Channel 4 in explosive row with millionaire Tories over ‘tax dodge’ investigation
By Glen Owen
Last updated at 10:10 PM on 16th October 2010
Channel 4 was last night embroiled in an explosive row with the Government over an investigation into the financial affairs of Cabinet Ministers.
The documentary makes allegations about millionaire Ministers including Chancellor George Osborne, Transport Secretary Philip Hammond and International Development Secretary Andrew Mitchell.
Last night, all three men strongly denied any implication that they had acted improperly by deploying tax-avoiding measures, with Mr Hammond warning that his ‘lawyers will be watching’ the programme tomorrow.
And the Foreign Office entered the row after learning that the report would claim that it had granted special financial treatment to the Cayman Islands – an infamous tax haven – thus indirectly benefiting companies run by Tory Party donors.
The Dispatches programme, timed to coincide with this week’s spending cuts, makes ironic use of the Coalition’s claim that ‘we are all in this together’, before delving into some of the ‘wealth management’ strategies Ministers use to preserve their fortunes.
The report will claim that Mr Hammond acted last year to limit his exposure to the new 50p top rate of tax by moving shares in his family property business into the name of his wife, who pays tax at a lower rate. He did so after the 50p rate was announced but six months before it came into effect in April. The programme estimates that the move saves him more than £26,000 a year.
It also says that Mr Hammond, who is worth £7 million, has ‘not received a penny’ from the firm, Castlemead, in salary, instead receiving cash in the form of share dividends – a tax-efficient measure used by the wealthy.
The programme asks why Mr Mitchell, ‘whose job is to alleviate world poverty’, has made large returns on investments in the British Virgin Islands, another tax haven.
It also highlights a Government policy U-turn over the Cayman Islands, which, the producers note, is the base for companies run by wealthy Tory donors such as Hugh Sloane, worth £185 million, and Michael Hintze, worth £250 million.
Last year the then Labour Foreign Minister Chris Bryant tried to force the islands to introduce direct taxation by restricting their access to loans to plug a budget deficit.
But the programme points out that within weeks of the new Government taking power, the demand had been dropped and the Foreign Office had granted permission for the islands to borrow an extra £100 million.
The programme also highlights the personal wealth of Mr Osborne, declaring that he stands to benefit from a trust fund worth more than £4 million – three times higher than previous estimates – which will save him and other family beneficiaries an estimated £1.6 million in inheritance tax.
Last night Mr Hammond explained that he had transferred his shares to his wife because he was expecting to enter Government and knew that ministerial rules barred him from holding shares. The remaining
60 per cent of his holdings were put into a trust. He added that the tax benefit from receiving income in share dividends rather than salary was ‘marginal’.
He said: ‘I have paid all taxes for which I have been liable and any suggestion that in reaching these arrangements my motivation was to avoid tax is without foundation.’
In a statement last night, Mr Osborne accepted that the family fortune would pass to him tax-free, but when he died his share would be subject to inheritance tax.
‘Any income received or gains made by the trust are also within the scope of income tax and capital gains tax respectively,’ said a spokesman.
Mr Mitchell said: ‘These investments are a matter of public record.’
How The Rich Beat The Taxman will be shown tomorrow on Channel 4 at 8pm