Let’s talk about “the tax thing”, from back in 2012, and gather the timeline of events in one place.
Mostly for people outside of the UK, I think we need to start by explaining some jargon, in relation to taxation of individuals (ignoring large businesses, corporations etc.).
It’s going to be a high-level post, in places, as tax rules can change from month to month…but mostly because I’m not a finance expert. So I’ve linked out to Accountancy firms etc.
Unfortunately, it’s also going to be a long one…because this one caused a lot of noise and almost cost Jimmy his career – but I think there were some questions that were not asked and a lot of the press was very much rage bait.
Bottom line is a LOT of people have gotten away with squirrelling away larger amounts, with a lot less publicity.
HMRC, BTW, is HM Revenue & Customs – the UK Government’s tax department.
Are you sitting comfortably?
Tax Legislation
UK employees (Public or Private sector) are taxed through PAYE (Pay As You Earn) and then self-employed people have to submit tax returns. No surprises there I would imagine.
Unfortunately, the UK taxation legislation is one of the most complex (and lengthy) in the world and last year (2025) was estimated at over 23,000 pages. Because of this many self-employed people (not just the very rich) engage Accountants, to submit their tax returns on their behalf (self-assessment).
If you are interested in how UK legislation has burgeoned, there are more details here.
Rule Changes
It’s perhaps a good idea to mention first that tax laws change ALL the time. After elections incoming Governments may tinker with the legislation – but it can also change after Budgets, to try and raise more money and/or plug loopholes.
I’m mentioning this up front as what applied in 2012 would not be applicable now.
How Much to Pay? PAYE & Mitigation
There are 3 “methods” of reducing your tax burden:
- Mitigation
- Avoidance
- Evasion
Mitigation is 100% legal and within the spirit of the law. It’s where you study current tax allowances and use them in your financial planning, regardless of whether you are PAYE or on self-assessment. Brits are encouraged to utilise allowances as, for example, paying into a private pension fund is something that will potentially help people to rely less on Government assistance in old age. Mitigation includes things like:
- Cash ISAs (which may be tax exempt investments, up to a certain value)
- Married tax allowance (transferring some of your allowance to your partner)
- Contributing to a pension scheme
- And the self-employed can offset certain operating expenses such as travel costs / phone and internet bills / equipment, software, training and subscriptions to professional bodies (relating to your employment)
This Frazer James website includes more details on some of the examples.
Avoidance vs Evasion
This is where perceptions get confusing as I think the mindset of a lot of the Brit population is that Avoidance involves people trying to pay less tax, while staying on the right side of legality. While Evasion is more serious and involves jail time and/or massive fines.
I’m not sure when it happened but Gov.uk now reads as if they are one and the same thing (see this page on Avoidance). As I said, things change…which is why people turn to Accountants!!!
Tax avoidance is the legitimate exploitation of tax loopholes to reduce the individual or business’ tax liability whereas tax evasion is the illegal evasion of taxes properly due. In the UK, both tax avoidance and tax evasion are illegal, although tax evasion is more likely to lead to criminal consequences.
However, it is not illegal to plan for your prospective tax liability it is important to distinguishes between tax planning and tax avoidance.
I see an AWFUL lot of people using Legal / Illegal to describe the difference between Avoidance / Evasion, which now seems to not be the case??? And, as a society, our media tends to go for the (usually famous) person benefitting from the savings and doesn’t mention the Accountants that actually advised that the scheme was legit. Or, if they do, it’s not the Accountancy firm that ends up in the headlines.
However, there is a huge list on this Gov.uk page of “avoidance enablers” so this current Government certainly doesn’t like people evading OR avoiding.
Under 2012 legislation the K2 scheme was LEGAL.
2012 and K2
So, what happened with Jimmy’s tax thing?
The Times ran a story in June 2012 that said that “thousands” of wealthy Brits were paying as little as 1% in tax (here) and that £168 million a year was being “sheltered” from HMRC.
This was written by the Money section (and presumably went through lawyers) but, for me, it still plays a little fast and loose with how they describe who saved what amount.
For one thing – they only named ONE person (Jimmy Carr) out of 1,100. And we moved from the first paragraph saying “1000s of people” to the 4th paragraph saying “1,100” – and yet only one name being mentioned. Excellent. Just enough obfuscation to get the “eat the rich” people wound up.
