Peter Mandelson received £400,000 tax-free in cash last year
from a company he owns. The company, of which he is the sole shareholder, gave
the former secretary of state a loan – a move described by a leading tax
campaigner as likely to have been motivated by tax avoidance. It allows those
who take advantage of the mechanism to delay when they pay tax on income earned
through their company – potentially indefinitely.
Salary payments or dividends from a small business are
liable for tax under UK rules, but in the case of a loan to a director –
provided a certain minimum rate of interest specified by HMRC is charged – the
borrowing is not liable for tax. The official interest rate that applied at the
time was 3.25%. The company charged £15,211 in interest on the balance. No
repayments were made on the loan by Mandelson during the year, nor was any
repayment schedule or term of loan set out.
Richard Murphy, a chartered accountant and director of Tax
Research UK, said Mandelson’s use of loans raised questions.
“How to extract cash from small companies whilst paying as
little tax as possible on the way is a massive part of the UK tax avoidance
industry,” he said. “Directors taking loans from companies they own is one way
in which this is done, which has been widely condemned in the past when done by
footballers and others. It’s just about impossible to think this is motivated
by anything but tax avoidance.”
Mandelson’s loan and property dealings previously came under
scrutiny after he was forced to resign from Tony Blair’s cabinet in 1998 when
it was revealed he failed to declare a secret property loan from Geoffrey
Robertson, a fellow Labour MP and tycoon, who was at the time under
investigation by Mandelson’s department. After a brief return to the cabinet,
he was forced to resign a second time in 2001 over his involvement in a
passport application of Indian billionaire Srichand Hinduja.
In August 2011, it was reported that Mandelson paid £8m for
a four-storey Regent’s Park townhouse with its own wine cellar. Mandelson
recently criticised Labour’s tax policies on wealthy individuals, about the
mansion tax, Mandelson said Ed Miliband’s plan to tax properties worth more
than £2m was “crude” and “sort of short-termist” and would “clobber”
homeowners.
During the early years of Blair’s premiership, he commented to an
audience of tech entrepreneurs that he was “intensely relaxed about people
getting filthy rich as long as they pay their taxes”.
He has made public speaking appearances for clients
including Coca-Cola, Lloyds bank and Samruk-Kazyna, Kazakhstan’s sovereign
wealth fund, as well as for mining companies operating in Africa. Mandelson
established a second company, Global Counsel LLP, in partnership with his
long-time aide Ben Wegg-Prosser and the advertising giant WPP. Global Counsel’s
clients include multinationals such as BP, Goldman Sachs and commodities giant
Glencore. In 2012, it was revealed that Mandelson was advising Asia Pulp and
Paper, which has been accused by environmental groups of destroying large
swaths of an Indonesian rainforest. He is the proverbial politician for hire.
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