Tax avoidance is ‘OK’ declares Farage as he dismisses ‘ridiculous’ attacks for using firm to halve tax bill on £45,000 extra earnings
● UKIP leader says no-one would pay more tax than they had to
● Says he paid money into company Thorn in the Side Limited to save cash
● He saved £11,000 by paying 20p corporation tax instead of 40p income tax
Nigel Farage has said that some tax avoidance schemes are ‘OK’ as he declared nobody pays more tax than they have to.
The UKIP leader defended using the schemes to reduce tax bills after it emerged he is using a private company that could halve the tax paid on his media earnings.
Mr Farage has funneled up to £4,000 a month in income from sidelines such as TV appearances and on the lecture circuit into the firm called Thorn in the Side Limited.
It means that last year he paid only 20 per cent corporation tax on profits of £45,000, instead of 40 per cent income tax.
Mr Farage, 50, who set up the company in 2011, said that criticism of the schemes was ‘ridiculous’.
He said: ‘No one voluntarily pays any additional income to the Inland Revenue. Most forms of legal tax avoidance are okay, but clearly some are not.
‘To receive money personally I have to pay 40 per cent. Corporation tax at 20 per cent is for retained profits (kept in the company) only, therefore the criticism is ridiculous.’
The use of personal service companies is not illegal, but they have been widely criticised by politicians for being a way to reduce tax bills.
Companies House records show that in 2012-13 Thorn In The Side Limited, of which Mr Farage is the only director and owns 100 per cent of shares, made a profit of £45,488.
If this had been declared as income he would have paid £21,883.03 in 40 per cent income tax and national insurance.
But by using the personal service company, he only paid £9,097.60 in corporation tax, and a further £1,687.50 on a £7,500 he took as a dividend, taxed at 22.5 per cent – meaning a saving of £11,097.93 on an income tax bill.
Mr Farage will be taxed on the money he has not taken as dividend when it is drawn out later, but by using the company he is able to draw it as income more slowly limiting his tax liability.
His firm of accountants, Buckley Watson, based in Leigh, Essex, said it was involved in ‘tax planning’ rather than ‘avoidance’ and has handled accounts for Mr Farage since 2003.
Spencer Watson, the firm’s founder, said personal service companies to reduce tax were common place.
He said: ‘They are used by millions of individuals in the UK to operate their businesses so as to protect their personal assets and to plan their taxes sensibly.
‘It should not be confused with any form of tax avoidance. My firm does not promote or use any tax avoidance scheme and never has done.’
As an MEP, Mr Farage also earns £78,000-a-year from Brussels and employs his wife Kirsten on the taxpayer, on a salary of up to £20,000.
In a speech last year, he took aim at ‘a common enemy – rich people, successful companies evading tax which of course is a problem’.
He was criticised after admitting he opened an offshore trust fund on the Isle of Man for ‘inheritance purposes’, but later claimed he never used it, adding: ‘It was a mistake. I’m not rich enough.’
In the 2012 London Mayoral race Labour’s Ken Livingstone was criticised for using a personal service company after declaring: ‘No one should be allowed to vote in a British election, let alone sit in Parliament, unless they pay their full share of tax.’
The BBC has also come under fire for allowing star presenters to have their wages paid into such companies, which means they end up paying less tax.
Last month there were calls for Gary Barlow to be stripped of his OBE after it was revealed he faced a £20million tax bill because it was ruled that a partnership he had invested in was an ‘aggressive’ tax avoidance scheme, set up for the purpose of making a loss to reduce investors’ tax bills.
Mr Farage was today in Malta, despite it being the last day of campaigning in the crucial Newark by-election where Ukip hopes to win its first seat in Westminster.
Just hours before polling stations opened in the Nottinghamshire constituency, Mr Farage was more than 1,500 miles away speaking at a conference organised by the Institute of Travel and Tourism of the UK.
There had been speculation that Mr Farage would stand as Ukip’s candidate in the by-election, but since he ruled that out he has appeared to have distanced himself from the contest. The latest opinion polls suggest the Tories will keep hold of the seat.
A newly-elected Ukip MEP yesterday admitted employing dozens of eastern European and Filipino workers in his family care company.
But Wales MEP Nathan Gill said that there was no inconsistency with his party’s stance on immigration.
Mr Gill, who provided ‘bunkhouse’ accommodation for immigrants working for the company in Hull, said: ‘We employed people from overseas because we could not find local workers to do the jobs. The bunkhouses were temporary accommodation we offered to people coming from overseas until they could get something more permanent.’