This is how the K2 tax avoidance scheme works

This is how the K2 tax avoidance scheme works

The recent Times investigation into tax avoidance in the UK said television personality and comedian Jimmy Carr used an offshore wealth management scheme called K2, this is how the K2 tax avoidance scheme works.

How the K2 tax avoidance scheme works is by high UK earners quitting their jobs and are then hired by an offshore company, the offshore company then hires out the UK high earners services and invoices out their services from the offshore company.

The high earner is then either paid a minimum wage by the UK company or the offshore company which is declared to HMRC in the normal way.

This is how the K2 tax avoidance scheme works

This is how the K2 tax avoidance scheme worksThe offshore company then loans the high earner the rest of their money minus of course their fees which are about 20% of the invoice value.

This is how the K2 tax avoidance scheme works.

High earners using the K2 Scheme do not keep as much money as is being portrayed.

This is how the K2 tax avoidance scheme works in general terms the actual workings may be slightly different to those described here.

The Prime Minister described this way of avoiding tax as “Very Dodgy”. The question is why is it dodgy? It is not illegal or even close to being illegal because it is declared to HMRC every year.

What it is, is very difficult to close down.

If you were to say the government should tax the loans, then everybody would have to pay tax on their mortgage and any other loans that they took out.

This has the government in a very difficult position and the only way they can deal with it is by embarrassing people that use this and similar schemes.

This is how the K2 tax avoidance scheme works for individuals and companies and lets not forget the UK is the fourth highest taxed country in the world.

This is how the K2 tax avoidance scheme works

K2 Tax Scheme

K2 Tax Scheme

The regime, called K2 Tax Scheme, is provided by accounting firm Peak Performance Accountants and allows its 1,100 clients to pay as little as 1%  income tax, an investigation by The Times has revealed.

It works by transferring salaries into a Jersey-based trust, which lends investors back the money. As the loan can technically be recalled, it is not subject to income tax.K2 Tax Scheme

K2 Tax Scheme

The K2 Tax Scheme arrangement is one of a range of schemes continuing to operate, despite the government’s vow to crack down on the “morally repugnant” practice. It is estimated by the Revenue that tax avoidance by individuals alone costs the economy £4.5bn out of £7bn lost in total every year.

Indeed, the lawyers for stand-up comedian and TV presenter Jimmy Carr – best known for his roles hosting 10 O’Clock Live8 Out of 10 Cats and regular guest appearances on QI and Have I Got News For You – have confirmed he is one of the scheme’s beneficiaries. They denied any wrongdoing and said that the scheme had been disclosed to the relevant bodies.

According to The Times‘s investigation, he safeguarded as much as £3.3m from the taxman through the K2 Tax Scheme arrangement.

Peak Performance Accountants’ Roy Lyness told an undercover reporter from the newspaper it was “a game of cat and mouse”.

“It’s like a satnav. I’m driving to Manchester, get a message saying there’s a smash at Stoke, press this button to re-route. The Revenue closes one scheme; we find another way round it,” he said.

Despite the chancellor’s promise to tackle aggressive tax avoidance in the Budget, Lyness told his clients: “We’re delighted to inform you that most of the powerful tax-saving opportunities survived unscathed.”

The government last week published a consultation document for a general anti-abuse rule (GAAR), designed to stop such artificial schemes.

K2 Tax Scheme

Will new low-cost loans finally help you to buy your first home?

By Sam Dunn

PUBLISHED: 14:34 EST, 8 October 2013 | UPDATED: 03:14 EST, 9 October 2013

The starting pistol has been fired on a race for cheap mortgages for first-time buyers and movers.

Yesterday, the Government launched the latest phase of its Help to Buy scheme, which guarantees loans for buyers with small deposits.

Ministers hope it will get the whole of the UK housing market moving again — not just London and hotspots across  the South-East.

A way up: The new deals unveiled yesterday herald the launch of the second phase of the Government's flagship Help to Buy scheme in bid to help first-time buyers and movers get their foot on the housing ladder

A way up: The new deals unveiled yesterday herald the launch of the second phase of the Government’s flagship Help to Buy scheme in bid to help first-time buyers and movers get their foot on the housing ladder

For those with small deposits equivalent to 5 per cent of their property’s asking price, the early signs are encouraging.

State-backed RBS and NatWest are offering a 4.99 per cent two-year fixed deal or 5.49 per cent over five years, both without a fee.

In the case of the two-year fix, this is nearly a whole percentage point cheaper than the nearest rival deal available  on the open market at Newcastle  Building Society.

