone would yield about £1bn.¹⁷
- Increase the digital services tax – £400m. The digital services tax is a flat % tax on large internet businesses’ income from digital services. So, for example, advertising revenue paid to search platforms and fees paid to marketplaces. The rate is currently 2%, and it raises around £800m, so a 1% increase should raise £400m. On the face of it, an easy tax to increase. However there are two good reasons not to. First, most of the economic burden of the tax falls on UK businesses. Second, there are geopolitical complications given that the DST is part of a complex and still-moving international negotiations over the future of international tax. I discussed these in more details when the Lib Dems proposed tripling the tax in their 2024 manifesto. There is a good analysis from TaxWatch here, a House of Commons Library introduction to the tax here, and a National Audit Office assessment of the tax here.
These changes could raise between £21bn and £41bn, depending on how each were implemented, and with significant uncertainties around many of the estimates.

Here are a few more possibilities, which could raise very significant sums but which I think are (for various reasons) unlikely:¹⁸
- Increase employer national insurance – c£8.5bn per % increase.¹⁹. Employer national insurance is currently 13.8%. It’s technically very easy to increase and would raise large sums (the £8.5bn figure comes from the HMRC “ready reckoner“). But employer national insurance is one of the worst taxes to raise; it exacerbates the already highly problematic bias against employment in the tax system. The economic burden would mostly fall on employees, and any increase probably breaks a pre-election promise. I wrote about these issues here.
- End the pension tax free lump sum – £5.5bn. On retirement, we can withdraw 25% of our pension pot, up to £268k, as a tax free lump sum. The argument for abolition is that most of the benefit goes to people on higher incomes paying a higher marginal rate. The argument against is that people have been paying into their pensions for decades on the promise of the rules working a certain way, and it’s unfair to now change that (and I agree with this position). Labour also seemed to rule out the change. But it’s an “easy” way to raise lots of tax – limiting the benefit to £100,000 would raise £5.5bn.
- Introduce “sin taxes” on unhealthy food – £3.6bn. An IPPR report recently proposed a “10 per cent tax on non-essential, unhealthy food categories including processed meat, confectionary, cakes and biscuits”, modelled on successful taxes in Hungary and Mexico. As a tax lawyer, my instinct is to be sceptical of such proposals; decades of VAT cake litigation attest to the difficulty of clearing defining different categories of food.²⁰ There is a concerning gap between the claims from health advocates and the IPPR, and the actual evidence²¹ So whilst taxing “unhealthy food” would be an effective way of raising tax, it is questionable if there would be any health benefits, and the tax would overall be regressive.
- Tax gambling winnings £1-3bn. The US taxes gambling winnings. The UK doesn’t (unless you are a professional gambler so gambling becomes your trade or profession). In theory this would raise £1-3bn.²² It would have two ancillary benefits: (1) discourage gambling (in a way that raising betting duties would not), (2) end the oddity that spread betting isn’t taxable when equivalent derivative transactions are. But there are three big downsides. First, it would be (in my view) unfair to tax gambling winnings without giving relief for gambling losses (as the US does). That reduces the yield. It also creates a relief that would be exploited for tax avoidance and tax evasion.²³ Second, it would in practice be regressive, hitting the poor disproportionately. Third, the tax would realistically need to be withheld at source (as it is in the US), which requires a new taxing infrastructure to be created. So, whilst an interesting thought, I can’t see this happening.
- Increase taxes on gambling – up to £2.9bn. The recent IPPR report also proposes increasing gaming duties. This would raise significantly more tax than taxing gambling winnings, and be easy to implement but (I expect) be less²⁴ effective at reducing gambling (if that is the aim). Taxing gambling winnings has a direct economic and psychological impact on gamblers, and therefore plausibly reduces gambling. Gaming duties reduce supplier profits, and so only reduce gambling if suppliers respond by closing businesses or increasing odds to protect their margin (and gamblers are price-sensitive).
- Cap tax relief on ISAs – up to £5bn. Cash and shares/stocks in ISAs is exempt from income tax and capital gains tax. This tax relief costs about £7bn of lost tax each year. Most ISAs are small – only 20% hold more than £50,000. But I expect this 20% receive around 80% of the benefit of ISA relief. So in principle the Government could save £5bn by capping relief for the first £50k (or some lesser amount for a higher cap, with diminishing returns setting in fast²⁵). However many would regard this as unfair – they took advantage of a widely promoted Government saving scheme, and now the rules are being changed after the event. I think that’s a compelling argument.²⁶ An alternative approach would be to reduce the £20k annual allowance, which naturally benefits people with the highest disposal income.²⁷ This however wouldn’t raise very much in the near term; Rachel Reeves may regarding the negative optics as outweighing the small financial benefit.
- Reduce the VAT registration threshold – £3bn. There is compelling evidence that the current £90k threshold acts as a brake on the growth of small businesses, as they manage their turnover to stay under the threshold. Reducing the threshold so everyone except hobby businesses are taxed would raise at least £3bn, and in the view of many people across the political spectrum, could increase growth. The economy as a whole would benefit, and small businesses would benefit in the long term. But in the short term there would be many unhappy small businesspeople. I fear this is, therefore, too difficult for any Government to touch. It would also take time to put into effect – APIs/apps would need to be ready to assist micro-business compliance, and HMRC would need to significantly gear up.
- Raise the top rate of income tax – <£1bn. The top rate of income tax (outside Scotland) is currently 45%. The rate was briefly 50% under Gordon Brown – could we return to that? I would be surprised. The previous 50p rate was in place so briefly that nobody’s quite sure what effect it had… but even in a best case analysis it would raise very little. Raising the top rate is a political signal more than it is a fiscal policy. And any increase would probably break Labour’s campaign pledge not to increase income tax.
- Raise the rate of income tax on dividend and/or interest income – £unknown. It’s sometimes suggested it’s unfair that the top rate of income tax is 45%, but the top rate of tax on dividend income is 39.35%. However dividends are usually paid out of income that’s been subject to corporation tax, meaning the actual effective rate of tax on dividends is around 56%. And even the 39.35% rate is one of the highest in the developed world.
- CGT on death – £unknown. There’s been considerable focus in the US on the ability of the very wealthy to use a “buy, borrow, die” strategy to avoid tax. A wealthy tech entrepreneur (for example) could be sitting on shares with a large capital gain, and so would face a considerable capital gains tax bill if they sold their shareholding. So what they do is borrow against their shares. They then receive a lump sum, just as they would if they had sold the shares, but with no tax at all. Of course they are paying a funding/interest cost, but this will usually be much lower than the CGT. Eventually they die, their children inherit the shares, but the historic capital gain disappears, so when the children sell, they are only taxed on the gain during their period of ownership. The original capital gain is wiped out.²⁸ The same strategy works in the UK.²⁹ One option for Rachel Reeves would be to trigger a CGT charge on death. However, the high resultant overall rate (up to 52%) could be politically unattractive.³⁰ The alternative would be to change the law so that, when you inherit property that is sitting at a capital gain, you inherit the capital gain too. So if you sell the property immediately you pay the same CGT as the original owner would have done. That seems a pretty rational change.³¹
- Wealth tax – £1bn to £26bn. Many campaigning groups are keen on a wealth tax targeted at the very wealthy – e.g. people with assets of more than £10m. But the practical experience of wealth taxes is that they’ve been failures, with only a handful of countries retaining a wealth tax³². The recent Spanish tax – which adopted the modish idea of only hitting the very wealthy – raised a pathetic €630m. It’s another failed wealth tax to join a long list. The academics on the Wealth Tax Commission recommended against an annual wealth tax, but supported a one-off retrospective tax raising up to £260bn over ten years. My feeling is that such an extraordinary tax would require a specific political mandate, which Labour do not have. And one-off taxes have a habit of not in fact being one-offs.
- CGT on unrealised gains – £unknown. Another proposal popular with campaigners is to tax capital gains annually, regardless of whether they are realised. No developed country has implemented such a tax. The Dutch tried, but their Supreme Court held it was contrary to the European Convention on Human Rights.³³ Kamala Harris is currently proposing a similar tax in the US, albeit only for taxpayers with wealth of $100m or more. There are four significant problems: valuation, dealing with unrealised losses, people leaving the UK before they hit the threshold, and other avoidance if (as is probably inevitable) some asset classes are excluded. If the US tax is implemented, and proves a success, then the UK (and others) may follow. Until then, I doubt Rachel Reeves would want to experiment with this one.
- Financial transaction tax – £7bn+.³⁴ This is another very popular tax amongst campaigners.³⁵ The usual argument goes: there is a huge volume of financial transactions. Placing a small tax on each of them would be barely noticed, but raise a lot of money. In 2019, Labour claimed they could raise £7bn. The catch lies in what precisely a “financial transaction tax” is. The idea was originated by James Tobin in 1972 – his idea was to “throw sand in the wheels” of international currency markets and tax every currency transaction in the world. The tax would “cascade” as trades flowed through currency markets, essentially ending them in their current form. That was Tobin’s aim – he wasn’t trying to raise revenue. Existing taxes on financial transactions, like UK stamp duty or the French, Italian and Spanish taxes³⁶, are quite different. They apply once, to the end-purchaser of securities, and not to market-makers and intermediaries – there is no “cascade effect”. They are designed not to deter transactions (although they have this effect to some degree) but to raise revenue. An actual FTT would necessarily end markets in their current form. The European Union spent years fruitlessly trying to come up with an FTT that didn’t have that effect – it failed, and gave up on the project. In my past life, I wrote about the problems with Labour’s proposal, and the problems with the EU proposal. UK stamp duty is already the highest such tax in any large economy. The question isn’t whether it should be increased – it’s whether we’d raise more tax revenue by abolishing it.
- CGT on peoples’ homes – £31bn.³⁷ We have a complete and unlimited capital gains tax exemption on homes – our “main residence”. On the face of it, that costs £31bn – quite the sum. So why not remove or limit the exemption? Because then you’re creating a cost for people moving house. Even if they’re moving from one house to another that’s similarly priced, they’d potentially have a large tax on their historic gain (a gain which has done them no good). It would make the current problems with stamp duty even worse. So realistically you can’t just tax all home sales – you have to introduce exemptions of some kind… so the £31bn figure is illusory. For this reason, those countries that in theory impose CGT on homes, in practice end up collecting little, thanks to a variety of exemptions, loopholes, and rules that let you roll the gain into your next house. Some people have suggested we just tax someone’s “final” sale. Good luck defining that. And the problem then is that people simply won’t sell, as death/inheritance wipes out all gains. You’re locking up the housing market, increasing what’s already a serious problem. Or you just tax at death, which is better dealt with by a general CGT reform. None of these ideas are very workable. This, plus the political reaction such a change would make, means I’d be amazed if it ever happens… although possibly maybe it’s something we could see for the very highest value properties?
- Means test the State pension – £1bn+. The State pension pays out about £11,500 per year. It’s easy to think that’s an irrelevant amount to wealthy retirees, and we should means test the pension to stop them benefiting. Given the Government spends about £138bn each year on pensions, blocking even just the wealthiest 1% from pensions would raise over £1bn. It seems a slam dunk. But that makes an elementary mistake³⁸ – a pension of £11,500 per year, updated with the “triple lock“, is actually a highly valuable asset. It would cost the average 66-year old somewhere over £250,000 to buy an asset like that.³⁹ ⁴⁰ ⁴¹ A family “just” in the wealthiest 1% has average assets of £1.9m per adult. So removing their pension would effectively expropriate over 10% of their wealth. That feels unjust. I doubt any Chancellor would do this.
- Increase the rate of VAT – £8bn+. This is one of the easiest way to raise significant sums – HMRC estimate that a 1% increase in VAT raises £8.6bn. The Cameron and Major Governments raised VAT upon coming into office, after saying they wouldn’t during the previous election campaign. But this feels very unlikely now.
My estimate of the actual yield of these “unlikely” items is between £18bn and £25bn, although some of the figures used by campaigners are much higher (£72bn+)

