A Labour-supporting millionaire is asking the general public for donations to fund a tax crackdown on hedge fund managers.
Multi-millionaire Labour donor Dale Vince and outspoken lawyer Jolyon Maugham are asking the public for tens of thousands of pounds in donations to fund a legal case against HM Revenue and Customs (HMRC).
Mr Vince, who is founder of UK renewable energy company Ecotricity and a wealth tax lobby known as the Patriotic Millionaires, has teamed up with the Maugham-led Good Law Project to take HMRC to court over the way it taxes private equity profits enjoyed by fund managers.
In March, Labour defended receiving around £1.5m in donations from Mr Vince after it was revealed he was a supporter of climate change campaign group, Just Stop Oil.
Mr Maugham has come under scrutiny over the last decade for his outspoken views and public statements.
On Boxing Day 2019, the lawyer, a prominent anti-Brexit campaigner, claimed on Twitter that he clubbed a fox to death while wearing his wife’s satin kimono and nursing a hangover.
The pair are now working with tax lawyer Dan Neidle and argue that the tax authority allows wealthy fund managers to pay less tax by classing the profit they make from deals as capital gains and not trading income.
They are using a crowdfunding page to ask for £50,000 in donations from Britons struggling with the cost of living crisis, despite Mr Vince being worth a reported £100m.
“Britain is in the midst of a brutal cost of living crisis. Energy and rent prices are soaring, and many of us are struggling to pay for the essentials,” the crowdfunding page said.
“Despite this, some of the richest amongst us are failing to hand over their fair share of tax thanks to a sweetheart deal between HMRC and private equity fund managers.”
The group says HMRC has taken a “blanket approach” to taxing private equity funds since 1987, when a statement was agreed between the fund industry and the tax authority, resulting in fund managers making extra profits as a result.
This agreement, known as “carried interest”, stated that profits from funds would not be taxed as income from trade but instead as profits from investment.
This means that some fund managers are paying a capital gains tax rate of 28pc, instead of the highest income tax rate of 45pc.
Critics questioned why Mr Vince was not using his own wealth to fund the legal challenge. Tax barrister Barbara Rich of chambers 5 Stone Buildings suggested the millionaire should pay his own legal bills.
On social media she said: “Litigation crowdfunding is more usually resorted to by those who cannot afford to pay their own legal costs and those of their opponents which they may be ordered to pay if they lose.
“Why is Vince asking people who are likely to be much less wealthy than him to pay for this litigation?”
The Good Law Project campaign said if it doesn’t spend all the money it raises on the HMRC litigation, any extra funds will go directly to future legal cases instead of being returned to the public who donated.
They believe the taxman could rake in around £600m in extra revenue per year if it stops allowing fund managers to utilise the so-called loophole.
This is not the first time The Good Law Project and Mr Maugham have asked the public to dip into their pockets to fund litigation proceedings. The group has reportedly raised millions of pounds from donations in recent years for spurious legal cases that are rarely successful.
Mr Vince recently helped raise £40,000 for an unsuccessful appeal to stop a new farming development on the banks of the River Dore and the River Wye.
Mr Vince and The Good Law Project have given HMRC until 9 June to respond to its challenge before it begins a judicial review.
Mr Vince said: “What I think is unfair is a tax system that favours those with most money at the expense of those with least, and sweetheart tax deals for those with money – it’s arguably unfair for anyone to have to fund a legal challenge against the Government to force them to apply the tax law as it is written.”
Director of Good Law Project, Jo Maugham, said: “The problem with the private equity sweetheart deal is that it reduces the support the state can offer to struggling families.”