288. Which politician is the worst tax dodger?

0:00So Churchill was a tax dodger.

0:02Dan Neidle:It wasn't so much that he was in trouble. He just spent money as soon as he made it, never held anything back and could never pay his tax. Mr. Polanski lived on a narrowboat for three years. He didn't pay council tax. And I think most people would expect that if you're living on a boat, it's more than one place for three years and that's your home. You should pay council tax. You mentioned Angela Rayner. She should have paid the second home rate of stamp duty. She has now settled and she wasn't fined. And I thought she would be because I thought she'd been careless. There's definitely an argument that tax is really complicated though, isn't it?

0:36You've said before about you think we have too many taxes. So should we be giving the benefit of the doubt before we go heavy on saying people are tax dodgers? We're delighted to say that this year the rest is money is powered by Octopus Energy. So we're joined by its founder and CEO, Greg Jackson. So Greg, I heard that the prices of solar and home battery storage are falling. So is it worth waiting before you invest in them? First of all, we never know what's going to happen to the future price of energy. It could go up or go down. So I think when people try to do a really detailed payback calculation,

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3:10hello welcome to the rest is money with me steph mcgovern and with me robert perston so tax lawyer dan needle is back um dan we wanted to uh get your thoughts on all the drama i guess around politicians tax affairs we've become obsessed haven't we as a nation working out whether politicians are paying the right level of tax that they should. So we want to chat about some of the examples that are in the news at the minute. We've got obviously Polanski and the Houseboat Council tax drama, Angela Rayner and the unpaid or was unpaid stamp duty, Farage getting five million pounds from a cryptocurrency billionaire.

3:50But I guess the first question to you though is, do we need to see what politicians earn and how they earn it? Do you think it's important that we know all that, that they're transparent about it?

3:59Dan Neidle:Yes and no. So if you're the prime minister, I think the answer is yes. But ultimately, I think we should all have a right to privacy and our financial affairs. And if we require all politicians to disclose everything and to properly see what's going on with their tax, it would have to be everything, then you are going to put good people off from entering politics, particularly people who have run a business or been an investor or done anything other than just be a simple employee. We've got a problem at the moment with getting good people to enter politics. And if you put another barrier in their way and something else that could scare them off, it feels a bad idea.

4:36So look, we do now have a convention that prime ministers do disclose at least some of their tax affairs. Actually, are we seeing proper transparency? see, because I have to say, it seemed to me when we looked at, for example, the Rishi Sunak disclosures, they begged as many questions as they revealed about the sort of stuff one would want to know about his financial interests and his tax.

5:03Dan Neidle:My personal bugbear is that there's a great fanfare. The Prime Minister has published his tax return. No, he hasn't. You get a two-page letter from his accountants, which summarises choice elements of it. It's not the tax return. So if we're going to do this at all, can't we do this properly, see the actual tax return? I can ask before we get on to the detail of individual tax cases involving politicians. Winston Churchill, for example, seemed to be permanently in dispute with the Inland Revenue and had to be bailed out at various times by his rich friends because he owed the taxman so much money.

5:40it's definitely, you know, not necessarily the case that great leaders are great with their finances or necessarily also as honest as they ought to be about their tax affairs.

5:55Dan Neidle:I'm going to waste listeners' time now by obsessively talking about Churchill, because there's an amazing story. So Churchill, it wasn't so much that he was in trouble. He just spent money as soon as he made it, never held anything back and could never pay his tax. And this came to a complete head in, I think, in the 30s. And he was about to be bankrupt. So he summoned the head of HMRC, had a meeting with the head of HMRC, and planned with the head of HMRC a tax avoidance strategy that would mean that he wouldn't, in fact, have a tax liability. So he brought in his own law to do it? No, he converted what should have been royalty income from his books into a capital gain that at the time was completely untaxed.

6:38I thought Inland Revenue rejected that proposal. They accepted it, did they?

6:41Dan Neidle:You were thinking about a separate time when he would have been taken to a tax, what would now be a tax tribunal, and HMRC were pressured into dropping it. No, no, this was a separate thing where he met with the head of HMRC and devised a tax avoidance structure. So Churchill was a tax dodger. Churchill was an amazing, complicated figure. So then coming to the modern day, and obviously everyone's talking about various politicians. let's talk about Zach Polanski first of all because you guys at the Tax Policy Associates did some digging on this to do with his houseboat and this kind of dual trap that he's in do you want to explain what you did and what you found?

