A story that provides us with an interesting little question. Is this a tax dodge or not? For a multi-millionaire sets up the sale of his business so that he pays no – not one single penny – on the sale of his business. It’s entirely within the law, of course it is, but it’s also true that he walks away with millions without contributing to that all important revenue to the Exchequer. This will, no doubt, bring down condemnation upon his head from the usual suspects.
Or, you know, maybe not?
Employee ownership, better known as the John Lewis model, remains a niche approach to business in the UK. But it is growing, and one West Country agricultural entrepreneur is the latest backer of an idea that has been embraced by more than 300 British companies.
Guy Singh-Watson is handing more than three-quarters of his Riverford Organic Farmers business to its 650 employees as part of plans to create a structure where the staff will have a say in the firm’s future.
According to this report he’s going to pick up £6 million from this. And of course good luck to him, I or you might think that veg boxes are a ludicrous idea but the joy of the market system is that 50,000 of our confreres disagree with us weekly and he’s making cash out of that difference of opinion.
But that increase in his bank balance by £6 million:
Staff will not have to buy shares under the employee ownership plan; their 76% stake will be held in a trust overseen by a board that will be involved in running Riverford alongside a staff council.
Workers will share about 10% of annual profits, as they have since the 1990s, and a loan from ethical bank Triodos will let the business pay £6m over four years to Singh-Watson, who turns 58 this month.
The interesting part of this arrangement being the following:
The EOT is an extension of the traditional employee benefit trust, but with distinctive features and tax advantages.
Crucially, an EOT must hold a controlling stake in its company and must benefit all employees on an equal basis.
The major tax exemptions:
A complete capital gains tax (CGT) exemption on gains made when a controlling interest in a company (or parent company of a trading group) is sold to an EOT.
Quite so, he gets to cash out for £6 million without a penny in tax being paid.
Now, I think that’s just great. Paying the minimum tax that the law demands is just fine by me. But as varied examples such as Vodafone, Starbucks, Boots and others shouted at by UKUncut and the like show not all share that view. It’s morally wrong if there’s money floating around that doesn’t get spent on diversity advisers perhaps. Even if people are indeed obeying every jot and tittle of the law, just as they’re intended to be used.
They’re printing the placards for the demos right now, right?