Funnyman Jimmy Carr is not so amused by rumours that he is the biggest investor in an offshore tax saving scheme.
Comic Carr reportedly has £3.3 million in a Jersey trust called K2 that has helped more than 1,000 of Britain’s wealthiest earners save around £168 million in tax.
K2 works on some simple tax principles – mainly based on tax rules relating to loans to investors.
Put simply, a taxpayer banks cash in to the trust, which then lends them the money back again tax-free.
Technically, the trust can demand repayment of the loan, but the trustees admit that no one has ever had to give back any money.
K2 is sold as a way to minimise tax by accountants and tax advisers throughout the UK.
Now, HM Revenue & Customs has stepped up an investigation in to K2 as a result of information divulged to reporters by the trust.
“This scheme, K2, was already under investigation by us,” said an HMRC spokesman.
“If, as is alleged, it depends on the use of loans it will not work. If the scheme does work technically, HMRC will challenge it in every way available to them. The government does not intend anyone, no matter who they are, to get away with paying less than they should.”
Geoff Cook, the chief executive of Jersey Finance, the Channel Island’s trade body for financial organisations, has explained the media debate is part of an ongoing discussion about the definitions of tax avoidance and tax evasion.
“I do not think these articles necessarily hurt our reputation. I think that we have a reputation for doing things the right way and abiding by the law and abiding by international standards,” he said.
“I am not defending the schemes, but the judgment call about whether they are acceptable or not is for the UK.”