The tax return evidence that 'shocked' George Osborne

George Osborne

The Treasury has released a copy of the illustrative examples which left George Osborne "shocked" about wealthy tax avoidance and led him to introduce his since-abandoned plans to cap tax relief on charitable donations.

In April the chancellor told the Daily Telegraph that he was "shocked to see that some of the very wealthiest people in the country have organised their tax affairs... so that they were regularly paying virtually no income tax."

He explained that he was talking about people with multi-million pound annual incomes and added: "I'm not allowed to be shown the names of the individuals but I've sat with the most senior people at the Inland Revenue, the people who run some of the high net worth units there. They have given me examples, anonymised examples, and so we are taking action."

Mr Osborne was justifying his controversial plan in the Budget in March to limit all tax reliefs, including for charitable donations, to an annual maximum of £50,000 or 25% of an individual's income, whichever was greater.

Following a freedom of information request from the BBC for a copy of the "anonymised examples" shown to the chancellor, the Treasury has now disclosed one sheet setting out three "illustrative" cases provided to him.

This shows:

  • an individual with an annual income of £15m paying nothing at all in income tax, largely due to charitable donations of £10m
  • an individual with an income of £10m also paying no income tax, due to a mix of reliefs including £4m given to charity
  • an individual with an income of £20m paying an average income tax rate of only 15%, largely due to charitable donations of £8m
Treasury document

It is not completely clear on what basis these cases were derived. The Treasury describes them as "stylised examples based on an analysis of the tax records of those individuals most affected by the change" and "not actual taxpayers' details". HM Revenue and Customs is legally prohibited from revealing the tax details of an identifiable individual.

Of course Mr Osborne may have been given further evidence in meetings of the tax avoidance problem he was seeking to tackle, but this is the only written documentation that the Treasury was able to provide.

The proposed limit provoked outrage from many charities, and two weeks ago the chancellor announced he was dropping plans to cap tax relief for gifts to charity, although he plans to press ahead with the restriction on other tax reliefs next year.

However, what is clear from this disclosure is that it is indeed charitable donations rather than other allowable reliefs which was the focus of the Treasury's concern to extract more tax from some of the country's richest individuals.

Martin Rosenbaum Article written by Martin Rosenbaum Martin Rosenbaum Freedom of information specialist

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  • Comment number 92.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • rate this

    Comment number 91.

    Irrespective of the arguments for and against restricting the tax advantages of charitable donations, what I find extraordinary is that Osborne launched his proposals without first discussing it with charities and having a public debate, got it wrong, and now has had to withdraw and reconsider.
    If I put forward proposals in such an unconsidered manner I'd be out of a job and rightly so.

  • rate this

    Comment number 90.

    Not suggesting we'd get that much extra by fixing loopholes but I was counting all behaviour such as channel islands as part of avoidance.

    Some of this behaviour also lowers GDP.

    I admit that I made a crude estimate because so little tax information to add to reported profits. The rules might be acceptible but definitely Ken Livingstone type arrangements commonly advised by accountant.

  • rate this

    Comment number 89.

    Gort: the problem with tax avoidance figures always starts with definitions. Buying CDs via the Channel Islands to save VAT could be classed as tax avoidance and even artificial. Very large businesses are included in HMRC figures, tax gap for those is est at £2.7b (annex I of HMRC report).

    37% of FTSE may have paid no tax because of carry forward of 2008/9 losses (all banks for example)

  • rate this

    Comment number 88.

    Even where accusation were wrong by media the defence is:

    Tesco "does not engage in highly aggressive tax avoidance".

    37% FTSE made a loss?

    Not including big business in £40bn stats signific.

  • rate this

    Comment number 87.

    The Treasury has released a copy of the illustrative examples which left George Osborne "shocked" about wealthy tax avoidance

    I just bet he was shocked he was brought up with all this going on around him who does he think he is fooling the working people of this country have known for years the rich have be hidding thier tax in off shore accounts so for george to be shocked i am shocked

  • rate this

    Comment number 86.

