I always look forward to reading The Times Rich List when it is published annually to see how the multi-billionaires at the top of the rankings have fared over the past 12 months. However, The Times list I find most interesting is The Times Tax List, which is the list of those in the UK who have the highest tax liability.
There are 2 things that immediately stand out form the Tax List. The first is that those named in the top 50 of the Tax List are differ significantly from those named in the top echelons of the Rich List and secondly the disproportionately high number of families connected with family businesses who make up the Tax List.
The Tax List is topped by Denise, John and Peter Coates, the father, son and daughter behind betting giant Bet365 who in the most recent Tax List are quoted as having a tax liability of £573m against a wealth of £8.44bn ranking them top of the Tax List but only 17th in the Rich List.
They were followed by the Glenn Gordon family (William Grant & Sons spirits) who are quoted as having a tax liability of £436m against a wealth of £3.595 billion (47th on the Rich List) with brothers Fred and Peter Done (Betfred) completing the top 3 with a tax liability of £191m against a wealth of £1.235bn (137th on the Rich List).
9 of the top 10 and 36 of the top 50 on the Tax List are family businesses of some description.
This got me thinking about why there are a disproportionately high number of Family Businesses in the Tax List? I believe this is down to values and family businesses simply doing the right thing.
Take the example of Denise Coates who is reported to have paid herself a salary of £421m. Out of this approximately £8.5m would have been paid as employee’s national insurance, a further £58m (approx.) would have been payable by BET365 as employer’s national insurance and the PAYE deduction on her salary would be circa £189.5m (based on the 45% rate for earning over £145m).
Under normal circumstances you would expect a business owner to take such sums by way of dividend which, even taking account of the additional corporation tax payable by Bet365 as a result of the increase in profits (given the lower salary costs), would still have resulted in a significantly lower return to HMRC as a result of the lower tax rates paid when money is paid as a dividend rather than as salary.
However, many family businesses see paying tax and avoiding complex tax schemes (usually seen as way of reducing tax liabilities) as the right thing to do, something ingrained in their values and DNA.
It is also worth pointing out that Bet 365 donated over £85m to the Denise Coates foundation supporting causes such as the Douglas Macmillan hospice and Alzheimer’s Research. This is in line with plenty of other family businesses whose values means they hold significant ties with their local communities and support charities and other similar types of organisations in their community. Which brings me to yet another Times list, The Giving list which once again is dominated by Family Businesses – doing the right thing.
Christian Mancier
Gorvins Solicitors