I believe this covers most of the serious suggestions that are out there – but if I’ve missed anything, or you have any new ideas, do please get in touch (or comment below).

Image by LGNSComms – own work, CC BY-SA 4.0, and photo-edited by Tax Policy Associates Ltd.
Footnotes
1. There were originally 29 proposals here; but someone in the comments pointed out I’d missed the, often suggested, idea that we tax capital gain on peoples’ homes. Another noted the financial transaction tax, and another tax on dividend/interest income. Then I added the DST and employer national insurance. Then fiscal drag. That takes us to 35. ↩︎
2. The source is the latest ONS data. ↩︎
3. Disclosure: my previous attempt to predict the tax actions of this Government was a dismal failure. So please take with a pinch of salt. I’m a tax lawyer, not a political columnist… ↩︎
4. Subject to an annual £60k limit, tapering down to £10k for high earners. ↩︎
5. Or indeed someone on £60k, with an anomalously high marginal rate of 57% thanks to child benefit clawback, or someone on £100k with an anomalously high marginal rate of 20,000%. ↩︎
6. Which has the disadvantage of in practice only applying to defined contribution pensions. ↩︎
7. We can roughly ballpark this if we assume £5-10bn of AIM/etc shares are held for IHT purposes, and 3% of all holders die each year in a non-exempt IHT event (i.e. excluding the first spouse). These figures come from discussions with private wealth and AIM specialists – note that Octopus alone manages £1.5bn in an AIM inheritance tax fund. Some AIM investors would move into EIS investments, but they are considerably more volatile and hence less attractive (even dangerous) from an IHT planning perspective. ↩︎
8. The headline and start of the article is misleading – trusts aren’t the reason the Duke of Westminster’s estate paid so little tax – it’s all about APR/BPR. ↩︎
9. The IFS and others believe the HMRC figures overstate the cost of a significant CGT increase; my understanding is that the dramatic HMRC figures reflect people accelerating gains to escape the increase, and then (after it comes in) deferring gains to try to wait it out. The first effect could be negated if the CGT rise was instantaneous, rather than taking effect from the next tax year. ↩︎
10. We could find no figures that enable a proper estimate to be produced – the £1bn is no more than an educated guess at the lower end of the yield – see the discussion here. ↩︎
11. Taxpayer responses, and the complexity of trust taxation, mean that determining the actual yield would be complicated. ↩︎
12. although it is economically akin to one. ↩︎
13. When the numbers get large, the answer can’t be the shareholders, because the bank profits aren’t enough to cover the figure. When the numbers are smaller, the answer depends on how competitive the market is for each of the banks’ products – in less competitive areas, banks have more scope to pass on the cost. ↩︎
14. i.e. the base cost should start at market value on the date a taxpayer becomes UK tax resident, not the historic base cost from when they lived abroad ↩︎
15. In other words, a deferred “exit tax”. ↩︎
16. The source for this and the other reliefs are the tables found here – this one is the CGT tab on the December 2023 non-structural reliefs table. ↩︎
17. 0% on children’s clothes costs £2bn/year. It’s hard to find good sources on the average spend on children’s clothes, but estimates range between £380 and £780, suggesting the VAT saving is around 10% of child benefit. ↩︎
18. However, please note the caveat about taking my predictions with a pinch of salt – I am not a political columnist. ↩︎
19. I said £7bn on Times Radio on 15 October off the top of my head – my apologies for the error. ↩︎
20. There isn’t just legal pedantry; there’s evidence that definitional problems meant that Mexican consumers switched to equally unhealthy but untaxed products, so that calorie consumption did not change (but there was an impact on sugary soft drink consumption, with a resultant improvement in dental health). ↩︎
21. Papers from health organisations report the Hungarian tax positively, but the evidence is much less conclusive. A study in 2021 found that the Hungarian tax had been effective in depressing consumption in economic downturns (when households are economising) but not at other times; and a more recent longitudinal study found that, over the long term, prices were higher but consumption returned to its previous level (and indeed increased). A systematic review in 2021 looked at over 2,000 studies and found no clear effect. The two studies cited by the IPPR are a theoretical modelling study and a review, neither of which refer to the contrary Mexican and Hungarian papers. ↩︎
22. Rather unsatisfactorily the source is a private conversation with someone knowledgeable and I can’t provide any further information. ↩︎
23. Although one could imagine designing a tax to minimise these effects, e.g. automatic deduction of 40% tax from winnings, with winnings and losses reported to HMRC by regulated gambling businesses, and no other losses permitted. ↩︎
24. The IPPR’s £2.9bn figure suggests no fall in gambling at all – this appears to be an error. ↩︎
25. Those who say that ISAs should be capped at £1m are engaging in symbolism not tax policy – there are only a few thousand people with £1m ISAs, and most of those will be only a little over the cap. A £1m cap would raise little. ↩︎
26. Disclosure: I have an ISA, but not a terribly large one. ↩︎
27. The £20k allowance was very generous when introduced in 2017/18, but has since been eroded by inflation. It’s fully used by about 7% of ISA holders, i.e. about 3% of all adults. ↩︎
28. Tax people would say it is “rebased” to current market value. ↩︎
29. Although it is less significant at the top end given we have fewer entrepreneurs, and less significant at the “bottom” end of wealth because it’s harder to obtain a margin loan. But people certainly do it with real estate. ↩︎
30. The political problem is that if someone owns a £1m portfolio that they bought for, say, £100,000 20 years ago, capital gains on death would be £252k and inheritance tax would be £400k – an overall effective tax rate of 65%. That is actually a rational result, because that’s what the rate would have been if they’d sold their house before dying. But politically I suspect the fear of an upfront high rate means this is a non-starter. ↩︎
31. With the inheritance tax liability then slightly lower to reflect the fact that the asset being inherited is pregnant with CGT. Alternatively the inheritance tax liability could be unchanged, but the CGT base cost adjusted to “credit” the IHT paid on the gain – a messier result. ↩︎
32. The exception is the Swiss wealth tax – but that is charged at a low rate on most people, not just the very wealthy, and so has little in common with the campaigners’ proposals. Switzerland has no capital gains tax or inheritance tax, and income tax on dividends is easily avoided. So the Swiss wealth tax in practice operates as a kind of minimum tax on wealth – but even with that tax, many Swiss cantons tax wealth much less than the UK (which is why so many very wealthy people move there). ↩︎
33. I am sceptical this is consistent with ECHR caselaw and I doubt a UK court would take the same approach, although I am sure it would consider the Dutch Supreme Court’s reasoning carefully. ↩︎
34. This was added thanks to a comment on X. ↩︎
35. I confess I find this depressing. The problems with an FTT are not obscure; they’re well known amongst economists and tax policy specialists. The question isn’t whether you agree or disagree with the tax, it’s whether it’s workable – and I’m not aware of anyone with expertise who thinks it is. NGOs like Oxfam wasted many £m of their donors’ money on a hopeless and counterproductive cause. And columnists who should have known better hailed the politics without thinking about the actual impact. ↩︎
36. The French, Italian and Spanish taxes were called “financial transaction taxes” to catch the wave of popularity of such taxes at the time. They are, however, essentially more limited versions of UK stamp duty reserve tax, and nothing like actual FTTs. ↩︎
37. This one wasn’t in the original list, but was picked up in a comment below – for which, thank you. ↩︎
38. Which I made myself until looking into the figures properly ↩︎
39. Annuities can be purchased in the market, but none have anything like the “triple lock”, so precisely pricing such a product is hard. A number of people with expertise kindly commented when I asked about this on social media, with estimates ranging from £250,000 to £400,000. ↩︎
40. An important caveat is that whilst this figure fairly reflects the commercial cost of such a pension, it doesn’t reflect the cost to the Government of providing it. In part because the Government has access to much cheaper funding than any commercial provider; in part because government will usually collect tax from the pension that it is paying (perhaps income tax on the pension itself; definitely VAT on purchases). ↩︎
41. Some people thought that a pension can’t be valued in this way, because the government could stop paying it at any time. That’s true in principle, but it’s also true in principle that a commercial annuity could stop paying, e.g. because the insurer goes bust. That is probably more likely than government suddenly ceasing to pay existing pensions. ↩︎
18 October 2024
How to reform income tax: end the high marginal rate scandal
It is a national scandal that teachers, doctors and others earning fairly ordinary salaries can face marginal tax rates of more than 60%, and sometimes approaching 80%. It’s inequitable and holds back growth. Rachel Reeves should commit to ending these anomalies.

