TAX and comedy don’t seem like a natural fit and yet over the past couple of weeks Jimmy Carr has done his single-handed best to dispel that idea. It is unfair to single Jimmy Carr out for special treatment over tax avoidance, but it is amusing.
There is a proud history of comedians being associated with tax. In the 1970s Max Bygraves made the headlines for refusing to become a tax exile and was said to have been paying 90% in income tax. But on the flipside, in the 1980s, Ken Dodd appeared to be forgetful about his tax returns. He was eventually acquitted of all the charges and gave criminal defence lawyers in the North West a new legal doctrine: The Ken Dodd Defence. Unfortunately this doctrine does not really extend beyond the boundaries of Liverpool, but the principles are simple. If you are a popular, famous Merseysider, elect for a jury trial and the odds of conviction diminish hugely.
While Jimmy Carr is arguably carrying on a great British comedic tradition, tax is rarely seen as a laughing matter.
One thing that will be certain as a result of the unfair publicity faced by Carr and others, is aggressive tax planning schemes will not be in favour with the Revenue. This will have a knock-on effect to the tax planning industry which is led by the big-four accountancy practices.
Tax planning is a huge industry. The Big Four can’t afford to get tax schemes wrong and have to lean on the side of caution. When the big-four become more cautious, the industry becomes more conservative and tax planning becomes steady.
From one perspective this may be seen as a good thing. Tax planning is often, incorrectly, seen as the preserve of the wealthy and ensuring the wealthy pay more taxes is a very populist message (probably why Carr has had such a hard time).
However the Revenue is a big machine with tax inspectors all around the country. If tax planning becomes more cautious the inspectors have to find something to do. One thing is to scrutinise “ordinary” tax returns more closely. Another is to enforce VAT more rigorously. The law of unintended consequences dictates your tax returns will be likely to face closer scrutiny. It is the man or woman in the street who is looked at, particularly if they own a business.
:: Neil Warwick is partner at Newcastle- based Dickinson Dees