For hard-pressed buyers, this adds up to a monthly saving of £86 on a typical £150,000 home loan and £2,259 over  two years.

Rivals Halifax and Bank of Scotland — also part-owned by the Government — have rolled out a deal at a higher 5.19per cent (plus a £995 fee) for those who have saved the same sized deposit.

Buy a £600,000 home with a 5per cent deposit

The new deals unveiled yesterday herald the launch of the second phase of  the Government’s flagship Help to  Buy scheme.

The first part of this, unveiled in April, allowed buyers to purchase a new-build property. If they put down a 5per cent deposit, they could then qualify for a further 20per cent in the form of a loan from the Government that is interest-free for five years. With 25 per cent behind them, they could qualify for a number of cheaper mortgage deals.

Some 15,000 such mortgages have already been handed out in the six months since the scheme’s launch.

The second part, which was originally scheduled to launch in the New Year but was moved forward to yesterday, allows buyers to purchase a home — either old or new — for up to £600,000 with a deposit worth just 5per cent of the property price.

The Government guarantees up to 15per cent of the property value for the bank in return for a small fee from the lender. The idea is that this guarantee cuts the risk for banks and building societies and allows them to lower their rates.

The first banks to offer loans were RBS/NatWest and Halifax.

RBS/NatWest says it anticipates a rush in demand from buyers and expects to sign up some 25,500 first and second-time buyers by 2016.

To cater for this, more than 700 branches will extend opening hours for two weeks.

HSBC has announced it will offer Help to Buy loans, with deals expected in November.

Virgin Money and Aldermore Bank will have rates in the New Year.

Other lenders are likely to set out their stall during the coming weeks.

It is hoped the scheme will add oil to the gears of the UK’s housing market. A recent report from the Office for National Statistics (ONS) showed that prices were still falling in some regions — though they were climbing quickly in London and parts of the South.

Justin Modray, of financial advice website CandidMoney, says: ‘If Help to Buy takes off without creating a property bubble, which is debatable, then it could have a huge impact across the country.

‘With growth in prices in towns and cities, it will help encourage job mobility and boost employment (as more people are prepared to move to find work), help fuel investment and bring everything that comes with such an injection of growth, such as improved schools and transport.’

No interest-only and no landlords

Although the scheme will be most appealing to first-time buyers, so-called ‘second-steppers’ — those who already own a home — will also be able to benefit.


Under the separate Help to Buy equity loan scheme, launched in April, banks and building societies are offering rates from 3 to 3.5 per cent for people with 5 per cent deposits boosted by a government equity loan. This only applies to new-build properties.

The equity loan is interest-free for five-years but then has a charge. 

There is also a NewBuy scheme where house builders and the government are underwriting mortgages with a number of lenders to allow them to provide mortgages to people with a deposit as small as 5 per cent on new build properties. This scheme ends in 2015.

In particular, this will help families who have been stuck in small flats or houses but are desperate to move in order to get more space.

To qualify, the house must be in the UK, worth £600,000 or less, and the mortgage must be a full repayment loan (not interest-only) and cannot be for a second home or buy-to-let. The loan must also not be any other kind of specialist offer, such as an offset or a guarantor deal, or be part of a shared-ownership or shared-equity scheme.

Anyone who applies will face the same scrutiny as other borrowers to ensure that they can afford the mortgage payments. This means every borrower must pass a test to see if they can afford the loan, and also see whether they could cope if interest rates were to rise.

Their income must be checked, and those who have a poor history of repaying mortgages in the past will be barred. This includes anyone who has missed just one mortgage repayment in the past 12 months.

The Council of Mortgage Lenders (CML), the trade body which represents banks and building societies, said that affordability checks would be just as stringent as for any borrower. Beneficiaries will be those who have struggled to save a deposit in order to qualify for a cheap deal.

With RBS/NatWest, you can currently apply for a Help to Buy loan only through one of its mortgage advisers. However, it says its deals will be available through independent brokers later in the year.

Potential customers will get an initial ten-minute check to see if they are eligible to apply and whether they might get accepted for a loan.

At Halifax and Bank of Scotland, the rules are slightly different. As well as over the phone or in a branch, you can apply online and even via an independent broker.

Just 44 deals for first-time buyers

The number of people desperate to clamber on to the property ladder has rarely been higher. After the credit crunch, property prices went into reverse. Hardest  hit were first- time buyers.