7:20Dan Neidle:I should say this is the Times' story primarily the Times did the running on this we did as a very detailed analysis as we can long form in the way a newspaper can't but all the credit goes to the Times for the story The basic story is super simple. Mr. Polanski lived on a narrowboat for three years. That was his main residence. He didn't pay council tax. And I think most people would expect that if you're living on a boat that's moored in one place for three years and that's your home, you should pay council tax. He didn't. But wasn't the complication to do with where he was registered, though, because he was registered at a nearby bungalow in order to vote.

8:04and therefore was that not classed as his main residence?

8:08Dan Neidle:Well, when the story was first raised, Polanski's people responded that no, he was only occasionally at the Narrabo. The problem with this is that he'd registered to vote there, but it wasn't even there. He'd registered to vote nearby a bungalow, maybe for convenience, but he never lived at the bungalow.

8:30Dan Neidle:So initially he was caught. Either it wasn't true that he was only there occasionally, or if it was true, why did he register to vote at this random bungalow? And the way that resolved is ultimately he admitted that he did live there. That was his home. But I think, unlike in the case of some politicians, you've slightly given Polanski the benefit of the doubt that you think it was a sort of, I think, I don't want to put words in your mouth, But I sort of thought you have now seen it as a semi-honest mistake. I almost always view these mistakes by politicians as a semi-honest mistake. I mean, I think Zahawi is in a slightly different category.

9:10Dan Neidle:But if you take, say, Angela Rayner or Polanski, the rules are a little bit complicated. They maybe should have thought about it more but didn't. But I think it was an honest mistake. Where I'm much less forgiving is in their response to them. So Ms. Rayna's initial response when the issue started to be raised was, oh, she'd taken advice. It's not clear that she ever did. Polanski's team's initial response was to say he didn't live there when he did. So it's the cover-up, which annoys you. Yeah. Or Richard Tice, again, when we in the Sunday Times did a story about his company's just failing to pay tax that was due.

9:47Dan Neidle:He could have said, look, thanks for pointing this out. It's really complicated. I'm going to go at this with my accountant, so I'll let you know how it goes. He didn't. He launched an intemperate attack on me and the Sunday Times, like a toddler who's been caught stealing the cookies. So just to understand then the Polanski tax situation, you do have to pay council tax on a houseboat. How much is it that he didn't pay that he should have? And is this quite a common mistake houseboat owners make? So if you have a houseboat and it's sometimes in one place, sometimes in another, or even it's in one dock and it moves around, it can be quite complicated.

10:21Dan Neidle:When you're in a houseboat which is just in one place and that's your main residence, it really isn't complicated. So, no, some people have given the excuse that this is a very complicated situation. I don't think that's right. How much council tax was it? We did work that out. Council tax wasn't that much in the grand scope of things. We probably think about£4 ,000. It's more the principle. Why is it that he didn't think he should be paying it? And why has his response to it been so slow and so reluctant? So you mentioned Angela Rayner. Just to remind listeners, she lost her job because she should have paid the second home rate of stamp duty on the apartment that she bought in Hove.

11:14She didn't pay that second, that high rate because she thought that having transferred her earlier property to her disabled son in trust, she, you know, essentially the new apartment didn't count as her main new residence. the standards the government's standards commissioner was critical of her because I think one of the lawyers had said that she should take proper advice on this two of them said she should take proper advice on this and he said that she hadn't taken that advice and that was regarded as a resigning issue for somebody who was the Deputy Prime Minister at the time and also the Housing Secretary.

12:11However, she has now settled with HMRC and she wasn't fined for negligence. And you, I think, initially were surprised that she wasn't fined for negligence. Is that right?

12:26Dan Neidle:Yes. She had to pay the tax, about£40 ,000. She had to pay interest, probably about£3 ,000. but she wasn't given a penalty and I thought she would be because I thought she'd been careless and initially I didn't understand that I then had a call with her lawyer and I should say that she clearly gave her lawyer permission to speak to me and he's a very eminent honorable KC and I'm sure he wouldn't lie to me but he was speaking to me on her behalf and so I can't just accept what tells me. But the way he told it, the prime minister's ethics advisor reviewed everything in a couple of days in a huge rush.

13:05Dan Neidle:This KC and his team reviewed everything over a period of months. And they came to the conclusion that actually, one of the lawyers had given Ms. Rayner definitive advice, and it was reasonable for her not to go further. And if that's correct, then sure she wasn't careless and if that's correct even more than that she's a wronged woman she should never have been sacked she did nothing wrong but is it correct i i don't know they're not willing to share the underlying documents it's possible that in fact she was right all along and has been treated very harshly it's also possible the documents aren't as clear as the case you were suggesting and it was merely that one of the uk's most brilliant lawyers managed to persuade HMRC when the facts are a bit murky than that?

