Richard Tice’s company broke the law by failing to pay tens of thousands of pounds in tax on dividends that were paid to him and his offshore trust.
Reform UK’s deputy leader, who is also the business, trade and energy spokesman for Nigel Farage’s party, received at least £91,000 in excess payments as a result of the failure.
Quidnet REIT Ltd, the property investment company he founded, owned and ran as chief executive, did not pay a required 20 per cent levy on the dividends, known as a “withholding tax”, before channelling profits to Tice and his trust registered in Jersey.
Tice, the Boston & Skegness MP, implied the failure amounted to a “technicality” and appeared to suggest it did not matter as he ultimately paid income tax on the dividends he received. He said: “I have paid all tax at the highest rate on all dividends received. HMRC has been paid in full.”
Dan Neidle of Tax Policy Associates said: “The rules are fairly simple and understood by everyone in the property world. Failure to pay the tax looks careless. We don’t get to choose who pays tax and when we pay tax, and the law required that the company paid the tax when the dividends were paid.”
At the relevant time, Tice’s company was a Real Estate Investment Trust, or Reit, a special legal status which meant it qualified for certain tax benefits. However, the law states that such firms “must, on making a relevant distribution (dividend) deduct from it a sum representing tax at the basic rate in force”.
Firms that fail to do so are vulnerable to investigation and enforcement action by HMRC. The taxman will seek to collect taxes that were not paid and can issue penalties for carelessness.
The company’s legal obligations are not affected by the amount of tax Tice or his trust did or did not subsequently pay on the dividends. However much either paid, the company was, and is still, required to pay its original amount. Neidle said: “We believe it’s clear from the company’s accounts and public filings that it did not [pay tax owed]. The company was legally required to pay tax and, if it did not, that tax should now be paid.”
Tice, a multimillionaire who has put his business acumen and success at the heart of his political career, owned more than 90 per cent of Quidnet personally and through various on and offshore entities he controlled. He added that he had received “professional accountancy advice” and the revelations were “hardly a story” and “just an attempt to smear a successful businessman turned politician giving hope to millions of people”.
The MP received some of the dividends in the form of shares, meaning he also continues to hold equity he would never have received had tax been correctly deducted.
When Angela Rayner, the former deputy prime minister, failed to pay stamp duty on the purchase of a second home, Tice said her position was “morally completely indefensible” and that she would resign if she had “any moral decency”.
Last month, following a Sunday Times investigation into Quidnet’s complex and unusual tax affairs, Tice said he encouraged members of the public to pay as “little tax as possible”. But today’s disclosures undermine his previous assertion to have exclusively legally avoided tax.
Tice still runs Quidnet, which owns industrial estates in Newark and Northampton. At the time the dividends were paid out, he controlled the firm via a complex ownership structure.
For almost three years between 2018 and 2021, the company qualified as a Reit, a structure which exists in numerous countries and which is designed to encourage people to put money into commercial property. Reits are subject to different tax rules. One feature is they do not have to pay corporation tax, with individual shareholders instead subject to tax on rental profits.
However, Reits are required to deduct a given proportion of dividends destined for certain shareholders, including individuals and trusts, before making payments. This is known as withholding tax and it is charged at 20 per cent, the basic rate of income tax. According to the Real Estate Investment Trusts (Assessment and Recovery of Tax) Regulations 2006, the company must pay this tax before any dividends are paid out and provide written records to HMRC.
Quidnet broke this law by failing to hold back tax before making dividend payments to shareholders on at least three occasions: March 2020, September 2020 and April 2021.
The first was a dividend of £684,055, which Quidnet chose not to pay in cash but in the form of 423,040 newly created shares. The company did not deduct tax on payments destined for Tice and RJS Tice Family Settlement, his trust in Jersey. Had it done so, it would have issued 29,300 fewer shares than it did and sent their value in cash, £47,700, to HMRC.
The second was a dividend worth £289,459, which the company issued as 186,627 new shares. In effect, all shareholders received 5p worth of shares for every share they previously held. But Tice and his trust should have received a lesser amount — 4p of shares for every share held — so that the difference, £20,041, could be paid directly to HMRC.
The third was a dividend paid partially in cash, partially in shares. Tice was entitled to £55,000 in cash, from which £11,000 should have been deducted. The trust received around £64,000 of shares, from which £13,000 should have been deducted. Company filings show that the trust’s shareholding increased by more than it would have done had tax been deducted before shares were issued.
Overall, Tice’s company did not deduct tax from these dividends, which were worth around £456,000, leading to a tax shortfall of around £91,200. He was responsible for the company’s affairs alongside two fellow directors, Nicholas Tribe, his long-term business partner, and John Purcell, who, unlike him, did not hold a substantial stake in the company.
The disclosures come after a Sunday Times investigation last month revealed that Quidnet avoided nearly £600,000 in corporation tax before funnelling dividends to mostly tax-efficient entities. Tice’s unusual approach to managing a company of its size and nature, while lawful, posed questions because Quidnet never met the rules for Reit status, instead exploiting a three-year grace period in which companies are able to try to comply. Tice withdrew from the Reit regime after 2 years and 11 months. Neidle said at the time that it was “hard to understand why Mr Tice did this”, noting that “small and medium businesses don’t normally use Reits”. He said the MP’s methods could amount to “highly aggressive tax planning”.
After the story was published, Tice opened a press conference by dismissing the inquiries into his tax affairs as a smear and saying Britons should strive to pay the minimum tax legally possible. Asked whether he encouraged members of the public to pay as little tax as permitted, Tice replied: “Yes, of course, that’s what you should do.”
