TaxPayers' Alliance reports Ken Livingstone to HMRC over tax irregularities

March 18, 2012 6:00 AM

When details of Ken Livingstone's tax arrangements first emerged, I wrote about my concerns on my blog. I said that "...for Ken Livingstone to throw around accusations of tax dodging one minute then rely on his accountants to minimise his own burden the next is clearly hypocritical."

Following further revelations, we have decided that it is only appropriate to report Mr Livingstone's tax irregularities to HMRC for them investigate formally. Hopefully this investigation will be swift, so voters in London's Mayoral election can know the full facts when they cast their ballot in May.

Here is the text of the letter I sent to HMRC today:

I write to request that HMRC conduct an investigation into whether Mr Ken Livingstone, through his company Silveta Ltd, has been setting disallowable expenses against tax.

HMRC rules state that to be set against tax, company expenses must be “wholly and exclusively incurred for the purposes of the trade.”

In response to publicity about his channelling his earnings through Silveta, Mr Livingstone has stated that he has employed three people, two of whom remain currently employed.  Mr Livingstone has made clear that he treats these expenditures as allowable expenses. On BBC London’s Vanessa Feltz show on Friday, 16 March, http://www.bbc.co.uk/podcasts/series/vanessa, he said:

“I’ve formed a company, and you have company expenses, travel, research and you employ people. And I’ve employed three people at different times over this last four years. And after you’ve had all those expenses, then the money you pay yourself I’ve paid tax on.”

One of the people he employed, he made clear, was an economist to work on his re-election campaign. He said: “Literally you can’t, if you’re running for mayor, off the top of your head come and say I’m going to cut the fares – you need to employ someone to go through their [TfL’s] books. I got a really well-established economist who’d worked in the public and private sectors, who spent a long time ploughing through – imagine the size of the accounts of TfL – who cam back and said, yes you can make a fares cut. It takes time to do that and you need to employ people to do it.”

In an interview on BBC Radio Five Live, Pienaar’s Politics, on Sunday, February 26, Mr Livingstone said: "The other thing is I've used that [company money] to pay for people to work on the campaign for mayor.”

In an interview on the Andrew Marr show, BBC One, on Sunday, March 11, http://news.bbc.co.uk/1/hi/programmes/andrew_marr_show/9704407.stm, Mr Livingstone said: “I employ people. I mean that fare scheme we've come up with, it took someone, a talented economist, to sit down and spend a lot of time going over the books. I've got people handling the media. I employ at the moment two people.”

Mr Livingstone has declared to the Electoral Commission a donation to the Labour Party of staff time worth just over £19,000. His campaign states that this is for three months' work of two staff. This implies that the staff were paid a total of £76,000 on a full-year basis.

It is my belief that the employment of an economist to come up with policies for Mr Livingstone’s re-election campaign and the employment of “people handling the media” for the campaign cannot be expenses incurred “wholly and exclusively” for the purposes of Silveta’s trade.

HMRC rules are clear that the purpose of the company is a matter of fact, determined by the revenues it raises and the objects set out in the Articles of Association. Silveta Ltd’s Articles of Association state that the Company’s objects are:

(a)     (i) To carry on business as a general commercial company.                   


(ii) To carry on any trade or business whatsoever and to do all such things as are incidental or conducive to the carrying on of any trade or business by it.


(iii) To undertake all or any of the following objects.


None of the following objects (b)-(z) specify political campaigning, the promotion of candidates, or anything related to the London Mayoralty or tube fares. Nor, clearly, can a political campaign be defined as a trade or business.

Silveta Ltd’s purpose is, as Mr Livingstone has stated, to handle his own personal earnings from “after-dinner speaking, TV stuff and all that” and not to further his re-election campaign. There is no evidence that Silveta Ltd received any revenues from its analysis of City Hall’s books, or the promotion of Mr Livingstone as mayor.

