Puzzle of Ukip leader Nigel Farage’s offshore trust
It’s all a bit of puzzle. Nigel Farage set up a family trust in the Isle of Man – the Farage Family Educational Trust. That’s not disputed. And he transferred his shares in the family metal brokers firm – Farage Ltd – to that trust. That’s not disputed either.
But then Mr Farage says that in 2004 he waived his rights to dividends from Farage Ltd in favour of his brother, Andrew. The result is that no money was transferred to the trust beyond the cost of setting it up.
Which raises the obvious question of why he bothered. Mr Farage says it was to “mitigate” the effects of inheritance tax on his children, though when I caught up with him outside his home in Bromley today, Mr Farage suggested on camera that a trust in the Isle of Man didn’t count as offshore (which it certainly does).
Mitigating his children’s inheritance tax bill would have been tax avoidance, of course. But because no money went into the trust fund, no avoidance occurred. His accountant told Channel 4 News it’s a “story out of nothing”. And Mr Farage even claims he’s not wealthy enough for inheritance tax to be a problem.
But I suspect HMRC will be looking closely at what Farage arranged. An official told us today that they like to “read the newspapers” and “come up with interesting stories”.
And Farage’s waiving of dividends in favour of his brother seems to have been an extraordinarily generous act, for Farage Ltd made profits of almost £1m between 2004 and 2010, so Farage’s decision turned out to be a brotherly gift of almost half a million pounds.
Some papers today – the Mirror and Telegraph online – have suggested Farage is guilty of hypocrisy, but I think they’ve misunderstood the Ukip leader’s recent speech to the European parliament on tax. I’m not sure Farage has actually attacked tax avoidance in the same way George Osborne and Margaret Hodge have done.
Nigel Farage is something of a Teflon politician – as with Boris Johnson, mud doesn’t stick to him that easily. But he and his party are going to be subject to a lot more scrutiny in the months ahead. As are other politicians who set up arrangements to avoid paying taxes.
Follow @MichaelLCrick on Twitter