Members of Take That, George Michael, David Beckham, Katie Melua, and now Jeremy Vine have all been accused of tax dodging or sheltering in order to protect their earnings. But, should they be criticised for being immoral, or congratulated for attempting to make the most of their tax allowances? And, should we think about doing the same sort of thing to protect our hard earned cash?
Let’s use the BBC presenter Jeremy Vine as an example of how one man’s perception of tax dodging is another’s perception of someone being exceptionally shrewd with his earnings.
Earlier this year Vine was accused of using a tax-avoidance arrangement. However, it turns out that everything he has done is perfectly legal and is saving him a huge amount in tax every year.
So, what’s the problem?
The main criticism has come from the fact that his wife and ten-year old daughter are involved in the ‘scheme’. This great fuss has come to light because they are both shareholders in his company Jelly Vine Productions, and Vine is diverting some of the income from Jelly Vine Productions to his wife in the form of dividends on the 30% of shares that she owns in the company. This means of saving tax through share ownership by a spouse was deemed legitimate by the Law Lords several years ago.
Good financial planning
Additionally, one of his daughter’s owns 19% of the shares in the company. Again, this is perfectly legitimate and is potentially excellent financial planning on Vine’s part. It’s difficult to see how this could be considered to be tax-avoidance as any dividends paid out on shares owned by a child under 18 are taxed as if they belong to the parent. It could also be the case that he’s creating a source of income that would become available to the child when she reaches the age of 18.
Sharing the tax load
Also, it could be that Vine is sharing the tax load of his activities between his wife and daughter in order to keep the tax liability at the lower rate, rather than paying out higher rate tax unnecessarily.
Who knows Mr Vine’s exact reasons for handling his tax affairs in this way? However, everything that has so far appeared in the press is perfectly legal and seems to be a sensible way to manage the tax allowances and future income of the Vine family.
To discuss this post, or to talk about our other tax strategies and your individual tax planning contact Stephen Usher on 0141 345 2355 or email email@example.com