This Government was elected on a platform of kickstarting economic growth. It has a large majority, and four or five years until the next election. It’s a rare chance for real pro-growth tax reform. That’s all the more necessary if we are going to see tax rises.

We’ll be presenting a series of tax reform proposals over the coming weeks. This is the fifth – you can see the complete set here.

Marginal rates

The “marginal rate” is the percentage of tax you’ll pay on your next £1 of income. It therefore affects your incentive to earn that £1.¹

If you doubt that, imagine that you pay tax at 20% on your £30k income, but the next £1 you earn will be taxed at a marginal rate of 100%. Would you work extra hours for zero after-tax pay? I think most people would not. The overall tax you pay would only be a bit over 20%, but your decision to work more hours is affected by your after-tax pay for those hours.

That seems a silly example (although we can find worse ones in our own tax system – see below). But a marginal rate below 100% will also change your incentives.

Perhaps you are only just managing to afford childcare, and every hour you earn increases your childcare costs? A marginal rate of 70% might mean your take-home pay is less than that childcare cost.

Or it may just be that you value your own time so that, if your take-home pay from working additional hours drops below a certain point, it’s not worth it to you.

Marginal rates – a normal example

In the current, 2024/25 tax year, combined income tax and national insurance rates for an employee look like this:²
- No tax on incomes below the £12,570 personal allowance.
- £12,570 to £50,270 – a combined income tax and employee national insurance rate of 28%
- £50,271 to £125,140 – a combined rate of 42%³
- Above £125,140 – a combined rate of 47%.
It’s important to realise that the different tax brackets only apply to income in that bracket. If you earn £50,271 you’re in the higher tax bracket, but you only pay 42% tax on £1. You still pay 28% tax on everything you earned before above the personal allowance. This is unfortunately not very well understood.

Imagine Bob is an employee earning £12,569. None of his income is taxed. Bob has the opportunity⁴ to earn an additional £1,000, putting him in the 28% tax bracket.⁵

There are three ways we could describe Bob’s position after earning that £1,000.
1. The applicable headline rate. Bob is a basic rate 28% taxpayer.
2. The overall effective tax rate. This is the total tax paid divided by Bob’s income. Total tax paid = £1,000 x 28% = £280. Income = £13,570. So effective tax rate is 280/13570 = about 2%.
3. The marginal rate – the percentage tax you’re paying on that new £1,000. This is 280/1000 = 28%.
Each of these has their uses.

The first figure is simple.

The second is useful for assessing how much tax Bob pays overall. If a political party proposed a sweeping set of tax reforms, Bob would be very interested in the impact on his effective rate.

But the third – the marginal rate – is important, because it affects Bob’s incentive to earn the additional pound. Right now it’s the same as the headline rate – but that’s not always the case…

Marginal rates – the problem

Jane is earning £60k and claiming child benefit for three children. That’s worth £3,094.

She’s now in the 42% tax band.⁶ Jane still pays basic rate tax for her income between £12,570 and £50,270, but now pays 42% tax for everything over that. So her total tax bill is (50270 – 12570) * 28% + (60000-50270) * 42% = £14,643 and Jane takes home £45,357.

Jane is thinking of working a few more hours to earn another £1,000. She’s in the higher tax band – so in a sane world she’d expect another £420 of tax, and a marginal rate of 42%.

But that is not the result. Once Jane’s income hits £60,200, the “High Income Child Benefit Charge” (introduced by George Osborne) starts to apply to claw back her child benefit – 1% for every £200 of earnings.

So that £1,000 of additional earnings costs Jane HICBC of £154.70, on top of the £420 of “normal” tax. A total of £565.

So how do we describe Jane’s position after earning that £1,000?
1. The applicable headline rate. Jane is a higher rate 42% taxpayer.
2. The overall effective tax rate – the total tax paid divided by Jane’s income. That’s 15207/61000 = about 25%.
3. The marginal rate – the tax Jane is paying on that new £1,000. This is 56.5% – and we will have the same result for all incomes between £60k and £80k. ⁷
As I mentioned at the start, there can be practical reasons for people to turn down work if the marginal tax rate gets too high – but there are also psychological factors. For many people, 50% feels like a high rate.

Charting the effect

We can chart Jane’s marginal rate for each pound of income she could earn. Incomes along the bottom, marginal rate along the top:

You can see the HICBC as the “tower” between £60k and £80k, which should be a smooth 42% plateau. Instead it hits 57%. (I’m hiding what happens after £100k)

The HICBC is a gimmick which enabled George Osborne to somewhat-surreptitiously raise tax on people on high incomes without raising the tax rate itself.

It’s a really bad policy:
- It means that Jane pays a higher marginal rate rate than someone earning £90k, or indeed £900k. Where’s the logic in that?
- The way in which HICBC works creates a nasty trap for the unwary, with thousands of people accidentally incurring HMRC penalties.
The politics are nice and intuitive – surely it’s not right for people on high incomes to receive child benefit? But the reality is that this logic inexorably leads to a high marginal rate, and a cumbersome and sometimes unjust collection mechanism.

Can it get worse?

Very much worse.

George Osborne’s HICBC was copying a trick invented by Gordon Brown to clawback the personal allowance for people earning £100k.

Again, the politics are nice, but the consequences are a mess.

If Jane starts earning between £100k and £125k then she faces a marginal tax rate of 62%. It then drops to 47% from £125k. Her marginal rate chart looks like this:

Needless to say, 62% is a very high rate.

The graduate tax

And if Jane has a student loan, that will add on 9% to the marginal rate, meaning that her marginal rate chart now looks like this:

The student loan system behaves like a crude graduate tax so that, between £100k and £125k, Jane’s marginal rate reaches 71%.

The anomalous marginal rates

Student loan repayments, personal allowance tapering and child benefit clawback all result in high marginal rates. But the rates are at least within “normal” bounds – they don’t exceed 100%.

