Why any tax avoidance "clampdown" is a ridiculous game of whack-a-mole

Danny Alexander's "mansion tax lite" has been torpedoed by oligarchs claiming their £2m+ properties are "open to the public". It shows how hard it is to stop the rich - and their lawyers - finding creative ways to beat the taxman.

In all the furore around the Budget, the Spending Review and so on, many have ignored the introduction of the Lib Dems so-called "mansion tax for tax-dodgers". This "tax", which only affects properties worth over £2m, was actually the closing of a loophole. 

The loophole in question - which allowed people to avoid stamp duty on expensive properties using offshore companies - was theoretically sealed from the start of April. A super-duty of 15 per cent was imposed on the purchase of properties worth more than £2m by companies; and an annual charge of up to £140,000 every year was levied on them once they were bought.

Well, in theory, at least. Like almost everything else the Lib Dems have promised to do, this has all fallen down around their ears. Why? Well, that's all down to clever tax lawyers seeing a new loophole, accidentally provided by short-term lettings website Air BnB.

You see, there's an exemption written into the rules, which lets off properties which are "open to the public" from the new tax. It's meant to exempt stately homes and museums, which are often private homes but open for viewing over the summer, and quite legitimately put the earnings from the tea room into a company. No one wanted them to be hit with a levy intended to stop tax-dodging oligarchs.

Of course, when you close a loophole intended for oligarchs, you'd better be sure not to open another, or their lawyers will spot it. One bright tax lawyer came up with the idea that if you offer to let out your property - regardless of whether you actually let out - it's technically "open to the public", in that literally anyone could pay to go and stay there. Provided, of course, they can afford whatever you are charging.

It's probably pretty reasonable to charge a fortune for your One Hyde Park flat, given the amenities, which include all your mail being X-rayed, iris recognition in the lifts, panic rooms, bomb-proof windows, a 21-metre swimming pool, a cinema, a golf simulator, a wine cellar and room service via a secret tunnel from the five-star Mandarin Oriental hotel next door.

So, you advertise your One Hyde Park flat (registered to an offshore company, of course - as 59 out of 77 flats in the building are) on Air BnB, no one volunteers to pay the huge fee you ask for, and you save yourself 140 grand in tax. Worst case scenario, you have to let out your flat to someone, but you probably don't care, because you can arrange to be skiing in Gstaad for that week anyway.

Some of the properties currently being offered on AirBnb are at eye-wateringly high prices. While there is no evidence that, for example, this £3,175 a night flat is using the loophole I've described - I can confirm from a tax lawyer for a major firm (who asked not to be named) - that offering your flat out to rent has become the standard advice being doled out to his firm's "high net worth clients".

So, Air BnB will doing brisk - perfectly legal - business as every oligarch and his babushka registers. And no one who is well advised will pay the Mansion Tax-lite. And the Lib Dem plan is yet another failure. Thanks internet!

Of course, while there is some schadenfreude to be had from yet another Lib Dem flagship policy running aground on the rocks of reality, it's also a salutary lesson for policy makers on the sheer difficulty of clamping down on tax avoidance. Even if they close the "AirBnB loophole", the lawyers of the rich will find another, as long as the "open to the public" exemption still exists.

This story is a great example of how the government's attempts to clamp down on tax avoidance amount to a ridiculous game of whack-a-mole - if we want to get serious about tackling tax avoidance, what we need is root and branch reform, not tinkering at the edges. Put away the mallet, George, and pick up a bazooka.

One Hyde Park in London: many of its apartments are owned by companies in the British Virgin Islands. Photograph: Getty Images

Willard Foxton is a card-carrying Tory, and in his spare time a freelance television producer, who makes current affairs films for the BBC and Channel 4. Find him on Twitter as @WillardFoxton.

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The man who created the fake Tube sign explains why he did it

"We need to consider the fact that fake news isn't always fake news at the source," says John Moore.

"I wrote that at 8 o'clock on the evening and before midday the next day it had been read out in the Houses of Parliament."

John Moore, a 44-year-old doctor from Windsor, is describing the whirlwind process by which his social media response to Wednesday's Westminster attack became national news.

Moore used a Tube-sign generator on the evening after the attack to create a sign on a TfL Service Announcement board that read: "All terrorists are politely reminded that THIS IS LONDON and whatever you do to us we will drink tea and jolly well carry on thank you." Within three hours, it had just fifty shares. By the morning, it had accumulated 200. Yet by the afternoon, over 30,000 people had shared Moore's post, which was then read aloud on BBC Radio 4 and called a "wonderful tribute" by prime minister Theresa May, who at the time believed it was a genuine Underground sign. 

"I think you have to be very mindful of how powerful the internet is," says Moore, whose viral post was quickly debunked by social media users and then national newspapers such as the Guardian and the Sun. On Thursday, the online world split into two camps: those spreading the word that the sign was "fake news" and urging people not to share it, and those who said that it didn't matter that it was fake - the sentiment was what was important. 

Moore agrees with the latter camp. "I never claimed it was a real tube sign, I never claimed that at all," he says. "In my opinion the only fake news about that sign is that it has been reported as fake news. It was literally just how I was feeling at the time."

Moore was motivated to create and post the sign when he was struck by the "very British response" to the Westminster attack. "There was no sort of knee-jerk Islamaphobia, there was no dramatisation, it was all pretty much, I thought, very calm reporting," he says. "So my initial thought at the time was just a bit of pride in how London had reacted really." Though he saw other, real Tube signs online, he wanted to create his own in order to create a tribute that specifically epitomised the "very London" response. 

Yet though Moore insists he never claimed the sign was real, his caption on the image - which now has 100,800 shares - is arguably misleading. "Quintessentially British..." Moore wrote on his Facebook post, and agrees now that this was ambiguous. "It was meant to relate to the reaction that I saw in London in that day which I just thought was very calm and measured. What the sign was trying to do was capture the spirit I'd seen, so that's what I was actually talking about."

Not only did Moore not mean to mislead, he is actually shocked that anyone thought the sign was real. 

"I'm reasonably digitally savvy and I was extremely shocked that anyone thought it was real," he says, explaining that he thought everyone would be able to spot a fake after a "You ain't no muslim bruv" sign went viral after the Leytonstone Tube attack in 2015. "I thought this is an internet meme that people know isn't true and it's fine to do because this is a digital thing in a digital world."

Yet despite his intentions, Moore's sign has become the centre of debate about whether "nice" fake news is as problematic as that which was notoriously spread during the 2016 United States Presidential elections. Though Moore can understand this perspective, he ultimately feels as though the sentiment behind the sign makes it acceptable. 

"I use the word fake in inverted commas because I think fake implies the intention to deceive and there wasn't [any]... I think if the sentiment is ok then I think it is ok. I think if you were trying to be divisive and you were trying to stir up controversy or influence people's behaviour then perhaps I wouldn't have chosen that forum but I think when you're only expressing your own emotion, I think it's ok.

"The fact that it became so-called fake news was down to other people's interpretation and not down to the actual intention... So in many interesting ways you can see that fake news doesn't even have to originate from the source of the news."

Though Moore was initially "extremely shocked" at the reponse to his post, he says that on reflection he is "pretty proud". 

"I'm glad that other people, even the powers that be, found it an appropriate phrase to use," he says. "I also think social media is often denigrated as a source of evil and bad things in the world, but on occasion I think it can be used for very positive things. I think the vast majority of people who shared my post and liked my post have actually found the phrase and the sentiment useful to them, so I think we have to give social media a fair judgement at times and respect the fact it can be a source for good."

Amelia Tait is a technology and digital culture writer at the New Statesman.