This month’s comment comes from Dr. Sam Hart. Sam Hart is an Associate Partner at Claritas Tax and sits on the STEP Journal’s Editorial Board. Having worked with Deloitte, Grant Thornton, and Azets, she has more than 20 years’ experience in Private Client tax, specialising in capital taxes and trusts.

Over the past 25 years, I have dealt with many High Net Worth Individuals and company executives, and the main point to note about them is that, in most cases, they are no different from anyone else in terms of running their own economic affairs in the most effective way they can. Most people do not have an aggressive desire to engage in edgy schemes of tax avoidance, and as supported by my own PhD research on the subject, most people are happy to make a contribution to society through paying tax.

What people often do, however, is structure their affairs in a tax-efficient way. This is not to suggest any impropriety, but in the same way that marketers use SEO to ensure their messages hit home, using specialist tax advisers like me can ensure individuals, and indeed companies, pay the right amount of tax simply by structuring things such that they do not pay more tax than is required.

What is a ‘fair’ amount of tax?

Of course, wealthy individuals do not always get the balance right: many will remember the outcry over celebrities such as Jimmy Carr and Gary Barlow being involved in dodgy ‘schemes’, and David Cameron’s family involvement in the Panama Papers raised even more eyebrows. These days, various organisations champion the idea of paying one’s fair share of tax, with certifications such as the Fair Tax Mark being made available to showcase one’s tax-paying credentials. Indeed, in his Budget speech last week, the Chancellor used the word ‘fair’ seven times, to emphasise just how equitable his tax measures would prove to be.

However, he also said that the Government would be “asking more of those people and businesses who can afford to contribute” to fixing the public finances after the ravaging by the COVID-19 support programmes. While the most significant measures in this regard were the increase in Corporation Tax rates to 25% (from 19%) with effect from April 2023, and the freezing of personal tax bands and allowances, estimated to be drawing in an additional £17.2 and £8.2bn respectively by 2025/26, it is unlikely a tax raid on the ‘better-off’ is off the cards for good.

Are tax boycotts concentrating executives’ minds?

One thing that has been seen in more recent times, led by corporates and their CSR-minded executives, is a string of larger companies paying back furlough funding they claimed during 2020. In most cases, the reasoning given is that the impact on their business was not a profound as it had appeared to be, and therefore repaying the money is the only right thing to do. 

Cynics might wonder whether the, as yet amorphous but still possible prospect of a future ‘windfall’ tax on those companies whose profits have actually increased during the pandemic concentrated the minds of those executives. Or perhaps it was a fear of customer backlash against companies pocketing millions in public funds, while still being able to pay healthy dividends to investors. No executive wants to be at the helm for the next ‘Starbucks’ style boycott.

In any case, while tax rates remain relatively low, it is possible for paying tax to be a virtuous behaviour that can be worn as a badge to repel any social media censure. When (not if) rates rise, company executives may find their position sits less comfortably with shareholders, and more HNWIs will look to employ tax-saving strategies that could include looking at moving offshore. The challenge for the Chancellor is to prevent this loss of wealth and talent and to encourage our economic recovery.

About Sam Hart

Sam Hart is an Associate Partner at Claritas Tax and sits on the STEP Journal’s Editorial Board. Having worked with Deloitte, Grant Thornton, and Azets, she has more than 20 years’ experience in Private Client tax, specialising in capital taxes and trusts.

About The Lede

This article was originally published in The Lede, Transmission Private’s monthly newsletter that tracks the future of reputation management. Featuring interviews with leading private client advisers from the worlds of law, finance, and accountancy, sign up today to receive the newsletter in your inbox every month.