There are points at which the marginal rate sails way over 100%, meaning that you are actually worse off after a pay rise. This occurs when tax benefits/allowances have a “cliff edge” after which they disappear completely:
- The £1,000 personal savings allowance drops to £500 once you hit the higher rate band, and to zero once you hit the additional rate band.⁸
- The marriage allowance lets a non-working spouse transfer £1,260 of their unused personal allowance to their partner, if they’re earning less than the £50,270 higher rate threshold. So it’s worth £252 – and it disappears once the higher rate band is hit.
These are irrational rules, but the tax at stake is small, and so the high marginal rate is limited to a small range of incomes. The significance is limited.

A much more significant cliff-edge effect results from the childcare schemes created by the previous Government. These provide generous subsidies that are removed suddenly when your wage hits £100,000. That creates a marginal rate that is truly anomalous – so high it is hard to calculate.

The childcare support scheme for parents with children under 3 could be worth £10,000 per child for parents living in London. And it vanishes once one parent’s earnings hit £100k. Here’s what that does to the marginal tax rate:⁹

The 20,000% spike at £100,000 is absolutely not a joke – someone earning £99,999.99 with two children under three in London will lose an immediate £20k if they earn a penny more.¹⁰ And the negative spike at £8,668 is because it’s at that point you qualify for the scheme – you have a huge negative marginal tax rate (which has the potential to create obvious distortions of its own).

The practical effect is clearer if we plot gross vs net income:

After-tax income drops calamitously at £100k, and doesn’t recover to where it was until the gross salary hits £145k.

This is ignoring the pre-existing tax-free childcare scheme, which also vanishes at £100k. The amounts are less (usually under c£7k/child) so the curve would look less dramatic. However, as the scheme applies to children under 11, taxpayers feel these effects for many more years.

Marginal rates for high earners

If Jane started earning beyond £145k, all of these problems go away, and she has a nice straightforward marginal rate of 47% forever.¹¹

What kind of tax system creates complexities and high marginal rates for people earning £60-125k, and simplicity and lower marginal rates for people earning more than £125k?

The complete picture

Here’s an interactive chart showing all the UK and Scottish marginal rates. You can click on the legend at the bottom to see the effect of child benefit clawback and student loans. Or you can view in fullscreen here.¹²

You’ll see that if you are a recent graduate living in Scotland with three children under 18, between £100k and £125k you face a marginal rate of 78.5%.¹³

The chart doesn’t include marriage allowance, childcare subsidies and the other extremely anomalous marginal rates, as the rates are so high that they make the chart unreadable.

The effect

We’ve received many reports saying that high marginal rates affecting senior doctors/consultants are an important factor in the NHS’s current staffing problems – exacerbated by the fact that the starting salary for a full time consultant is just under £100,000.

But it’s important not to just focus on the impact on jobs that we might think are of particular societal importance.

It’s also problematic if an accountant, estate agent or telephone sanitiser turns away work because of high marginal rates – it represents lost economic growth and lost tax revenue.¹⁴ It also makes people miserable.

Sometimes people take the work, but use salary sacrifice or additional pension contributions so their taxable income doesn’t hit the threshold. But that doesn’t work for everyone; sometimes they’ve hit the pensions allowance; sometimes it doesn’t always make sense to work harder now, for money that they can’t touch for years.

We can see the effect in this chart from the Economist, based on data from the Centre for the Analysis of Taxation:

That cliff at the £100k point is people holding back their earnings so they don’t hit the £100k marginal rates. That represents a loss of working hours to the public and private sectors and a macroeconomic impact on the UK as a whole. Quite how large an impact is an interesting question, which I hope someone looks at.

What’s the solution?

These problems are getting worse over time, as fiscal drag takes more and more people into the thresholds that trigger these high marginal rates.

When Gordon Brown introduced the personal allowance taper in 2009, only 2% of taxpayers earned £100,000; by 2025/26 over 5% of taxpayers will. When George Osborne introduced child benefit clawback a year later, only 8% if taxpayers earned £50,000; by 2025/26 over 20% of taxpayers will (which is likely what motivated Jeremy Hunt to increase the threshold to £60,000).¹⁵

This creates a double problem. First, the economic distortions created by the high marginal rates start to impact into mainstream occupations (doctors, teachers). Second, the revenues raised by the marginal rates are now so great that they become hard to repeal.

Ending the high marginal rates in one Budget is, therefore, not realistic – particularly in the current fiscal environment. The cost of making child benefit, the personal allowance, and childcare subsidies universal, would be expensive (somewhere between £5-10bn, depending on your assumptions). The obvious way of funding this – increasing income tax on high earners, appears to have been ruled out.

We would suggest four modest steps:
- An acknowledgment that the top marginal rates are damagingly high, and that the Government will take steps to reduce them when economic circumstances permit.
- Some immediate easing of the worst effects, at minimal cost to the Exchequer, for example by smoothing out the personal allowance taper over a longer stretch of income, therefore reducing the top marginal rate.
- A commitment to uprate the thresholds for the HICBC, personal allowance clawback and childcare subsidy in line with earnings growth.
- A commitment that no steps will be taken to make the high marginal rates worse, or create new ones.
- A new rule that Budgets will be accompanied by an OBS scoring of the highest income tax marginal rates before and after the budget.
There’s a coherent political case for people on high incomes paying higher tax (whether we agree with it or not). There is no coherent case for people earning £60k, or £100k, to pay a higher marginal rate than someone earning £1m. It’s inequitable and economically damaging. Ms Reeves should call time on high marginal rates.

Graphic by DALL-E 3: “A businesswoman climbing a set of stairs labeled with different tax percentages, with the middle step showing 100% and the others smaller %s, representing the different marginal tax rates. Widescreen. Cinematic.”
Footnotes
1. Everything interesting happens at the margin. For more on why that is, and some international context, there’s a fascinating paper by the Tax Foundation here. ↩︎
2. Ignoring Scotland for the moment; we’ll get to the Scottish rates later. ↩︎
3. That’s the headline rate – the actual rate is different… for which see further below. ↩︎
4. Perhaps he is self-employed and chooses which clients/work he takes on. Perhaps he is employed, and can choose how much overtime to work, or whether to accept a promotion. Perhaps he is going back to work after time spent looking after young children. Many people have the ability to work additional hours if they wish. ↩︎
5. Strictly that doesn’t exist – you’re paying basic rate tax plus Class 1 employee national insurance contributions. But realistically this amounts to 28% tax. I’m going to count income tax and national insurance as if they’re one tax throughout this article. ↩︎
6. Strictly that doesn’t exist – she’s paying 40% higher rate tax plus 2% Class 1 employee national insurance contributions. Realistically this is 42% tax. ↩︎
7. Note that the marginal rate will vary depending on how we calculate it, and the size of the “perturbation” we calculate the marginal rate over. Most textbooks define the marginal rate as the % tax on the next pound/dollar of income. Say that we looked at the tax Jane paid on £60,199 of income – that would be £14,726. A £1 pay rise takes her to £60,200, and tips her into the HICBC – she now pays £0.42 more higher rate tax, plus an additional HICBC charge of 1% of your child benefit – £30.94 (assuming you have three kids). So the marginal rate is 100 * (£31.63/£1) = 3,163%. This is not very meaningful, as nobody’s incentives are going to be affected by the consequence of a £1 pay rise. It also creates the silly result that the marginal rate on her next £1 pay rise will be 42%, because the HICBC won’t increase until she gets to £60,400. So it’s better to use a more realistic figure like £1,000. The practical consequence is that the 56.5% figure isn’t *the* correct answer, but it’s a sensible and useful one, and it’s important to check that weird marginal rates aren’t just an artifact of the chosen perturbation. Our charting code uses a £100 perturbation for convenience, but then “smooths” the HICBC formula so the marginal rate doesn’t leap up and down. ↩︎
8. The £5,000 starting rate for savings tapers out, but slowly, and so it just somewhat increases the marginal rate – it’s also less relevant for most people. ↩︎
9. The chart is for a single earner, but if they have a partner, the partner would also need to be earning at least £8,668 (the national minimum wage for 16 hours a week) ↩︎
10. The 20,000% figure is a consequence of the code that produces the chart incrementing the gross salary by £100 in each step. It would be a mere 2,000% if we used the same £1,000 perturbation as above. Two million percent if we used the conventional £1 perturbation. Or two hundred million percent if we looked at the one penny increase. ↩︎
11. Ignoring pensions, which create a marginal rate problem all of their own… ↩︎
12. The code and underlying data are available here. ↩︎
13. Note that the gap between the Scottish and UK marginal rates is much higher than the gap between statutory rates. The HICBC and personal allowance tapers have a bigger effect on higher rates, and so magnify the difference. ↩︎
14. Particularly when the economy is running at very little spare capacity; it would be different if there was high unemployment/plenty of spare capacity, because the work that was turned away would (at least in theory, in the long term) be undertaken by others ↩︎
15. Data from the HMRC percentile stats, uprated for post-2022 inflation. ↩︎
17 October 2024
How to end offshore secrecy – a new proposal
Offshore secrecy is a problem. Tax avoidance, tax evasion, sanctions evasion, drug cartels, corruption, questionable government contracts – all have been enabled by offshore companies whose ownership and accounts are hidden from public view.

