Jimmy Carr faces backlash over K2 tax avoidance scheme

The comedian Jimmy Carr has become the focus of public anger over his use of a tax avoidance scheme.

Mr Carr has been using a tax shelter scheme called K2 as a way of lowering the amount of tax he paid. The scheme is legal and his tax affairs were fully disclosed to the tax authorities.

The scheme is being used by over 1,000 people and it is estimated that it helps to shelter around £168 million from HMRC. An investigation by The Times which was published on Tuesday put the focus on Mr Carr.

The scheme involves an individual resigning from his company and subsequent salary payments are made to an offshore trust, enabling the individual to enjoy tax rates as low as one per cent.

Following the publicity, which included the Prime Minister, David Cameron, calling Mr Carr’s use of the scheme “morally wrong”, Mr Carr has announced that he will no longer use the scheme.

Using Twitter to explain his decision, Mr Carr said: "I appreciate as a comedian, people will expect me to 'make light' of this situation, but I'm not going to in this statement.

"As this is obviously a serious matter. I met with a financial advisor and he said to me 'Do you want to pay less tax? It's totally legal'. I said 'Yes'."

"I now realise I've made a terrible error of judgement.

"Although I've been advised the K2 Tax scheme is entirely legal, and has been fully disclosed to HMRC (Her Majesty's Revenue and Customs).

"I'm no longer involved in it and will in future conduct my financial affairs much more responsibly. Apologies to everyone. Jimmy Carr."

Speaking on the BBC Radio 4 Today programme, Treasury Minister, David Gauke said that the scheme might not be as effective as it is made out to be and that HMRC could potentially recover some of the tax.

David Cameron, speaking from Mexico, said: "People work hard, they pay their taxes, they save up to go to one of his shows. They buy the tickets. He is taking the money from those tickets and he, as far as I can see, is putting all of that into some very dodgy tax avoiding schemes.

"That is wrong. There is nothing wrong with people planning their tax affairs to invest in their pension and plan for their retirement - that sort of tax management is fine.”

However, Labour leader Ed Miliband did not take the moral high ground. He said: "I'm not in favour of tax avoidance obviously, but I don't think it is for politicians to lecture people about morality.

"I think what the politicians need to do is - if the wrong thing is happening - change the law to prevent that tax avoidance happening."

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