'Careless': Critics said Philip Hammond should set an example

'Careless': Critics said Philip Hammond should set an example

‘Careless’: Critics said Philip Hammond should set an example

Chancellor of the Exchequer Philip Hammond was facing questions about his business affairs last night after it emerged that a private company in which he holds an interest has paid virtually no tax – despite making £1.6million in profits since he joined the Government.

An investigation by The Mail on Sunday has revealed that a construction firm linked to Hammond has paid just £5,964 in tax on total profits of £1.6million since it was set up in 2010.

That is an effective tax rate of 0.4 per cent – a long way below the standard 19 per cent corporation tax rate.

Tax experts said the company, Chiswell (Moorgate) Limited, appears to have taken advantage of rules that legally allow firms to minimise tax bills when their profits are unpredictable.

The Mail on Sunday has established that one of the firm’s directors also works as an accountant who specialises in ‘mitigating’ tax.

There is no suggestion of wrongdoing by Hammond or the company itself. However, critics said the revelations were at odds with statements he has made on corporation tax.

As Chancellor, he has launched a crackdown on web giants such as Amazon and Google, which have been accused of using legal means to reduce their tax bills, and called on them to pay their ‘fair share’ to support public services.

Former Business Secretary Sir Vince Cable, leader of the Liberal Democrats, said: ‘The Chancellor is without doubt a man of honesty and integrity who makes legitimate use of his experience as a successful entrepreneur.

READ  Russia Offers Attractive Valuations

‘It is extraordinary that he has been careless enough not to ensure that his company is above tax dodges that others would be condemned for.’

Hammond’s links with Chiswell stem from the time before he became Transport Secretary in 2010. 

Hammond, 63, was a successful entrepreneur who amassed a multi-million pound fortune from his construction empire, which builds houses and care homes. Once he became a Minister, Chiswell was established as the parent company of the firms he owned – or part-owned – to distance him from his business interests.

He has no involvement in the running of any of the companies owned by Chiswell, but he is a beneficiary through The Hammond 2010 Discretionary Settlement trust, which controls Chiswell.

Since it was established in 2010, the company has made an annual profit in five separate years, totalling £1.6million. In three of the eight years, Chiswell made annual losses. Normally, a company is expected to pay corporation tax in any year in which it makes a profit, but not when it makes a loss.

If it had paid the standard corporation tax rate on the £1.6million it earned in profitable years, the company would have paid the taxman around £300,000.

According to accounts filed with Companies House, Chiswell made a small loss last year of £5,109 and so is not expected to pay any tax.

Its biggest profit was in 2017, when it made £788,633. It did not pay any tax that year. The only year in which the company did pay tax was 2015, when it handed over £7,567 – even though it made a loss – to account for taxes owed from previous years.

READ  Hidden catch of Help to Buy: Homeowners face a mass of red tape to remortgage

However, it also received a rebate of £1,603 in 2011, meaning the firm’s total tax bill in eight years of operation has amounted to £5,964.

Chiswell's main operating subsidiary is Castlemead, a  company co-founded by Hammond in 1984 that took off in the early 2000s when it began building doctors' surgeries and care homes

Chiswell's main operating subsidiary is Castlemead, a  company co-founded by Hammond in 1984 that took off in the early 2000s when it began building doctors' surgeries and care homes

Chiswell’s main operating subsidiary is Castlemead, a company co-founded by Hammond in 1984 that took off in the early 2000s when it began building doctors’ surgeries and care homes

Tax experts said it was unclear exactly how the company had reduced its tax bill. But they suggested it had used rules that allow the storing up of tax reliefs from years when a company makes a loss and using them when it makes a profit.

It is also possible for a firm to offset losses at one of its subsidiaries against profits at another, such as the parent company.

Critics said the Chancellor should be setting an example of good business ethics by making sure companies in which he has an interest pay the standard rate of corporation tax.

A spokesman for Hammond said: ‘The Chancellor has no direct interest in this company, but in response to your query, we have checked with the professional advisers to the trustees who confirm that all tax returns that are required in respect of Chiswell (Moorgate) Limited and its subsidiary companies have been made and all tax due has been paid.’

Chiswell’s main operating subsidiary is Castlemead, a Wrexham-based company co-founded by Hammond in 1984.

It started out as a housebuilder, but business took off in the early 2000s when it began building doctors’ surgeries and care homes. Castlemead Group Limited is 65 per cent owned by Castlemead Limited, which is in turn entirely owned by Chiswell. While none of the companies has paid a dividend for a number of years, Hammond previously extracted millions of pounds from his construction empire. 

Between 2003 and 2010, he and his wife Susan received dividends worth £3.75million from Castlemead. At its peak in 2007 before the financial crisis struck, they cashed in £1.75million.

Richard Murphy, of campaigners Tax Research UK, said the complex nature of Hammond’s business empire meant it was not possible to put an exact figure on its tax payments.

‘It’s one of the absolutely fundamental failings of UK company accounts. We don’t know because he doesn’t have to tell us,’ Murphy said. ‘Why is it that we cannot get data on the tax affairs of companies where we have a reasonable right to know? This is wrong.’

Simon Linley, a director of Chiswell and a nominee for Hammond’s trust, declined to comment. He is an accountant at Tunbridge Wells-based Creaseys, which counts Hammond’s company as a client. It said it did not comment on clients.

On Creaseys’ website, Linley says he is a tax specialist who gives advice on ‘mitigating capital gains tax and inheritance tax’. Another nominee for the Hammond trust is his friend Lord Moynihan, the former Sports Minister.

 



READ SOURCE

WHAT YOUR THOUGHTS

Please enter your comment!
Please enter your name here