There has been some complete shite written about Ken Livingstone’s tax affairs; he has replied in this article at the Huffington Post.  Here’s the law. The HMRC insist that people once known as sole traders incorporate themselves and run fully regulated companies so that the might of the Companies Act applies to their record keeping.  As a reward, or inducement, unlike those of us who pay PAYE, they are allowed to evaluate and pay their tax bill a year in arrears. The HMRC also take a view as to whether these “Companies” are in fact “disguised employment”.  If you fail their 13 tests, and are deemed to be in “disguised employment”, then all the company revenue  is considered “income” and taxed under income tax rules as earned income.

Ken passes these tests because

  • he employs staff
  • he receives money from multiple customers
  • and err, I have no access to his (or Boris’s) tax records, and so have no idea how many other tests he passes and fails

So, the HMRC consider him to be a genuine service company and he’ll pay tax on

  • the company profit, Corporation Tax
  • any dividend income, income tax as unearned income
  • any salary or non salary benefit, income tax as earned income
  • any employer’s national insurance (NI) liability on himself and his staff
  • any employee NI contributions on his own salary

Frankly,  I find it difficult to believe that the Daily Telegraph don’t pay Boris Johnson using similar vehicles. I can’t believe that they’ll put their hands up for the employer’s NI on £250K if they could legally avoid it. Also the disguised employment rules make paying a class 1 NI stamp on two wages a bit tricky!

It should also be noted that the Civil Service rules, which I assume do not apply to the Mayor of London,  demand that public servants are beholden to one wage, that paid by the taxpayer; this is in order to eliminate any suspicion of conflict of interest. I think we know who breaks the Civil Service rule; even if it is merely chickenfeed.

It’s not chickenfeed, it’s a shit load of money; it’s also more than he earns as Mayor.

The London Mayors and their tax affairs
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