It seems “tax” is becoming a premier problem in the UK and certainly the times are not good (or to say taxing) for British prime ministers, cutting across political parties.
Last week Prime Minister David Cameron grabbed headlines for all the wrong reasons after his name appeared in the Panama Papers scandal. This week it’s the turn of former British Prime Minister Tony Blair.
It was claimed that Blair consulted Britain’s top taxman over a secret trust he set up to manage his multi-million pound wealth.
Two of Blair’s advisers allege that Dave Hartnett, head of Revenue & Customs, was approached about the controversial trust by a consultant hired by the former Premier’s lawyers.
The revelation about the trust, which sits at the heart of the veteran Labour leader’s business empire, raises questions on whether the alleged access amounted to special treatment by tax officials.
According to an investigation by The Times, discussions with HMRC officials included how his advisers would treat the trust for tax purposes.
These discussions took place soon after Blair left office a decade ago.
They told undercover reporters that the former Prime Minister had used the interest-in-possession (IIP) trust to receive payments from his consultancy work, some of which was with controversial regimes. IIP trusts are legal entities that can hold property, shares or other sources of income for a beneficiary, most commonly for their lifetime.
According to experts, such trusts can offer vital tax benefits, including the possibility of passing on wealth to children free of tax.
The trusts do not have to file accounts. Blair’s lawyers said the trust had been set up due to a desire for privacy. However, they stressed he did not seek or obtain a tax advantage.
But the fact of its existence raised questions about whether Blair received special treatment due to his position and MPs demanded an investigation into it.
One leading tax QC said that ordinary taxpayers “wouldn’t have got anywhere near” Hartnett or his senior colleagues.
The Times was not able to verify independently that the HMRC chief was contacted in the way the two advisers separately claimed.
Tory MP David Davis, the former shadow home secretary, questioned what private discussions might have taken place.
He said: “These arrangements appear to have been put in place without any proper scrutiny, and are not available to ordinary taxpayers.” Davis said he would write to the Commons public accounts committee calling for “an inquiry into special treatment of high-profile individuals by HMRC”.
Blair’s representatives, however, denied receiving any special privilege from tax authorities. They said Hartnett had not been consulted on his behalf and no special treatment had been sought or received.
Hartnett has previously come under fire for offering ‘sweetheart’ deals to companies, including Goldman Sachs and Vodafone, during his time as head of HMRC.
There is no suggestion that he offered such a deal to Blair.
A sweetheart deal or sweetheart contract is an abnormally favorable contractual arrangement.
Hartnett, who left HMRC four years ago, said he had “no recollection” of the advisers’ claims. He added: “I don’t give advice to individuals at all.”
A spokesman for the former PM said: “Tony Blair did not set up this structure for reasons of tax advantage. He has paid full UK tax on all his earnings. He specifically instructed the accountants who set up the structure that there was to be no tax advantage or avoidance through it. Neither did he receive any special privilege from the tax authorities. So the entire premise of the story is mistaken as we have repeatedly told The Times for the last year.”
