Tax Avoidance? Surely not!

Anyone following stories about tax in the media will be well aware of the criticism being handed out by politicians to big business for not paying ‘enough tax’.  Some firms produce accounts which show large accounting profits but seem to pay little or no tax.  The Public Accounts Committee, under the chair of Labour’s Margaret Hodge, has been particularly vociferous about such matters.

What then should we make of the Labour Party’s latest published accounts which show income of £33m, a surplus of income over costs of £2.8m and corporation tax of……..nil?

As way of background, political parties are treated as unincorporated associations and are liable to corporation tax on investment income so that, for example, the Conservative party reported a surplus of £1.46m and paid £521k tax.

So what should we make of the Labour Party?  Well, a spokesman for them explained “Corporation tax is paid on taxable profits and we made no taxable profits” and a review of their accounts shows that in fact they had tax losses brought forward from earlier years available to them.  From looking at one set of accounts and not even considering the tax background, should we conclude that the Labour Party must be evil nasty tax avoiders?  Or should we conclude that tax is complicated and that you really can’t tell the tax position of a company just by looking at one set of accounts or even several?

Personally, I’m in favour of the latter conclusion. And I hope in future that Margaret Hodge reaches the same conclusion.

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