As cheap credit dried up, banks were no longer willing or able to offer hefty loans to those with a tiny deposit.

This is because if property prices plummeted, they would be in negative equity — and, in the worst cases, run a greater risk of failing to repay these loans.

There has been a high price to pay for those who can’t afford to save for a bigger deposit. Currently, if you’ve got a chunky 30per cent saved up, the best deal is from Nationwide BS, which charges 2.39 per cent for a two-year fix. On a typical £150,000 loan, the monthly payments are £665 and the overall cost is £16,059.

If you’ve managed to save a 20per cent deposit, the best two-year fix is from West Bromwich BS, also offering 2.39per cent and costing £665 a month. The total cost is £16,259 — slightly higher than the Nationwide one because of a fee.

But if you have only a 10per cent deposit and want a loan over the same period, the best rate is with Skipton  BS at 3.99 per cent.

This works out at £791 with an overall total cost of £18,984 — £2,925 more than if you have 30 per cent deposit.

In August 2007, a staggering 986 different loan deals were available for those who had only a 5per cent deposit. A year ago, there were just 69. Today it’s fallen to just 44 (excluding the new Help to Buy deals).

Today, the average two-year 95per cent rate has a rate of 5.08per cent, according to Moneyfacts data analyst.

For a five-year deal at 95per cent rate, it’s 5.20per cent.

At the moment, the average deposit put down by a first-time buyer is 20per cent, says the CML.

But for many that is an impossible task. With the average house price at £170,000, that means a typical deposit of £34,000 is needed. Now with Help to Buy, first-time buyers can get on the housing ladder with just £8,500 — a much more manageable sum, especially for two working people saving together.

The first part of Help to Buy already appears to have had an impact. According to the CML’s most up-to-date statistics, lending to first-time buyers has hit its largest quarterly total since 2007.

Between April and June, 68,200 purchased their first home. In June alone, its data showed 25,300 loans were advanced to first-time buyers — a 30per cent increase on the 19,400 loans advanced 12 months earlier.

First-time buyers accounted for 46per cent of all house purchase loans in June — up from 44per cent in May — and well above the 38per cent seen on average since 2007.

The new year may bring lower rates

Although some banks are expecting a flood of inquiries, there is really no rush. It will be January before many big names are offering Help to Buy loans, and this is when competition will really hot up.

The more banks enter the market, the cheaper rates could get.

Certainly, those such as HSBC which already have very competitive mortgage rates are expected to offer lower-cost deals than those being proffered by RBS and Halifax.

Don’t expect super-low deals, though, as there is still a fair amount of risk involved in this type of mortgage lending.

Help to Buy ends on December 31, 2016 — so there are three years for it to run. The same principles apply with this scheme as whenever you buy a house: the bigger the deposit you can afford, the cheaper your loan will be and the less at risk you are if property prices should suddenly start to fall.

If you only put down a 5per cent deposit, then it doesn’t take much of a fall in house prices before you are in negative equity.

Beware of cost hikes in the future

While Help to Buy is likely to ease the burden for many buyers today, there are two things to be wary of.

One comes from the dangers of a house price bubble.

If demand for properties soars, so could prices. However, bubbles tend to burst, and if prices suddenly crash, those who bought at the top with just a small deposit could be nursing losses and quickly plunged into negative equity.

The other danger is from rising interest rates. Many economists expect the Bank of England base rate to start rising before 2016. If this happens, mortgage rates are also likely to increase.

When the current mortgage fix  deal ends, buyers may find that the cost of taking on a new loan is a lot more expensive.

If the Government’s guarantee has also gone by then, too, then rates could rise even further.
So although buyers have got on the property ladder, all that may happen is that they have stored up problems for the future.


If you have a 5 per cent deposit, the benefit of these marginally lower Help to Buy rates are unlikely to prove the difference between being able to buy or not.

Time will tell if the Help to Buy guarantee prompts lenders to accept more 5per cent deposit holders from now on.

A 5 per cent deposit will still mean high monthly repayments. On an average property of £164,000 they will be around £930-£950. If you saved for a 10 per cent deposit you could pay closer to £800, a 20 per cent deposit would be around £600 and 25 per cent deposit would mean paying around £500 a month

If you want to live in London, where average values are about £360,000, a 5 per cent deposit would still mean paying about £2,000 a month.

The government guarantee lasts for seven years. The Treasury feels there is less risk of default after this period.

Politicians and economists expect house prices to increase in the coming months so it may be worth getting on the ladder before you are priced out.