It appears clear to me that the salaries of a media assistant and an economist/policy adviser are not allowable expenses under HMRC rules.When details of Ken Livingstone's tax arrangements first emerged, I wrote about my concerns on my blog. I said that "...for Ken Livingstone to throw around accusations of tax dodging one minute then rely on his accountants to minimise his own burden the next is clearly hypocritical."

Following further revelations, we have decided that it is only appropriate to report Mr Livingstone's tax irregularities to HMRC for them investigate formally. Hopefully this investigation will be swift, so voters in London's Mayoral election can know the full facts when they cast their ballot in May.

Here is the text of the letter I sent to HMRC today:

I write to request that HMRC conduct an investigation into whether Mr Ken Livingstone, through his company Silveta Ltd, has been setting disallowable expenses against tax.

HMRC rules state that to be set against tax, company expenses must be “wholly and exclusively incurred for the purposes of the trade.”

In response to publicity about his channelling his earnings through Silveta, Mr Livingstone has stated that he has employed three people, two of whom remain currently employed.  Mr Livingstone has made clear that he treats these expenditures as allowable expenses. On BBC London’s Vanessa Feltz show on Friday, 16 March, http://www.bbc.co.uk/podcasts/series/vanessa, he said:

“I’ve formed a company, and you have company expenses, travel, research and you employ people. And I’ve employed three people at different times over this last four years. And after you’ve had all those expenses, then the money you pay yourself I’ve paid tax on.”

One of the people he employed, he made clear, was an economist to work on his re-election campaign. He said: “Literally you can’t, if you’re running for mayor, off the top of your head come and say I’m going to cut the fares – you need to employ someone to go through their [TfL’s] books. I got a really well-established economist who’d worked in the public and private sectors, who spent a long time ploughing through – imagine the size of the accounts of TfL – who cam back and said, yes you can make a fares cut. It takes time to do that and you need to employ people to do it.”

In an interview on BBC Radio Five Live, Pienaar’s Politics, on Sunday, February 26, Mr Livingstone said: "The other thing is I've used that [company money] to pay for people to work on the campaign for mayor.”

In an interview on the Andrew Marr show, BBC One, on Sunday, March 11, http://news.bbc.co.uk/1/hi/programmes/andrew_marr_show/9704407.stm, Mr Livingstone said: “I employ people. I mean that fare scheme we've come up with, it took someone, a talented economist, to sit down and spend a lot of time going over the books. I've got people handling the media. I employ at the moment two people.”

Mr Livingstone has declared to the Electoral Commission a donation to the Labour Party of staff time worth just over £19,000. His campaign states that this is for three months' work of two staff. This implies that the staff were paid a total of £76,000 on a full-year basis.

It is my belief that the employment of an economist to come up with policies for Mr Livingstone’s re-election campaign and the employment of “people handling the media” for the campaign cannot be expenses incurred “wholly and exclusively” for the purposes of Silveta’s trade.

HMRC rules are clear that the purpose of the company is a matter of fact, determined by the revenues it raises and the objects set out in the Articles of Association. Silveta Ltd’s Articles of Association state that the Company’s objects are:

(a)     (i) To carry on business as a general commercial company.                   


(ii) To carry on any trade or business whatsoever and to do all such things as are incidental or conducive to the carrying on of any trade or business by it.


(iii) To undertake all or any of the following objects.


None of the following objects (b)-(z) specify political campaigning, the promotion of candidates, or anything related to the London Mayoralty or tube fares. Nor, clearly, can a political campaign be defined as a trade or business.

Silveta Ltd’s purpose is, as Mr Livingstone has stated, to handle his own personal earnings from “after-dinner speaking, TV stuff and all that” and not to further his re-election campaign. There is no evidence that Silveta Ltd received any revenues from its analysis of City Hall’s books, or the promotion of Mr Livingstone as mayor.

It appears clear to me that the salaries of a media assistant and an economist/policy adviser are not allowable expenses under HMRC rules.

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