We believe everyone would benefit if all companies, everywhere in the world, had to publish basic information: their shareholders, directors, beneficial owners and accounts. But previous attempts to persuade or force this result have stalled.

We’re presenting an alternative. Companies across the world would be invited to publish their basic corporate information on Companies House. Companies that don’t would be subject to a 10% “transparency levy” on all payments received from the UK, and barred from public sector procurement contracts. Companies from countries with fully open corporate registers would be entirely exempt.

The UK could introduce the transparency levy unilaterally. We’d anticipate it would then be implemented by many other countries – OECD members and developing countries alike. We’d see a new wave of corporate transparency. All it takes is for the UK to take the first step.

The case for open company registers

Journalists frequently find their investigations stymied by offshore secrecy. We might trace a dubious business to Belize, or to Arkansas, but it’s then impossible to find out who owns it, who runs it, or what its business actually involves.

This is an obvious problem for journalists investigating malpractice and corruption; it’s also a problem for banks deciding whether or not to open a bank account for a company owned by an offshore entity.¹

On the face of it, law enforcement and tax authorities don’t need open registers. The Financial Action Task Force and the OECD have made considerable progress in ensuring that, in theory, law enforcement has full access to company information (including the identity of companies’ beneficial owners). But in practice it’s often hard to obtain cross-border access; formal requests have to be made, the process can be slow, and bad actors can use legal proceedings to slow things down further (giving them the time to move their assets elsewhere).

Worse still, many countries still don’t require key information to be filed at all. The US, Bermuda and Belize, for example, don’t require companies to file accounts. If the local authorities don’t have the information, it’s impossible for foreign authorities to obtain it, short of complex local litigation.

So offshore secrecy doesn’t just block investigations by journalists and financial institutions; in practice it’s a significant impediment for investigations by public authorities. That’s why there’s a strong public interest in open corporate registers.

The current problem

Anyone can go onto the UK’s Companies House and find all the filings made by any company. This includes its shareholders, directors, accounts, and the identity of its true human owners (the “persons with significant control”², or “beneficial owners”). This is all searchable, for free, by any member of the public.

This is not typical. This interactive chart shows how open each country’s corporate registry is. All thanks to data from opencorporates.com, and you can click on a country to go to the individual assessment:

Many countries have public registers which show companies’ directors, shareholders and accounts. But important jurisdictions like the US and Dubai don’t, and tax havens almost never do (Gibraltar is an unusual exception).

The UK has one of the more open company registries in the world ³ (the best, in our view, is Estonia, where the company registry search is both comprehensive and user-friendly).

Fewer countries still have open registers of beneficial owners – the individuals who really run a company (sometimes hidden by layers of ownership, trusts and other arrangements).⁴ The EU introduced mandatory public beneficial ownership registers in 2020, but an unfortunate decision of the CJEU blocked this, resulting in a significant reversal of the progress that had been made. Under the new anti-money laundering directive, the registers will be open, but only to people with a “legitimate interest” in money laundering. So, for example, it may not be possible to search the French register when investigating tax avoidance.

There are around 35 countries with open beneficial ownership registers:⁵

There are other countries, like the US, where there is a register, but it’s only accessible by local law enforcement.

The problem is that bad actors will gravitate towards countries that don’t have open registers. There is widespread agreement that this needs to change. The question is: how?

The current solution

International efforts to persuade tax havens to open up their corporate registers have largely been unsuccessful.

The UK has taken direct steps to require the Crown Dependencies (e.g. Jersey) and Overseas Territories (e.g. Cayman Islands) to have open beneficial ownership registers, overriding their local legislatures. This continues to meet resistance.

The moral case for requiring tax havens to have open beneficial ownership registers was seriously damaged when the CJEU blocked open registers across the EU on the basis they conflicted with beneficial owners’ right to privacy. If Cyprus and Malta don’t have open registers, why should Jersey? And why the focus on so-called “tax havens” (typically small islands) when the richest country in the world has some of the least transparent company laws in the world?

There are also obvious practical problems with forcing the CDs/OTs to adopt open beneficial ownership registers. Those with most to fear from transparency will move elsewhere. Increasingly that means Dubai, which has essentially zero corporate transparency. There is also a valid fear on the part of the Crown Dependencies/Overseas Territories that legitimate clients who wish privacy would also relocate to Dubai and elsewhere, putting them at a competitive disadvantage. And sometimes countries resist for darker reasons.

In any event, the project is limited in scope. There are no current plans to require “tax havens” (or indeed anyone) to publish other corporate information, in particular accounts.

We need something that is simultaneously more democratic (which doesn’t involve overriding self-governing territories), more ambitious (not just beneficial ownership) and fairer (not just “tax havens”).

An alternative model – FATCA

In the 2000s, following a series of bank secrecy scandals, the US Government resolved to require banks across the world to report their US accountholders to the IRS.⁶

The US of course had no way to require this as a matter of law. So it did something much smarter.

Under what became known as “FATCA“⁷, the US asked financial institutions worldwide to agree to report their US accountholders to the IRS. Financial institutions could freely choose whether to sign up to FATCA. But if a financial institution chose not to, it would be subject to a 30% withholding tax⁸ on all its US income. So, in reality, financial institutions had no choice at all – they almost all ended up becoming compliant with FATCA.⁹

This was highly controversial, but a brilliant innovation. The original idea was conceived by the Congressional Black Caucus, who saw it as both a more effective and fairer strategy than the previous approach of targeting small island tax havens for economic sanctions, and letting larger states off the hook. FATCA treated all countries equally.

OECD members eventually responded by creating a multilateral version of FATCA – the Common Reporting Standard.¹⁰ Thanks to CRS, over €12 trillion of accounts are automatically reported between countries every year. If a UK resident opens a bank account almost anywhere in the world, it will be automatically reported to HMRC. That is all thanks to FATCA, and the revolution in cross-border reporting that it created.

Our proposal is inspired by FATCA – we believe the UK should use a unilateral measure to incentivise businesses and countries to move towards transparency.

The proposal – the transparency levy

The following paragraphs summarise our proposal.

This is very much a “proof of concept”, and not a fully-worked-out technical proposal, but we’ve included some of the legal detail in footnotes.

Disclosed entities

The key concept is a “disclosed entity” – an entity that publishes “transparency¹¹ disclosure” about itself. That means it lists its shareholders, directors and beneficial owners, and publishes annual accounts.¹²

As a policy matter, we want every company, partnership, trust or other entity¹³ that has any dealings with the UK to be a “disclosed entity”. An entity that isn’t, is an “undisclosed entity“.

Where an entity is incorporated in a country (like Denmark, Estonia or the UK) which already has a free public register including “transparency disclosure” – then that company would be a “disclosed entity” automatically. It wouldn’t have to do anything. HMRC would publish a list of all such countries (“disclosing jurisdictions“).¹⁴ Listed companies¹⁵ would also become “disclosed entities” automatically, given they don’t have beneficial owners in the usual sense, and already publish detailed accounts.

At the start, many countries in the world wouldn’t be “disclosing jurisdictions”, because they don’t have open company registries publishing transparency disclosure. A company in such a country could still opt to be a “disclosed entity” by filing its own transparency disclosure with Companies House in the UK. Companies House already registers plenty of foreign companies – little would be required in terms of systems/IT changes.¹⁶

So every company, trust and partnership in the world could become a “disclosed entity”. Why would it do this? Because of the transparency levy and the procurement rule.

The transparency levy

Anyone in the UK making a payment to an “undisclosed entity” would have to withhold a 10% “transparency levy“.¹⁷

So, for example, if a UK company was making a £100 interest payment to a BVI company which hadn’t registered with Companies House and become a “disclosed entity”, the UK company would deduct £10 for the transparency levy and the BVI company would only receive £90. The transparency levy would be paid to HMRC.

Payments to “disclosed entities” would not be subject to the transparency levy. It would be simple for UK payers to check if they were paying an entity which was disclosed.¹⁸

The transparency levy could simply apply to all payments, regardless of their nature, but it would be simplest – at least at first – to apply it to the narrower category of payments that are traditionally subject to withholding tax. That means UK source rent, interest¹⁹, dividends²⁰, royalties and annual payments. By limiting the levy to financial payments, there’s no impact, for example, on a small business supplying goods or services to the UK.²¹

The transparency levy therefore creates a powerful economic incentive for foreign entities to become “disclosed entities”, either by registering their own details with Companies House, or to pushing their government to upgrade their public register so the country becomes a “disclosing jurisdiction”.