However, the early rates don’t seem much better to what is already on the market so it is still worth shopping around.

You will also have to consider how long you want to fix your mortgage for and what the rates may be like in the next two or five years, especially if the Bank of England base rate increases.

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Fifth of workers say they will never be able to afford to retire

Nearly one in five workers in Britain is resigned to the fact that they will have to toil away for a lifetime.

Survey findings published today paint a particularly bleak picture for those people living alone in retirement, with 36 per cent of people who are divorced or separated being expected to work indefinitely.

HSBC’s report, The Future of Retirement, is the latest study to highlight the issues facing an ageing population. It found that 31 per cent of people who are widowed also thought they would never afford to retire.

Christine Foyster, the head of wealth management at HSBC, said: “People want to slow down in later life and, while some welcome the chance to stay economically active, many may not. Whereas some people regard a comfortable retirement as a natural entitlement, for a growing number this may not be the case.”

The report surveyed 1,050 respondents in the UK. Almost two fifths of retired people surveyed (39 per cent) said that financially they had not prepared adequately, or at all, for a comfortable retirement, with 35 per cent only realising they were underprepared after retiring.

Despite this, just 2 per cent of people in Britain who have not prepared adequately or at all said they would have to go back to work to cover their financial shortfall. Instead, some 44 per cent are resigned to the idea that they will just never be able to make it up.

“Today’s workers should prepare for retirement as early as possible to have some certainty for retirement. Life is full of reasons to prioritise short-term spending over longer-term planning, but the sooner people start saving, the less likely they will have to rely on working in old age,” Ms Foyster added.

HSBC’s study also suggests that even those who do eventually retire might not be able to achieve the retirement they want. Nearly half of retired people who said they have been unable to realise their plans for retirement said this was because they have less money to live on than they had envisaged.

Middle-waged to get burned in retirement

Pensions minister Steve Webb warned this week that up to 12 million people will face a shortfall in their pensions despite the introduction of automatic enrolment. Crucially, he pointed out that middle-income workers are just as likely to be hit as low-paid ones.

“Under-saving is far from being the exclusive preserve of low earners,” Mr Webb said. “Many on middle and higher incomes clearly need to do much more to ensure that they get the retirement that they want.”

Exclusive research handed to The Independent backs up his concerns. It reveals that one in 10 middle-income workers, defined as earning between £30,000-£50,000, has no pension at all while one in five is currently not making any pension savings.

The figures are being published as part of the Scottish Widows Workplace Pensions Report. It reveals the full scale of the problems facing the squeezed middle-waged. Frighteningly, a third of those with no pension are being forced to prioritise paying off debts rather than save for their retirement. A second third is prioritising mortgage payments while the remaining third say they simply need their cash to cover living expenses.

And the research shows that even among those who are saving into a pension, the middle-waged actually face a larger-than-average income shortfall in retirement. The shortfall is based on people’s expectations of how much income they think they will need in retirement compared with how much they are actually saving. Across all income bands the average monthly pension shortfall stands at £669: for the middle-waged it is £740.

In fact the pension gap between what all British workers are prepared to save and what they need to is widening. In the past year the amount employees are prepared to stash in their retirement savings pot has shrunk by almost a quarter. The Government’s auto-enrolment programme is designed to help reduce the pension gap facing millions in the future.

But the research revealed significant gaps in people’s knowledge about how much they are paying into a pension – even among the one million who have already been auto-enrolled into their workplace scheme. More than a quarter have no idea how much they put in while almost half don’t know how much their employer adds.

Lynn Graves, corporate pensions chief at Scottish Widows, warned: “We cannot ignore the correlation between poor employee awareness of the scheme and the lack of understanding of the realities of retirement.”

Tom McPhail, pensions expert at Hargreaves Lansdown, said: “The research highlights that we’re still a long way from mission accomplished when it comes to pensions. Most employees aren’t saving enough, yet the amounts they are willing to save are falling. This highlights the vital role that employers, advisers and pension companies have to perform in helping employees to plan effectively for retirement.”

Helping employers select quality pension schemes

Ref: PN13-29
Thursday 1 August 2013

The Pensions Regulator has today launched a suite of new guides to help employers with limited pensions experience to select a good quality scheme for automatic enrolment.

An employer’s guide to selecting a good quality pension scheme for automatic enrolment helps employers evaluate whether a scheme is well run, offers value for money and protects workers’ retirement savings, without being costly or complicated.