13:53Dan Neidle:I don't know. There's definitely an argument that tax is really complicated though, isn't it? It's, you know, I've interviewed maths professors before who've struggled with doing their tax returns because they are so complicated. And you've said before about you think we have too many taxes. So should we be giving the benefit of the doubt before we go heavy on saying people are tax dodgers? I'm not saying these people are tax dodgers. I'm saying that they should have acted differently. But the complication is kind of our fault. So do you think we should have a high rate of stamp duty on second homes?

14:24I just think stamp duty is an absolutely terrible tax and stamp duty should be abolished and we should have other property taxes. That's my view.

14:30Dan Neidle:All right. I agree with you. I completely agree with you. But if we accept the logic that there should be stamp duty on second homes, it's a pretty popular policy, then suddenly you have a whole world of complication. How do you define what's a second home? How do you deal with married couples? How do you deal with people trying to avoid the rules through trusts? How do you deal with trusts that are set up to protect disabled children? That political decision to have stamp duty on second homes leads to a whole load of complication. And that's not the fault of the HMRC. It's not the fault of the politicians for how they drafted it.

15:02Dan Neidle:The original sin is the original decision. Right, Dan, let's hold it there for a couple of minutes and go to a quick break.

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16:51While supplies last, ends June 30th. Terms at aka.ms slash college PC. What is it about the Zahawi case that means that you are more critical of him?

17:03Dan Neidle:He set up a company. when he was very young, he arranged for his shares in the company to be held by an offshore trust controlled by his parents. Then when he was much older, an experienced politician and businessman, he accepted money from that trust without declaring it to HMRC. That is a degree of planning and of highly aggressive tax avoidance, which is nothing like that which we've seen from any other politician that I'm aware of. So for you, it's about the fact it was offshore and it was all set up in advance. And that is someone who is very cleverly thinking, I am going to make sure I don't have to pay more tax than I want to on this.

17:45Dan Neidle:And then, you know, I have to clear an interest because when I and other people started reporting on it, he then sent lawyers who said that there was nothing wrong. The tax was fully paid. He wasn't under investigation by HMRC. And those statements were all lies. We found out later, all of them were lies. What happened to the lawyer who gave you misleading information? The Solicitor's Regulation Authority disciplined the lawyer who advised Sir Harway for having written to me and threatened me and told me that not only would I have to retract what I said, but I couldn't tell anyone that I'd received this threat.

18:23Dan Neidle:And the lawyer was disciplined for that. That was then overturned by the High Court. So he got away scot-free. So you've already referred to the fact that you had this rather heated dispute with Richard Tice about the tax arrangements of his company. Despite the fact that you had this heated argument, do you put him in the category of somebody who may have just made a mistake rather than having behaved very aggressively in terms of his tax planning? I've been less forgiving there because I worked as a lawyer for many years. I had lots of clients in the real estate world. And the thing about people in real estate is they really understand how real estate is taxed because tax is so important to the real estate world.

19:06Dan Neidle:And yet Tice seems to have made a series of very basic errors resulted in underpaying tax by several hundred thousand pounds. It's not clear to me how he made those errors. He's certainly not explaining it. All we've had from him is bluster and insults. So I'm quite unimpressed with both the fact he didn't pay the tax and his efforts to not talk about it. I mean, I should point out before we move on that he does claim that he has paid all the tax that is... He hasn't quite, though, has he? He said, if there's errors, we will look at them. There were a couple of separate issues. One of them, he claimed the tax had paid, but in a very unconvincing way.

19:47Dan Neidle:And the other one, he's simply not talking about. Shall we quickly talk about Nigel Farage then and this£5 million payment from a cryptocurrency billionaire? You know, Farage has described it as various things, including as a reward for his years of campaigning for Brexit. He talked about needing it for security at one point. We've had various different opinions on that. But Dan, what's your take on it in terms of the tax and also, you know, how it works in terms of personal gifts like this? Five million gift is pretty astonishing, raises a whole bunch of questions. But tax, I don't think should be at the top of anyone's list.

20:24Dan Neidle:Normally in the UK, we don't tax gifts. Yeah, if someone gives you a gift and they die within seven years, there could be inheritance tax. But if the donors abroad, no UK inheritance tax. If there was a clear quid pro quo, you give me this gift, I will do this thing. Could be taxable, but no evidence of that. Feels unlikely. and if Mr Farage had done work for Mr Harbourn in the past and this was kind of payment for that work, almost like a tip, then it would be taxable. Again, no evidence of that. So we wrote a very long report about this because so many people are asking the question, plug for the Tax Policy Associates website here and anyone interested can look at it.