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Lewis Hamilton tax: should financial affairs ‘overtake’ his track success?

Author

Andy Wood

Andy is a practical, creative tax adviser who assists a variety of clients in achieving their personal and commercial objectives in the most tax efficient manner.

Lewis Hamilton tax – should financial affairs ‘overtake’ his track success?

These are heady times for Lewis Hamilton, the former kart racer from Stevenage.

Just days after nudging himself ahead of Michael Schumacher as the most successful Formula One driver of all time, he is now being talked about as worthy of becoming sport’s latest ‘Sir’.

However, unlike the tyres beneath his 160 mph car, the progression from podium to knighthood is looking anything but slick.

That’s because, according to The Times, it’s likely that his tax affairs will come in for intense scrutiny before the powers that be give him the green light for a gong.

Back in 2018, the ‘paper highlighted how HMRC was having its say in whether the rich and famous should receive honours.

A document from the Revenue to the Cabinet Office committee overseeing the honours’ process stated that “poor tax behaviour is not consistent with the award of an honour”

As I wrote on this ‘blog early last year, the former England football captain David Beckham is one of those who reportedly had his own knighthood blocked because of his investment in a film scheme later determined by HMRC to amount to tax avoidance.

Whilst Lewis Hamilton has left most of his Grand Prix contemporaries trailing in his wake, he was pursued – temporarily, at least – by allegations of dodging VAT on the purchase of a private jet which surfaced as part of the ‘Paradise Papers’ leak in 2017), even if he was later cleared of any wrongdoing.

As some have suggested, the latest controversy begs the question as to whether the honours’ system is truly based on merit or if there’s a bias against talented young sportsmen from relatively humble beginnings who have amassed great wealth and status.

Should Hamilton’s decision to live in the sunny tax haven of Monaco count against him when it didn’t against the retail tycoon Philip Green, who was knighted in 2006, eight years after relocating to the principality?

Others, of course, like Jim Radcliffe, the owner of the petrochemical giant Ineos, have moved to tax havens after being made a knight of the realm.

Without wishing to mix my sporting metaphors, tax has become something of a political football in recent years,

Both politicians and HMRC have rejoiced in their ability to increase pressure on high-earning sportsmen and women, in particular, to pay more tax.

It generates headlines and makes them look as though they’re really trying to close a so-called ‘tax gap’ which last year stood at £31 billion, according to the Revenue’s latest annual figures which were published a fortnight ago.

I would suggest, however, that they and their supporters may be guilty of misdirecting their focus: playing the man and not the ball.

As the Sunday Times’ annual ‘tax list’ has made clear once again, some of the country’s wealthiest individuals pay eye-wateringly large amounts of tax already. Among those to feature this year was Sir James Dyson, even though he now resides in Singapore.

Lewis Hamilton only failed to make the ranking because those compiling it couldn’t easily quantify how much was handed over to the taxman in the UK.

That, he has previously said, is because his income – and the substantial resulting taxes due – are generated not in one location but in the many different territories in which the Formula One circuit takes place.

There is nothing to stop Hamilton dipping into his significant riches – which amount to roughly £200 million, at the last in-depth media count – and making a donation to the Treasury.

After all, there is a system – euphemistically referred to as ‘patriotic payments’ – which allows people to help the UK out.

Looking at the latest figures, though, it appears that the Government received only £49,000 in this way during the last financial year.

How many of Lewis Hamilton’s critics contributed is unclear, as the donations are anonymised.

If he did cough up, though, would he not be accused of trying to buy an honour: precisely the same thing that numerous well-heeled and politically-connected entrepreneurs have been accused of doing over the years?

Lewis Hamilton Tax – conclusion

In short and in marked contrast to his abilities on the racetrack, Hamilton can’t win.

It’s as though, in sight of yet another personal triumph, the taxman may pop up waving not a chequered flag but a briefcase and bring him screeching to a halt.

If the Revenue is allowed to bang the gong, as it were, might we see other wealthy individuals who use legitimate tax planning to manage their liabilities choosing to leave these shores and take their cash elsewhere?

I’d suggest that it’s a racing certainty.

If you have any queries about this article, Lewis Hamilton tax: should financial affairs ‘overtake’ his track success, then please let us know.

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