    It includes "aritificial avoidance" as a distinction from what it viewed as natural avoidance,

    It is also interesting to note:
    "Classification of schemes targeting Very Large businesses enables these to be excluded from the calculations"

    You've been trying to suggest that avoiadance isn't a big issue and that it is reasonable behaviour to accept. It isn't even if 2% of my est.

  • rate this

    Comment number 85.

    yes I was wrong about hmrc stats but their formulae is low:
    "As a result the amount of avoidance, and therefore the avoidance tax gap, is likely to be underestimated."

    which also acknowledges possible broader definitions of avoidance


  • rate this

    Comment number 84.

    #80 HMRC figures are not limited to illegal avoidance. £35b includes tax avoidance, evasion and non collection. Even the specific avoidance figure includes an estimate for legal tax planning which is why HMRC quotes a figure of between £4.7b and £14.7b.

  • rate this

    Comment number 83.

    HMRC figure is for illegal avoidance."

    Illegal avoidance is evasion.

    And the HMRC figure from their 2009 'tax gap' report was around £40bn and included fraud, error, nonpayment and what it called artificial avoidance schemes.

    And despite repeated errors in your posts your going to stick to your "crude probabilities"?

  • rate this

    Comment number 82.


    In 400ch you expect what exactly...

    There are over 275,000 accoutants in UK

    You state you think if anyone could avoid tax they will. Yet, you believe that hardly anyone exploits legal loopholes to pay no tax.

    Your arguments are all diversionary

  • rate this

    Comment number 81.

    "It is the ratio of the £48bn to the ~£450bn income + NI tax (from memory) which highlights an issue."

    You're about £200bn over the actual figure for Income tax and NIC. But what issue exactly does it highlight? It's the nature of most companies that they pay more in IT and NI than they do in CT. You'd expect that.

  • rate this

    Comment number 80.

    HMRC figure is for illegal avoidance.

    I was estimating avoidance based upon crude probabilities from direct stats not anyone else's figures.

    Often banking sector for example quote their contribution there's a PWC study for example. But once you exclude the indirect contribution from its worlers you realise they are well short of 23% without significant investment in company, etc

  • rate this

    Comment number 79.

    But corporation tax is set at a nominal 23%."

    No it's not. The full rate is 24%, the small companies rate is 20%.

    Sorry but the rest of your post is nonsense. You confuse nationality with domicle and vague references to gas prices, losses and foreign companies suggests a grasp of knowledge more suited to a Daily Mail reader ranting on about benefits cheats.

  • rate this

    Comment number 78.

    #56/57 there are two figures on tax avoidance which are widely quoted. £120b and about £35-40b.

    The first figure is based on a report prepared for the public sector union in order to justify why cuts in public sector spending was not needed. There may be some bias there!

    The £35-40b figure is prepared from HMRC figures by HMRC/ONS.

    I prefer the HMRC figure

  • rate this

    Comment number 77.

    I may be using a wider definition for avoided than you. But corporation tax is set at a nominal 23%.

    It is the ratio of the £48bn to the ~£450bn income + NI tax (from memory) which highlights an issue.

    I am saying that issues sonn add up:
    £30k foreign national max tax.
    Offshore business
    Claiming losses in one company that lead to profits in another company (i,e, gas prices)

  • rate this

    Comment number 76.

    75 - "but I can definitely language to any level"

    What confidence, since there are barristers and judges who can't agree on what some tax legal language means.

    I suppose it helps if you've made your mind up how you're going to interpret it before you've even read it, as you have here.

  • rate this

    Comment number 75.

    #73 seems to have cut the link I used.

    But as for claims that I wouldn't understand the data if I had it - I suppose are understandable since I've time in the middle of the day to spend arguing in 400ch. but I can definitely interpret raw data, stats, legal language to any level.

  • rate this

    Comment number 74.

    73 - "It is £100bn an estimate extrapolated from various ratios"

    Oh, an estimate extrapolated from various ratios. Can't get much more definitive than that. Care to give a little more detail?

    Here's a detail - the TOTAL corporation tax raised in 2011-12 was only £48.1bn. So you're really arguing that twice as much was avoided as was paid?

  • rate this

    Comment number 73.

    I said I wasn't an expert not that I didn't know anything about it.

    It is £100bn an estimate extrapolated from various ratios with corp currently


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