One that knows how tax works and how if David pours his money into her business, they pay less in tax and at the end of the day they keep more money.
people dragging them without knowing how big money actually works...
I know how tax works, and I also know how big money actually works. I’ll happily join Somerville in forming a negative opinion of their financial capabilities and business sense.
Losing money ‘to pay less tax’ is never a good policy, although it never seems to stop anyone from referencing it in relation to loss-making businesses. You offset your trading losses against your profits, not your tax, and even then you don’t always get to offset all of the losses.
UK corporation tax is charged at 19%. If David Beckham’s image rights company loans VB Limited £1m, and she burns through it without turning it into a profit, the most he could recoup after writing it off is £190k. He won’t be able to set his £1m of losses against a tax bill of £1m. Does that sound like a good bargain to you? It doesn’t to me.
As it happens, her fashion company was refinanced last year. Private equity investors have taken a majority stake for what is, frankly, not much money in the PE world. Far, far less than the Beckhams have invested to date. The investors will borrow money and attempt to grow the revenue and add value to the VB brand before trying to sell the business to somebody else. That’s why she’s now trying to hawk skincare and make up: she’s never going to make money from the clothing line. She’s tried everything, including a failed US supermarket collaboration. If the strategy works, it’s worth the investors‘ while to borrow because the PE house will be operating out of Luxembourg or the Caymans where they don’t need to worry about being taxed on gains, or stamp duty.
These advantages are of no use to the Beckhams, who are one step removed. They undoubtedly refinanced because they couldn’t afford to chuck away £10m a year on a hobby business. Pretty much everything they have invested so far is up in smoke. They might have some ‘sweet equity’ shares that might pay out if the business is sold above a certain multiple of what the PE house paid, after repayment of debt. Good luck with that.
However you present it, it is very optimistic to describe either of the Beckhams as people who understand how tax or big money work.
www.thesun.co.uk
