Did Ken Livingstone break tax rules over Labour donation?

The Evening Standard has reported:

Ken Livingstone was under fresh pressure over his alleged tax avoidance after he was forced to admit using his private company to make a sizable political donation.

Mr Livingstone had previously claimed to have personally made a donation to the Labour Party of £19,202 in December for “staff costs” during his election campaign.

But he has now confirmed to the electoral commission that the donation came from his private company Silveta Ltd, through which he allegedly avoided at least £50,000 in tax by benefiting from corporation tax at 20 or 21 per cent rather than paying income tax at up to 50 per cent on all of his earnings.

It was today claimed the Labour candidate broke HM Revenue and Customs rules by offsetting the £19,202 donation made through Silveta against tax.

You can read the full story about Ken Livingstone’s tax affairs here.

* Mark Pack is Party President and is the editor of Liberal Democrat Newswire.

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This entry was posted in London and News.
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4 Comments

  • Andreas Christodoulou 31st Mar '12 - 4:50pm

    This sounds like dross. A company is fully entitled to donate to political parties and this must be disclosed (as it sounds like it has been) in the financial statements.

    These expenses should be then added back in the tax computation for the company. We don’t know whether this has been done as the tax comp is not public information.

    I can’t find who is accusing Ken of tax evasion or on what grounds they know or suspect that he hasnt adjusted his tax computation but I’m disappointed in LDV using cut and paste journalism from tabloids without adding any facts or taking care to verify the precise nature of the claims made.

  • ” through which he allegedly avoided at least £50,000 in tax by benefiting from corporation tax at 20 or 21 per cent rather than paying income tax at up to 50 per cent on all of his earnings.”

    I’m no Ken Livingstone fan but this is just ridiculous.

    If his business makes a profit of £200k in one financial year then he pays 20% corporation tax on this profit.
    So he has £160k left in his company which he can then withdraw as dividends.
    The first £40k of this is not subject to any income tax as he has already paid corporation tax and the same rate he would have paid income tax at .
    However he’ll then pay 40% and then 50% on any dividends he takes above 40k.

    The only tax he doesn’t pay is NI on dividends BUT if he takes a salary from the company then he’ll be paying both employees and employers NI contributions on the salary.

    I’m in the exact same taxation situation (albeit with a fraction of the income!) and it is the only way I can operate as a freelance worker with income from multiple sources who needs limited liability insurance to carry out my work.

    In other words there is plenty to criticise Livningstone over but this is not one of them.

  • Martin Pierce 1st Apr '12 - 9:03am

    I agree with the comments above. Unless Livingstone actually EVADED tax by somehow not paying tax on his dividends, then he will not have paid only 20% instead of 50%. I am also a freelancer working through a Limited company and essentially it all comes out much the same in the wash. There is one advantage to a limited company though – political donations (and charitable) are deductible against Corporation Tax (whereas as an individual only charitable donations are) – I know because I have made all my donations to the Lib Dems via my company since I started it. I would therefore be amazed if Livingstone HADN’T donated via his company. If I were Livingstone I’d tackle the Standard head on about paying only 20% instead of 40% or 50% – assuming he has of course followed the normal rules and paid more

  • Andreas Christodoulou 1st Apr '12 - 11:08am

    I was of the impression that political donations, not being for the purporse of trade, were disallowable expenses for corporation tax purporses.

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