Who applies the levy?

Where a bank or other intermediary is making a payment, they would be subject to an obligation to withhold the transparency levy (as they are at present for UK interest withholding tax). In other cases, the payer would withhold the levy.

The transparency levy would largely be self-policing, because all the risk of failing to apply would fall on the UK payer, but the cost of the levy falls on the recipient. UK payers are therefore incentivised to err on the side of caution and apply the levy even when the technical position is unclear.²² ²³

UK individuals and companies would list, in their tax returns, the foreign entities they’d made payments to, and whether they were disclosed entities or undisclosed entities.²⁴

The procurement rule

The “procurement rule” is simple – no supplier would be able to enter into a contract with UK central or local government (procurement, real estate or anything else) unless it is a “disclosed entity”.²⁵

What about avoidance and evasion?

There are two obvious approaches bad actors would take to avoid/evade these rules:
- First, by simply filing false information (as is currently endemic with Companies House reporting).
- Second, by registering one offshore entity, but having it secretly make payments “behind the scenes” to another undisclosed offshore entity. In tax terminology, the first entity is a “conduit“.
How to deter and prevent such behaviour?

There would have to be active enforcement by HMRC, to prevent the new register duplicating the existing problems with Companies House. But HMRC has the considerable advantage that (unlike Companies House) it has enforcement powers and expertise.

HMRC would have to be given additional powers. For example:
- If HMRC has reasonable grounds for believing that a “disclosed entity” has filed false information, or is acting as a conduit for an undisclosed entity, it would require the entity to remedy the situation. If the entity doesn’t, it would be put on a “bad list” of non-compliant entities.²⁶ Payments to an entity found to be non-compliant would become subject to the transparency levy, with an additional charge to make up for the period in which it was wrongly claiming to be compliant.²⁷
- UK companies would be liable for avoidance by offshore “conduit” companies if they are in the same group.
- Making a false declaration would be a criminal offence for a company’s directors; dishonestly failing to withhold the levy would be a criminal offence for the payer’s directors (in the same way as for any tax). However, in most cases it would be the transparency levy mechanics which would incentivise compliance, not the (usually remote) prospect of criminal prosecution.
Would it be legal for the UK to introduce the transparency levy?

We don’t believe there are legal impediments that would prevent the introduction of the transparency levy:
- The levy would not be subject to (or contravene) the UK’s tax treaties, because the treaties only cover certain designated taxes, and the transparency levy is different from all of them.²⁸
- The levy should be compatible with the UK’s WTO obligations, as it is being introduced to help counter tax avoidance, tax evasion, sanctions evasion, money laundering and corruption.²⁹ ³⁰
- If adopted by EU Member States, the levy should be consistent with EU law, because it applies equally to all payments, depending on the objective status of the recipient, and is not discriminatory. So there should be no breach of the free movement of capital or the freedom of establishment.
- There should be no GDPR violation; in most EU countries, director and shareholder information is already published. Beneficial ownership information often isn’t, and in those countries we anticipate companies may need to obtain the consent of their beneficial owners before registering and becoming “disclosed entities”. There is an obvious economic incentive on beneficial owners to give this consent.
There have been a number of recent legal challenges to transparency initiatives – but a UK transparency levy would be introduced by primary legislation, and so wouldn’t be subject to legal challenge.

Implementation

It’s anticipated that relatively few payments would end up being subject to the levy, because most affected businesses would simply become disclosed entities. However the total amount of in-scope payments is so vast – likely in the trillions of pounds – that the transparency levy would still likely raise a large sum, particularly in the early years.

The funding raised from the transparency levy would be used to finance the additional work for Companies House and HMRC, and to help the Crown Dependencies and Overseas Territories build capacity for their own open registers (if that’s what they wish to do).

Implementation would be phased, with (for example) entities able to register as disclosed entities through the course of 2026, and the transparency levy and procurement rule both starting to apply from 2027.³¹ The scope of the levy could potentially expand over time, from dividends, interest, royalties and rent in 2027, to include fees and sale proceeds from 2028, and all payments from 2029. But it is possible that, as was the case with FATCA³², global adoption would render an expansion of the rules unnecessary.

Wouldn’t the levy stop people from doing business with the UK?

The transparency levy copies the brilliant innovation at the heart of FATCA – the creation of a powerful incentive for foreign companies to voluntarily comply with a rule. There is, however, one very important difference: FATCA was complicated and expensive for financial institutions – they had to create entirely new systems to operationalise the reporting of all their US accounts, costing many billions of dollars. By contrast, it would take most companies less than an hour to register with Companies House, submit their corporate information, and update it once per year. The transparency levy should be no impediment to legitimate business.

And the basic concept here is nothing new. Businesses that operate cross-border are used to the idea that, if they want to escape withholding taxes, they have to register, or complete a form.

Won’t the UK come under significant pressure from other countries not to introduce the levy?

This is a complex question, and dependent on unpredictable geopolitical events (e.g. the outcome of the upcoming US Presidential election). A Kamala Harris administration might well welcome a global transparency initiative that requires no US legislation. And there is strong support for corporate transparency across the world, particularly in the European Union, South/Latin America and Africa.

The lesson from FATCA is that, when one country announces its intention to introduce a measure of this kind, the first reaction is complaints that it amounts to extraterritorial legislation. The second reaction is that other countries see the benefit and adopt similar measures.

The UK could be pushing at an open door.

Multilateral implementation

Whilst the UK could implement the transparency levy unilaterally, the ideal outcome is that other countries would adopt it, either creating their own registration system, or taking advantage of the UK’s own implementation and simply cross-referencing Companies House.³³

The UK should therefore advocate for international adoption of a transparency levy at the UN and OECD, and in bilateral discussions with other countries.

The more countries that implement the levy, the greater the moral and practical³⁴ pressure for widespread adoption of open registers. And the easier/cheaper it becomes for other countries to implement the levy, because they can “piggy-back” on existing implementations.

Why it works

The transparency levy is a radical new way of solving an old problem:
- It’s a path to worldwide corporate transparency that doesn’t require countries to act against their own immediate interest. We wouldn’t be begging Dubai to comply; we’d be giving Dubai companies a strong incentive to comply, if they want to continue to do business with the UK.
- We’d be creating an incentive for countries to create their own open corporate registers, to save their businesses the bother of individually registering with the UK’s Companies House.³⁵
- The transparency levy treats all countries equally – it doesn’t attack politically vulnerable small islands whilst ignoring the widespread secrecy problem in the US and EU.
- The transparency levy uses a well established pre-existing concept. Many countries impose withholding taxes on outbound payments unless procedural formalities are completed. The purpose and details of the transparency levy are different, but the basic idea is nothing new.
- The procurement rule avoids subjective judgment about tax avoidance, but ensures there won’t be a repeat of valuable contracts being awarded to businesses whose ultimate ownership is highly opaque.
- The disclosure, levy and procurement regime is reasonably straightforward for the UK to implement, building on an existing Companies House system and existing withholding tax mechanics.
- Once the UK has implemented, it becomes easy for others, particularly developing countries, to follow. They wouldn’t need to build any kind of complex registration/compliance system, just enact a transparency levy into their own local law, and cross-refer to the register kept by the UK Companies House.³⁶
We welcome comments, criticisms and suggestions.

Many thanks to all the tax lawyers, trade lawyers, regulatory lawyers and transparency campaigners who contributed to this proposal.

