Ken Livingstone uses loophole to save £50,000 in tax

Hypocrite Ken Livingstone, who has attacked tax avoiders as “rich b——-” who should   “not be allowed to vote”, has avoided at least £50,000 in tax by having   himself paid through a personal company.

Ken Livingstone, Labour’s candidate for London mayor

Ken Livingstone, Labour’s candidate for London mayor Photo: PA

Companies House documents show that Mr Livingstone, who is Labour’s candidate   for the London mayoralty, earned £232,000 in 2009, the first year after his   defeat to Boris Johnson at the last mayoral election.

The money, from personal appearances, speechmaking and hosting a radio show,   was paid directly into a new company set up by Mr Livingstone and his then   partner, now wife, Emma Beal, who are sole shareholders.

Accountants shown the documents by The Sunday Telegraph say the move   appears designed to ensure that Mr Livingstone paid corporation tax at 20 or   21 per cent, rather than income tax at up to 40 per cent — a loophole the   former mayor has himself attacked as “Robin Hood in reverse”. Mr Livingstone   confirmed this arrangement last night.

He is also able to split his income 50-50 with his wife, even though it was   earned entirely by him, saving further tax, and pay Mrs Livingstone from   company funds as his “assistant”.

Mr Livingstone, who has called for a top tax rate of 80 per cent, has made   attacking “the rich” a key part of his campaign to retake his old job at   this May’s election. He has criticised tax avoiders, saying: “These rich   b——- just don’t get it… No one should be allowed to vote in a British   election, let alone sit in Parliament, unless they pay their full share of   tax.

“Cameron’s problem is too many of his team have become super-rich by   exploiting every tax fiddle… [We should] sweep away tax scams and everybody   should pay tax at the same rate on earnings and other income.”

Mr Livingstone has criticised Mr Johnson as a “mayor for the rich” whose   earnings include his pay as a Daily Telegraph columnist. “I live a normal   life, I have a normal home,” Mr Livingstone said at a debate last week. To   applause, he told Mr Johnson: “If you can’t live on £140,000 [the mayoral   salary], you must have a very interesting lifestyle.”

Mr Livingstone’s latest accounts, for 2010, show he has almost £320,000 in   cash in his company, Silveta Ltd, with earnings of £284,000 invoiced in that   year alone. By leaving his earnings in his company, a shareholder can avoid   large amounts of income tax.

Richard Murphy, an accountant and expert in tax avoidance, said: “Mr   Livingstone chose not to pay out this profit to himself and his partner and,   as such, the profits would only have been subject to corporation tax at 21   or 20 per cent in the company. Higher taxes would very likely have been paid   on this income if it had been paid to the shareholders in 2009.”

Mr Livingstone said: “The company has paid [corporation] tax and when it pays   me you pay an amount that is effectively the same rate as you would have   done on income tax.”

Accountants say that this is incorrect. If Mr Livingstone did decide to take   any money from the company, by paying himself and his wife a dividend, he   would make further tax savings, they said.

Richard Mannion, national tax director at Smith & Williamson, an accountancy   firm, said there was nothing illegal about what Mr Livingstone was doing.

However, he added: “Given what Mr Livingstone has said about tax avoidance,   that takes you into a whole different area of what is legally correct and   what is morally correct.”

Last week, The Sunday Telegraph revealed how the broadcaster Moira Stuart, the   face of HM Revenue and Customs’ advertising campaign, has avoided tax by   channelling payments through a personal company.

Mr Murphy, who is a supporter of Mr Livingstone, said: “Personal companies   like this should be reformed so the income they earn is taxed on their   owners as if it were part of their own income. That way, tax, and National   Insurance if appropriate, could not be avoided by putting a company between   a person and their income.”

Mr Livingstone added: “Do you expect my wife to work for nothing? She was   forced out of her job [at City Hall] once Boris won, and spent time   organising my life. It’s right that she should be paid [from the company].”