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The 1% tax haven: Comedian Jimmy Carr 'has £3.3m in Jersey avoidance scheme'

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Jimmy Carr is one of thousands of wealthy Britons using an offshore scheme to pay a little as 1 per cent income tax, it was claimed last night.

The comedian is understood to be the largest beneficiary of a Jersey-based accountancy arrangement said to shelter £168million a year from the taxman.

He puts away £3.3million a year via the K2 tax scheme which, according to the Times, is used by 1,100 tax avoiders.

And Danny Alexander today attacked the rich who use tax loopholes to reduce their rate of income tax, describing them as the 'moral equivalent of benefit cheats'.

Wealthy: Jimmy Carr (left) is reportedly using an offshore bank account to pay just 1 per cent income tax. Danny Alexander (right) today described those 'who dodge the tax system as the moral equivalent of benefit cheats'

HOW DOES IT WORK?

The K2 tax scheme, a Jersey-based accountancy arrangement, is used by 1,100 people.

It works by transferring salaries into a Jersey-based trust, which lends investors back the money.

As the loan can technically be recalled, it is not subject to income tax.

Jersey is self-governing, with its own financial, legal and judicial systems. It has no VAT in place and sets its own income tax.

And low taxation is the reason why the affluent flock to the tiny island.

Income tax is a flat-rate of 20 per cent. Britain, in contrast, charges top earners 50 per cent, although this will fall to 45 per cent next April. Jersey's s Goods and Service Tax (GST) - equivalent to the UK’s 20 per cent VAT - is also far lower at 5 per cent.

But beyond that, non-residents have also benefited. An accountancy industry has thrived in what critics say is a lax regulatory environment – finance makes up 41 per cent of its economy compared to, say, 4 per cent for hospitality.

But ‘tax havens’ worldwide, from Bermuda to Liechtenstien, have come under pressure to clean up their act as the cash-strapped U.S. authorities and EU governments try to claw back tax lost to avoidance schemes.

Jersey rejects the criticism saying it is a ‘transparent and cooperative jurisdiction’. It calls the perception of it as a tax haven an ‘ancient myth’.

The Chief Secretary to the Treasury told Sky News: 'It is vitally important that everybody pays their fair share of tax.

'People who dodge the tax system are the moral equivalent of benefit cheats and we are coming to get them.'

K2 works by transferring salaries into a Jersey-based trust, which lends investors back the money. As the loan can technically be recalled, it is not subject to income tax.

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George Osborne used his budget in March to attack what he called ‘morally repugnant’ tax abuses and announced a raft of measures designed to stop them.

Together with a general anti-avoidance rule, he aimed to increase revenues by £1billion over the next five years.

Individual tax avoidance costs the economy £4.5billion out of £7billion lost in total every year, according to Revenue & Customs.

Last night, HMRC maintained it was extremely effective at shutting down such schemes. But, according to the investigation carried out by the Times, those behind K2 are confident they can continue to avoid the taxman.

Roy Lyness, of Peak Performance Accountants, which runs the scheme, told an undercover reporter on the newspaper it was ‘a game of cat and mouse’.

Jimmy Carr puts away £3.3million a year via the K2 tax scheme which, is used by 1,100 tax avoiders and is one of a number of tax avoidance practices

TWITTER REACTION

'BREAKING. Jimmy Carr has added a final date to his 2012/13 tour. He's doing a gig in Jersey. Well I say gig, but it's more of a drop off.'Ian Hyland, Mail On Sunday columnist'Just read that shocking secret about Jimmy Carr in the Times. Never knew he was a comedian! #boom'John Prescott, former deputy prime minister'Please have your Jimmy Carr "tax" joke in by the end of the day to avoid a £100 fine.'Michael Legge, comedian'Maybe he should hide his jokes offshore #taxavoider'Andrew Bloch, Twitter user

He added: ‘The Revenue closes one scheme, we find another way round it. It’s like a satnav. I’m driving to Manchester, get a message saying there’s a smash at Stoke, press this button to re-route. ‘That’s all we do with tax avoidance. The Revenue puts a block in, we just go round the block.’

K2 works by transferring salaries into a Jersey-based trust, which lends investors back the money. As the loan can technically be recalled, it is not subject to income tax.

Mr Carr’s lawyers have confirmed his membership of K2 but denied any wrongdoing and said that the scheme had been disclosed to the relevant bodies in accordance with legal requirements.

He recently performed a comedy sketch lampooning Barclays, which has been criticised for tax avoidance.

Playing a female bank clerk, he joked: ‘Why don’t you apply for the Barclays 1 per cent tax scam.

‘You will need the world’s biggest, most aggressive team of blood-hungry amoral tax lawyers. If you meet the criteria, you’ll pay 1 per cent tax, like Barclays do.’

Nice ride: Jimmy Carr fills his Bentley with petrol

'Largest beneficiary': The 39-year-old, who performed for the Queen at her jubilee (pictured), puts away £3.3million a year via the K2 tax scheme

Tackling avoidance: George Osborne used his budget in March to attack what he called 'morally repugnant' tax abuses and announced a raft of measures designed to stop them

According to Peak Performance, Mr Carr pays himself a salary of £100,000 before sheltering his remaining income - £3.3million – through the scheme.

The 39-year-old, who performed for the Queen at her jubilee, owns his own company and makes much of his money from DVD sales and television appearances.

Analysis of Mr Carr’s publicly available accounts shows that four out of five companies that he controls were set up by Blue Cube, part of the Peak Performance network of accountants that sells K2.

Blue Cube says it offers ‘remuneration planning for directors of limited companies resulting in between 0 and 25 per cent tax’.

The day after Mr Osborne’s crackdown, Mr Lyness assured his clients tax-saving opportunities were unscathed.






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