Consultants allegedly advising on avoiding Labour tax clampdown

A professional from a leading accounting firm has been caught on camera allegedly advising the UK’s super wealthy on how to avoid millions of pounds in taxes. An undercover film reported by The Guardian suggests the scheme he pointed towards could have cost the tax payer around £12 million in a single case.

Soon after the Labour Party won a landslide election victory in July, business leaders were quick to issue advice to the inbound government. A number of professional services big-wigs were among them – particularly with regards to tax policy. Weeks later, however, it has emerged that some have also been adopting much less conciliatory tactics.

With the new Chancellor Rachel Reeves having ‘discovered’ a £22 billion shortfall in public finances – something of an open secret in the year leading up to the election – Prime Minister Keir Starmer’s government is poised to raise some taxes in its October budget. Reeves has reiterated that she would not raise VAT, national insurance or income tax, as promised in Labour's manifesto, but she did not rule out increasing inheritance tax, capital gains tax, or reforming tax relief on pensions.

As these discussions continue, a report from The Guardian claims to have caught international accounting brand Baker Tilly providing advice on how to legally protect their fortunes from inheritance tax and capital gains tax. Undercover filming at a private event, a week before the general election, showed Baker Tilly telling advisers to the ultra-wealthy “how they could use offshore pension schemes to shield their clients’ fortunes from tens of millions of pounds of inheritance taxes”.

According to the report, one promoter explained at the event how a client of his had put £30 million into a pension scheme to protect it from inheritance taxes.

Stuart Clifford, a principal at Baker Tilly Isle of Man, said to an undercover reporter at the event, “My last one I did of these – £30 million… [The client] said … ‘That’s my kids’ money. So let’s protect it from IHT today.’ [The] day he got it – £30 million [went] into [the offshore product]. He’s not doing anything funky. He’s not paying a lot for it, that’s just going through investment managers and what have you.”

With inheritance tax usually coming in at a rate of 40% above a £325,000 threshold when given to a non-spouse or non-civil partner, the reporters calculated that the scheme had saved almost £12 million in taxes. While such schemes are legal, critics argue tax avoidance is immoral and deprives the public purse of hundreds of millions of pounds that could fund vital services – and there are some voices which have called for a closing of the loophole. However, the Baker Tilly representative added that he was confident this would not happen, as ministers have “bigger fish to fry”.

When approached for comment by The Guardian, Baker Tilly Isle of Man declined to reveal the value of assets it had helped clients place into such schemes over the past five years. However, it did say that the remarks from the exclusive event in the City of London attributed to the firm’s representative had “been taken out of context from the much wider discussions surrounding retirement planning”.

The professional services industry's top players have often been accused of regularly working with businesses to reduce their tax burden. The sector is closely tied to the offshoring of private wealth in tax havens – for example, Big Four partners are embedded throughout the offshore world, and a 2011 study by the Financial Mail found that among them the Big Four operate 81 offices in offshore havens. Among them, Deloitte alone employed roughly 150 people in the tiny English Channel islands of Jersey and Guernsey, two of the world’s busiest offshore havens.