Tax is back as a theme and a story to groans and cheers, depending on your perspective. Mrs Sunak’s non-dom saga laid the ground. Liz Truss’ low-taxes-for-growth campaign and Kwasi’s kamikaze budget got everyone talking about it last summer. Dan Neidle, formerly of Clifford Chance and now an unencumbered independent expert, has since pushed the envelope further with his revelations about Nadhim Zahawi’s tax affairs and, more recently, his tie-up with the i-newspaper to ask questions of former Labour party Chairman Ian Lavery.
Given the Spring Budget is only a month away and the end of the tax year looms in early April, there will be no let-up on tax-related stories in the media. And with this specialist subject taking centre stage on the political battlefield once more, with calls for a windfall tax on energy companies, a wealth tax and effectively a tax on public schools, we can expect tax to remain a hot topic for the foreseeable future.
Tax advisers have long had a PR tightrope to walk. On the one hand, it’s great to be seen as an expert in CGT, DPT, IHT, IR35 and the like. On the other hand, advisors will wish to avoid giving away the crown jewels of advice mechanics or teeter into territory that could be said to encourage tax avoidance. The last thing any firm wants is a spotlight for the wrong reasons on its modus operandi or heaven forbid its clients, either from the media or HMRC. Mr Loophole may be able to trade on his nick-name, but not many can do the same.
There are also litigation funders increasingly willing to take on the tax expert fraternity. Just ask Andrew Thornhill KC and Jonathan Peacock KC who, separately, found themselves subject to negligence allegations from film-finance fund investors left out-of-pocket when HMRC tightened their rules. Both cases eventually settled without admission of liability but not before a fanfare of publicity and arguably dents to their hard-earned reputations.
HMRC may be attracting its own bad press at the moment for slow responses and low prosecution rates but on matters of tax denied to public coffers the media is on its side.
So what is good PR advice to anyone caught in the cross-hairs of a tax story?
If you are an individual in the public eye:
- Try not to make tax ‘mistakes’ in the first place! Make sure you understand the steps you are taking, or advisors are taking on your behalf. If you are investigated or required to pay a penalty to HMRC don’t obfuscate. Worse – don’t bring in reputation lawyers to ‘kill’ media interest.
- If you get into dispute with HMRC be prepared for this process to play out in public. Eamonn Holmes has talked about the stress he experienced during his case.
- If the wind changes on what is legal or ‘within the rules’, apologise and swiftly pay back any tax owed. This isn’t a panacea to all ills, but it’s a start. Gary Barlow found that ‘the smell’ of a tarnished reputation doesn’t easily dissipate, but the passage of time helps.
- If what you are doing is legal but ‘a bad look’ and you’re in the public eye, think twice. Jimmy Carr spoke of his regret at investing in a perfectly legitimate offshore tax scheme (Jersey based K2) after media exposure, a public outcry and his investment decision being branded ‘morally wrong’ by David Cameron. He has actually dealt with the issue quite well in repeated media interviews since, admitting his ‘terrible error of judgment’ and promising to conduct his financial affairs ‘more responsibly in future.’ In contrast Nadhim Zahawi was criticised for apologising to his family but not the wider public for his ‘careless mistake’, which resulted in a deficit to the public purse – far from optimal for a former Chancellor of the Exchequer, however short-lived in the post.
For companies under scrutiny for their tax affairs:
- Apologising and changing behaviour can be unrealistic in a world where corporate profits are king and the tax system is usually the issue. Yes, Amazon is known to pay minimal direct taxes on its UK based profits, for example, but it can do this legitimately within the tax rules and with clever structuring of its global business operations. Media messaging should therefore emphasize an assiduous adherence to UK tax rules and the fact allowances are available to all UK companies.
- It also makes sense to catalogue the total £s spent on investment in the UK, number of people employed here and any UK CSR initiatives for which the company can claim credit, to mitigate critical stories.
- Whilst companies on the backfoot may find customer loyalty isn’t seriously impacted as a result of tax exposés, this may well change with the purpose-led attitudes of Gen Z, who seem much more willing to act on their principles when it comes to consumer purchasing decisions.
- In a general economic slow-down, an increasing number of think tanks and lobby groups (such as TaxWatch and the Fair Tax Foundation) will look to expose the tax affairs of big corporations. They feed their calculations to the media and by doing so aim to keep the pressure on the Government to review the rules and on HMRC and consumers to hold these companies to account.
If you are a tax adviser:
- Be aware, there are downsides as well as upsides to commenting in the media.
- Focus expert marketing-oriented commentary around tax deadlines, winners and losers, obvious top tips and common mitigation steps.
- Work with your clients if the media spotlight falls on them to ensure consistent messaging with your firm and that technical accuracy and emotional intelligence underpin reactive responses.
High-profile clients dodging their tax paying responsibilities makes great media copy, and never more so in this climate of a cost-of-living crisis. There is rarely a reputational ‘win’ in such tax-matters, merely damage limitation.