Go to an employer’s guide to selecting a good quality pension scheme for automatic enrolment (PDF, 88kb, 10 pages).

The regulator’s research suggests that small and medium-sized employers will approach finance professionals with whom they have an existing relationship for advice about automatic enrolment. For this audience, the regulator has published two guides aimed at independent financial advisers and accountants which clarify how they can help their clients prepare for the new employer duties.

Go to a financial adviser’s guide to selecting a good quality pension scheme for automatic enrolment (PDF, 41kb, 7 pages).

Go to an accountant’s guide to pension scheme selection and automatic enrolment (PDF, 41kb, 7 pages).

Executive director for DC, governance and administration, Andrew Warwick-Thompson, said:

“Choosing and running a good quality pension scheme is key to the success of automatic enrolment. Many employers already run a good scheme, but most organisations will be embarking on this journey for the first time. These guides will help employers and those advising them to feel confident about selecting a scheme that is well-suited to their workforce and business requirements.”

Some employers who select a group personal pension (GPP) or master trust for their workforce may choose to be more closely involved in the running of the scheme. To help them the regulator has published a guide to management committees for employers, monitoring your pension scheme (PDF, 57kb, 13 pages).

There is no legal requirement for employers to have a scheme management committee in place, but if an employer chooses to establish one it can bring certain benefits to a workplace pension scheme, including:

  • early identification of administration problems
  • better value for money
  • improved employee engagement and awareness of employer contributions
  • improved member understanding of their retirement savings
  • fewer member complaints.

Mr Warwick-Thompson added:

“Not every employer will want to be closely involved in the running of their own pension scheme and instead will choose a good quality multi-employer master trust or group personal pension plan. However those engaged employers who do want to take a more active role can help to ensure the scheme is better run and lead to a more comfortable retirement for their workers. Monitoring your pension scheme, can guide them on how to do this.”

Editor’s notes

The Pensions Regulator is the regulator of work-based pension schemes in the UK. We have objectives to: protect members’ benefits; reduce the risk of calls on the Pension Protection Fund (PPF); to promote, and to improve understanding of, the good administration of work-based pension schemes; and to maximise employer compliance with automatic enrolment duties.

Press contacts

Ben Lloyd 01273 627208

Cat Dean 01273 662019

Katherine Long 01273 811859

Out of hours 01273 648496

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Regulator appoints Stephen Soper as interim chief executive

Ref: PN13-30
Thursday 1 August 2013

The Pensions Regulator has today announced the appointment of Stephen Soper as its interim chief executive, with effect from 1 August.

Mr Soper, who is currently executive director of defined benefit regulation, will take charge of the regulator until a permanent replacement is found for Bill Galvin, who left his position as chief executive at the end of June.

The regulator’s chairman Michael O’Higgins said:

“The role of chief executive requires a wide range of regulatory, industry and policy skills. While the regulator searches for a new chief executive, the Board has decided to appoint Stephen Soper as interim chief executive.

“His appointment will ensure we maintain effective leadership and clear accountability while we continue the recruitment process.

“Stephen has substantial experience of senior roles in both the financial services industry and the regulator. I know he will do an excellent job and is supported by a strong and dedicated team.”

Stephen Soper said:

“I look forward to working with the pensions industry, Government, and my colleagues at The Pensions Regulator, to ensure that pension schemes are well run, the interests of members and the Pension Protection Fund (PPF) are protected, and that the roll-out of automatic enrolment continues to progress smoothly.”

Geoff Cruickshank, a senior member of the defined benefit (DB) regulation management team, has been appointed as interim executive director for DB regulation while the regulator searches for a new chief executive.

Editor’s notes

  1. Stephen Soper joined the regulator following over 23 years’ experience working in multinational financial services organisations, focusing on banking and insurance. A chartered banker (ACIB) Stephen began his career at RBS within the international banking division and subsequently worked at the Allied Dunbar Group, Zurich Financial Services, Eagle Star and Aon. He has held various executive positions including commercial bank treasurer, board director, chief operating officer of a UK Bank, restructuring director and group change director.
  2. The Pensions Regulator is the regulator of work-based pension schemes in the UK. We have objectives to: protect members’ benefits; reduce the risk of calls on the PPF; to promote, and to improve understanding of, the good administration of work-based pension schemes; and to maximise employer compliance with automatic enrolment duties.

Press contacts

Ben Lloyd 01273 627208
Rebecca Sandles 01273 811870
Katherine Long 01273 811859

Out of hours 01273 648496

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