Image generated with Flux AI: “A secure safe containing secret financial documents”
Footnotes
1. In practice the most important barrier to money laundering and other financial crime is the banks, and their anti-money laundering (AML) and “know your client” (KYC) teams. They, of course, have no special investigatory powers. Open registers would help them do their job more effectively, and that would benefit all of us. ↩︎
2. It is unfortunate that UK company law uses the PSC concept; it would have been better to align with the well-understood “beneficial ownership” concept. This paper won’t go into the differences between the two ↩︎
3. Companies House has many problems, largely caused by a failure to check data and enforce the rules (which may be about to get better). We would also be cautious about assuming that the UK is worse than others, as opposed to just having more companies, and more widely publicised problems). ↩︎
4. Note that some sources, like openownership.org, conflate closed registers (open only to local law enforcement) with open registers). ↩︎
5. Data from openownership.org; code to display map by Tax Policy Associates Ltd, and available on our GitHub here. ↩︎
6. The US has a particular issue here, because it taxes US citizens no matter where they live. That “citizenship based taxation” is in our view unfair – more on that here – but that doesn’t change our view of the effectiveness of FATCA. The US couldn’t in practice enforce citizenship-based tax against some of its expats before FATCA – FATCA meant that it could. So most of the complaints about FATCA, are in fact complaints about citizenship-based taxation. ↩︎
7. The Wikipedia article on FATCA is a pretty good summary of how things stood 10 years ago, but unfortunately is now mostly rather out of date ↩︎
8. A “withholding tax” is a requirement on a person making a payment to deduct from that payment an amount representing tax that is really the liability of the recipient. Withholding taxes are widely used in circumstances where it is easier for a tax authority to collect tax from the payer than the recipient. The case people are most familiar with is their own employment income, where in most countries the employer withholds the tax. But it is also very common for tax authorities to require tax to be withheld from cross-border payments, where the tax authority has little ability to tax a foreign recipient. ↩︎
9. This is a very simplified history. Data protection and bank secrecy laws meant that most banks feared they wouldn’t be able to voluntarily provide account information to the IRS. So they pushed their governments to enter into agreements with the US under which (e.g.) the French government would require its local financial institutions to make reports to the IRS (solving the data privacy problem) and in return the US would deem all French financial institutions to be compliant. This would never have happened if it wasn’t for the original promise/threat of a withholding tax. ↩︎
10. CRS was entirely consensual, with no withholding obligation to prod people into compliance. But, once a country had accepted the principle of FATCA, it was very hard for it to refuse to sign up to CRS. Large countries acted out of self-interest. Small countries fell into line. ↩︎
11. Discussion can be impeded by the fact that “transparency” can, in a tax context, mean that an entity is not subject to tax itself, but whose shareholders, partners or members are taxed as if they were carrying on the business. The entity is then “tax transparent” or “fiscally transparent”. If, alternatively, it is taxed like a normal company, it is referred to as being “opaque”. When we use the words “transparent” and “opaque” in this proposal, we are using the more colloquial meaning of whether the company’s details are publicly disclosed ↩︎
12. Thought would need to be given as to what standard is required for the accounts. The current standard for small UK companies – which is about to change – feels insufficient given that it doesn’t include the P&L. ↩︎
13. Whether or not strictly a legal entity under its local law. So, for example, unincorporated associations would also be included – past regulations that have omitted unincorporated associations have created loopholes. ↩︎
14. It would have to be a little different for trusts and partnerships, which traditionally don’t register with company registries at all. Practically, a separate “disclosed trust/partnership” concept would probably be required. As of today, it’s possible that no country in the world would be a “disclosing jurisdiction” for trusts and partnerships – the UK certainly wouldn’t be. So all trusts and partnerships receiving payments, including UK trusts and partnerships, would have to register with Companies House. This is a feature, not a bug. ↩︎
15. At least those listed on major markets ↩︎
16. i.e. because Companies House already registers foreign companies with a UK branch, and foreign companies that own UK land. ↩︎
17. The levy of course wouldn’t have to be 10%. A levy that was too small (say 1%) could be regarded by some bad actors as an acceptable price for secrecy, and so fail to achieve change. 5% might be sufficient. 20% might be too high. But it is also advantageous to raise some funds in the short term to fund implementation in the UK and abroad. This would need careful thought. ↩︎
18. Indeed much simpler than it is to apply current UK withholding tax rules, which are notoriously awkward. ↩︎
19. The quoted Eurobond for listed bonds needs some thought. It’s not workable to e.g. require Marks & Spencers plc to identify individual bondholders, because it won’t be able to (there is a nice explanation here as to why that is). However simply excluding listed bonds creates a loophole. There would have to be an anti-avoidance rule so that, for example, the transparency levy applies to listed bonds issued between connected parties. ↩︎
20. Listed shares would also need thought; again, they should be generally excluded subject to an anti-avoidance rule ↩︎
21. And if expanded to all payments, thought would need to be given as to how to avoid creating a barrier for small businesses, particularly those in developing countries. ↩︎
22. And to ensure this, any contractual term that purported to prevent the levy being withheld, or make the cost of it sit with the payer (a “gross-up” or indemnity) would be void. That’s fair given that it’s entirely within a foreign company’s control whether to comply and become a “disclosed entity”. Such a rule is not unprecedented – the UK has had a rule for over a hundred years that any attempt to make one party indemnify another party’s stamp duty is void. Other countries (e.g. Switzerland) have statutory rules that prevent any attempt to make the payer contractually liable for the cost of a withholding tax caused by the recipient’s status. ↩︎
23. There would need to be a refund mechanism, so that if the transparency levy is wrongly applied (e.g. the payer thought the recipient was an undisclosed entity when they were in fact a disclosed entity), the recipient can reclaim it. However, there should be no way for an undisclosed entity to be subject to the levy, become a disclosed entity, and then reclaim historic levies it had been subject to. That would enable people to play games with timing of disclosure. The transparency levy is not a tax, and standard refund mechanisms are not appropriate. ↩︎
24. The fact a payment was made to an undisclosed entity should be of interest to HMRC, and other regulatory and enforcement authorities, given that (after the rules had bedded in) all legitimate parties would be expected to become disclosed entities. Consideration could also be given to publishing the number/amount of transparency levy payments each company makes. ↩︎
25. This goes further than the new requirement that contracting parties must declare their beneficial ownership. ↩︎
26. That mirrors the approach taken under FATCA, where (for example) a UK financial institution is automatically deemed to be compliant with FATCA, but in the event of “significant non-compliance”, they lose that status. ↩︎
27. There is a similar mechanic in the UK’s existing interest withholding tax rules; if a foreign company claims relief from withholding under a tax treaty, but wasn’t actually eligible, then HMRC can direct the UK payer to make “catch-up” withholdings so that the full amount of historic tax is collected. ↩︎
28. See e.g. Article 2 of the UK/France treaty. The question is whether the transparency levy is “identical or substantially similar to” income tax. It isn’t. The levy isn’t related to profit in any way (there are no permitted deductions), and wouldn’t be creditable against any UK tax liability the foreign entity might have). Note that the question isn’t whether the levy is similar to “withholding tax”, because there is strictly no such tax. Withholding tax is simply a particular collection mechanism for income tax, and it’s income tax which is designated in tax treaties. The transparency levy is nothing like income tax. ↩︎
29. See the WTO Appellate Body decision in the Argentina v Panama case, where the Appellate Body held that countries could restrict trade with tax havens for “prudential” reasons or to comply with national laws, as long as they did so in a consistent and non-arbitrary manner. ↩︎
30. There would need to be some form of “anti-conduit” rule, where a UK person making a payment to a disclosed entity which it knows will be on-paid to an undisclosed entity has to apply the levy. ↩︎
31. Some delay is advisable to minimise “teething problems” with the new rules, as well as to give financial institutions time to build withholding and reporting systems. Delay may also increase the likelihood of international adoption – these processes tend to move slowly at first. ↩︎
32. FATCA was initially planned to extend to a much wider and more complex class of payments, encompassing gross sale proceeds and non-US source payments – but this ended up being deferred indefinitely because the standard withholding approach proved a sufficient incentive for widespread adoption. If that didn’t happen, and the UK remained the only country with a transparency levy, then it might be necessary to expand the scope of payments impacted by the levy to prevent avoidance by shifting one form of payment into another. ↩︎
33. An approach that would be particularly attractive for countries without the capacity or budget to implement their own systems. ↩︎
34. i.e. because if many countries created their own registration systems then that could be quite burdensome for companies – i.e. because they’d have to make numerous separate registrations. The solution is for their home jurisdiction to create its own open register, so all local companies automatically become “disclosed entities”. ↩︎
35. That’s a stronger incentive if many countries adopt, all with their own company registry. The burden of registering with many registries would push businesses to lobby countries to create open registries and become “disclosing jurisdictions. ↩︎
36. It would in many ways be preferable to create a new international register, of the kind suggested by some campaigners. Implementing such a register in the short term is likely to be difficult from both a political and a systems perspective. In the long term it’s conceivable that the transparency levy would begin a process that ends with such a register. However the important benefit of the transparency levy is that implementation isn’t dependent on international agreement or building complex new IT systems. ↩︎
22 September 2024
Will Labour’s non-dom reforms cost the UK £1bn?
There’s a report Labour’s non-dom changes will cost the UK £1bn – but the figure is meaningless, based on a self-selected survey.

The report shouldn’t distract from what’s an important question – what will actually happen if the Government completely abolishes the non-dom regime? And are the consequences bad enough that the Government should reconsider one of its flagship policies?

The last Conservative Budget announced the end of the non-dom regime, which exempts foreigners living in the UK from tax on their foreign income,¹ and its replacement with a new four year exemption.² The Conservatives were going to allow existing non-doms to use trusts to protect their historic position – Labour will close that “loophole”.

There is a good summary here from law firm Farrer & Co of how Labour’s proposal differs from the Conservatives’.

The question is: how will non-doms react?

Anecdotally there are many reports of non-doms leaving, either prompted by Jeremy Hunt’s budget reforms to the regime, or the prospect of Labour going further. But anecdote isn’t evidence, and people who want to prevent a change in law have an obvious incentive to exaggerate the impact of that law.

This short piece looks at what evidence we do have, and whether that suggests Labour’s proposals need to be tempered.

The lobbyists’ report

The Telegraph and City AM headlines suggesting the non-dom changes will lose £1bn in tax are taken from a report from Oxford Economics. But the report isn’t freely available.

I believe that’s wrong – people trying to influence public policy should do so openly.

Here’s a full copy of the report:³

[pdfjs-viewer url=https://taxpolicy.org.uk/wp-content/assets/FIFB%20Oxford%20Economics%20report.pdf viewer_width=600px viewer_height=700px download=true fullscreen=false print=true]

PDF download here.

The £1bn estimate and other figures in the report come from a survey of 73 non-doms and 42 tax advisers. The report says nothing about how the survey was conducted and whether there was any attempt to make it representative. There is no sign of any statistical analysis.

The results are therefore statistically meaningless, in a similar way to the private school VAT survey we commented on earlier in the year.⁴

The survey will also have suffered from a significant “preference signal” effect – the people surveyed will have known the use to which the survey would be put, and so have an incentive to provide a dramatic answer.

I therefore don’t think anything at all can be taken from this report. All the numbers and pretty charts flow from the meaningless survey responses.

What evidence do we have of non-dom behaviour?

There were significant reforms to the non-dom rules in 2017 – most importantly, a 15 year limit on how long someone could live in the UK and remain a non-dom. So on the face of it, many people lost all the benefit of the non-dom regime, and what happened in 2017 should be an excellent guide to what will happen now.

Arun Advani, David Burgherr and Andy Summers undertook a very careful and rigorous analysis of the evidence, and concluded that very few people left as a result of these changes. I am confident they are right on this.

However we need to be cautious about extrapolating the 2017 changes to what’s now proposed, because the 2017 changes by design included a massive loophole⁵: “trust protections“. Someone who was about to hit the 15 year limit could put their property into trust, and therefore keep many⁶ of the benefits of being a non-dom including, importantly, that their non-UK assets remained outside inheritance tax.

Most non-doms don’t have significant assets outside the UK, and didn’t take advantage of the trust protections.⁷ It was a small number of the very wealthiest – “ultra high net worths” (UHNWs) – who did, and they therefore weren’t much affected by the 2017 changes.⁸ ⁹

The Conservatives would have preserved that “trust protection” for assets put into trust before April 2025. Labour is committed to end it. That means all non-doms will (after a few years) be fully subject to income tax, capital gains tax and inheritance tax.

Labour’s changes therefore will impact UHNWs much more than the 2017 changes (which in economic terms barely affected most of them). I’ve spoken to many UHNWs and their advisers, and the prospect of their estate being subject to inheritance tax is seen as highly significant. Hard evidence is hard to find, and we’re left with little more than anecdote. That’s tricky when the number of people affected is very small, and the sums are very large.

So whilst I believe the research from Advani et al tells us how the vast majority of non-doms will react to Labour’s changes, I don’t believe it tells us how the UHNWs will react.

Do we care if the UHNWs leave?

There are two effects if the non-doms leave the UK, or spend less time here

(The “spend less time” is important. You will, generally speaking, be resident in the UK if you spend three months here. There are some non-doms who spend four months a year in the UK. For them, leaving the UK could involve just spending five weeks fewer here.)

The obvious effect is that they will pay less tax. Non-doms pay a large amount of tax, and “deemed doms” (who’ve been here past the 15 year time limit) also pay a considerable amount. However (whilst no data is available) my strong expectation is that most of this tax is paid by the “normal” non-UHNW non-doms, who are unlikely to leave.¹⁰

The more important, and more subtle, impact of UHNWs leaving will be economic. What happens if some of the wealthiest people in the world leave the UK, either completely or for at least 9 months each year?

I’ve spoken to a variety of economists on this and heard a wide range of views – for example:
- One view is that there will be significant adverse effects. UHNWs will spend less money here, both on business investments and personal purchases. Businesses run by UHNWs (such as private equity) will leave. Property prices will be affected. There will be job losses across the entire ecosystem that has grown up around UHNWs – accountants, lawyers, restaurants, interior designers, car showrooms. The City of London, which is responsible for an outsize share of the UK’s economic output and tax revenues, will decline.
- An alternative view is that the UK economy doesn’t actually benefit from UHNWs. They have caused significant asset price inflation, and of house prices in particular. The employment they generate is not particularly productive or socially useful, and their exit would prompt employment to move into more productive sectors (given that the economy is at or near full capacity). A relative decline in the City would be a good thing.
I’m not an economist and so I’m unable to judge which of these scenarios is closer to the truth. However answering the question of what happens if UHNWs leave seems to me critical to any non-dom tax reforms.

So what should Labour do?

I see four ways Labour can resolve the UHNW/non-dom issue:
- Conclude that most UNHW’s won’t leave if Labour proceeds with its reforms (I am sceptical).
- Accept that most UHNWs will leave, but conclude that the economic cost of this is negligible, or even that there’s a benefit.
- Accept that most UHNWs will leave, and there will be an economic cost, but proceed anyway for principled and/or political reasons.
- Conclude that most UHNWs will leave, and that’s undesirable – and so do the minimum necessary to stop them leaving in significant numbers. That probably means preserving¹¹ their inheritance tax exemption.¹²
An important point to add: making the UK more attractive for non-doms is not just a question of tax. I’ve heard a variety of non-tax concerns which have driven some UHNWs to consider leaving the UK (or indeed pushed them to already leave). The most common: crime, difficulties navigating the immigration system, and fears about the long term economic future of the UK.

Anyone wishing to lobby for retaining the status quo, or at least elements of it, would be much better off addressing these very real tax and non-tax questions, rather than producing glossy reports based on bogus statistics.

The private schools’ attempt to lobby against Labour’s VAT proposal was a dismal failure because it chased headlines in Conservative newspapers rather than assembling evidence that could convince Labour policymakers, and making proposals for incremental changes.¹³ Those who wish to defend the non-dom regime should avoid falling into the same trap.

Many thanks to all the non-doms and advisers who’ve spoken to me in the last few months.
Footnotes
1. That’s a considerable simplification, but sometimes only one sentence will do. I talked more about the detail here. ↩︎
2. Almost certainly not as a result of my article proposing that he do just that. ↩︎
3. © Oxford Economics and republished by us in the public interest. The report says it’s confidential. We doubt that’s correct as a legal matter, but in any case we believe there’s a legitimate public interest in publication. ↩︎
4. The size of the private school survey was much much larger, but because of the absence of statistical controls, that doesn’t make it any better. ↩︎
5. Since it was intentional it’s unclear if “loophole” is the correct word – but I’m not sure what term would work best here, so I’m lazily using the word “loophole”. ↩︎
6. This is a considerable simplification but is in essence correct, subject to careful tax planning and implementation. ↩︎
7. Take, for example, a professional who has come to work in the UK from abroad, perhaps a doctor perhaps a banker. They may be highly earning, but they have little in the way of assets and are relatively young. They would be paying income tax and capital gains tax at similar rates in most countries where they could be working. They are therefore not terribly bothered about inheritance tax (which they could insure against anyway). If they are working here and have a young family, it is often not very easy or desirable for them to move abroad. So it’s unsurprising we didn’t see many such people leaving in 2017. Now it has been suggested that the Tory/Labour change may cause some such people to not come to the UK in the numbers they have historically, because four years is too short a timeline. I am a little sceptical of this; I don’t think four year tax horizons are something most normal people think about when moving from one country to another. ↩︎
8. An extreme example would be an Arab sheik, who has property all over the world, but spends four months a year in the UK. He pays very little tax here, but spends a lot of money here. He simply won’t accept paying UK income tax or capital gains tax, and certainly not 40% inheritance tax. It would be very easy for him to cease being UK resident, because that would just have involved spending a bit less time in the UK. However it was also very easy for his advisers to set up an appropriate trust. ↩︎
9. Another example would be a senior private equity executive, probably American. He or she won’t care very much about capital gains tax or income tax, at their current rates, because they’re fully subject to US tax and the rates aren’t much different. But UK inheritance tax will have been seen as a big problem – in practice it’s much much higher than US estate tax. Again, it would have been fairly straightforward for them to use trust protection. ↩︎
10. Why? Because “normal” non-doms – doctors, bankers, etc – earn employment income here and pay tax on it. UHNWs don’t work here, and their income will mostly, or even entirely, be foreign investment income which isn’t taxed under current rules unless remitted to the UK. ↩︎
11. Or perhaps tapering down over decades. ↩︎
12. And it could be made a simple IHT exemption for foreign property, rather than requiring trust shenanigans. ↩︎
13. For example, arguing that Labour should phase in the change. ↩︎
8 September 2024

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