The reporter had contacted a number of tax avoidance specialists (that were offering this Jersey based scheme) and one of them had discussed Jimmy’s personal tax affairs. And then The Times printed it.
This is one my main bugbears with this whole thing – as my first question would be – surely, it’s the Accountants that should have been named and shamed? Whether it’s a garage telling us our “big end” has gone or an accountant saying “yes, it’s legal” we all trust experts most days of the week. If you pay an accountant, then you expect them to understand the law and give you good advice.
But, also, as this story (and many others) mentioned – Jimmy’s Lawyers had been contacted and confirmed that he was in K2, that HMRC had been made aware of this and denied any wrongdoing on his behalf. So, my 2nd question would be “where is the story?”
If HMRC knew about it – what were they doing? Were plans underfoot to shut K2 down? Why hadn’t they been in touch with him prior to this Times story?
The piece was picked up by tabloids and broadsheets alike and the activist group UK Uncut (see The Guardian) said they were considering changing their campaign strategy so that they were personally protesting Mr Carr.
And what about the other 1,100…? This is the danger in only naming ONE person – you paint a target on their back.
The Telegraph went on to describe JC as the “largest beneficiary”, through funnelling £3.3m into K2 in a year. This is where I have another bone to pick – because this wording stirs up public anger – but isn’t giving any context around the other 1,100 people.
As the “hardest working man in comedy” is he the “largest beneficiary” because he had more going on than anyone else? (multiple TV shows and gigging). Other people in the scheme included comedians, musicians, lawyers etc. and, certainly with the entertainers, their earnings tend to fluctuate, year on year, depending on whether they are on tour / have an album out etc.
The implication being – if other people in the scheme COULD have earned more, then they would have saved more tax. Playing Devil’s Advocate, it sounds like he was being scapegoated for working harder than the other scheme members.
I’m just all for even-handedness – name one and you have to name all (with specifics).
Not Morally Acceptable
This Accountancy firm, Crunch, have an easy to read article here and make it clearly that Jimmy’s involvement was “avoidance and not illegal at the time”. But his name / story is still top of their list of people that have been caught out.
David Cameron was at the G20 in Mexico when he stepped out to declare to ITV that Jimmy’s tax affairs were “not morally acceptable” – but refused to comment on Gary Barlow’s investment in a similar scheme (short clip here).
All of which came back to bite him in the a** in April 2016 when the Panama Papers came out (BBC – here) and it came to light that Cameron had held shares in his father’s offshore investment fund. Jimmy tweeted:
I’m going to keep it classy. It would be ‘morally wrong’ and ‘hypocritical’ to comment on another individual’s tax affairs. (here)
As a bit of light relief (an intermission if you like) see Jimmy explaining, in his own words, on Room 101 that he’s paid it all back – plus interest.
And Sky put Charlie Brooker on the spot – amusing short clip here.
Who Were the other 1,100?
We never actually got to see a full list of K2 participants but there have been other similar schemes, often for MUCH larger amounts, that didn’t receive half as much publicity as this one.
Insider.co.uk has some of them listed and, again, is a bit too ambiguous with the wording for me. It says Jimmy was part of a scheme that “cost the taxpayer £52m”. But what wasn’t said was that was £52m across 1,100 people. The devil is in the details.
The original investigation never mentioned whether Jimmy was in K2 more than 1 year but 45% of £3.3m is nowhere close to the £20m that Take That had to repay, after they were investigated. And Gary got an OBE…with David Cameron resisting calls to remove it from him because he said it was awarded “for his charity work”. See The Guardian here.
Crunch reported here that Jimmy faced a £600,000 tax bill in 2014. As he would have repaid the K2 underpayment before that I’m not sure what they are implying with that number? As examples of him being singled out this is a minor story – but it was updated in 2025 so this stuff continues to dominate search engines and AI.
Which brings us back once again to the point – why was only Jimmy’s name printed? Because if you Google K2 his name is all over the results and I wonder how many people notice that there is even a mention of “1,100 other users”?
There was another scheme written about in 2014 (Liberty – here) with 1,600 people in it. That story says George Michael sheltered £6.2m (he was listed, amongst other names). Now, I love George’s music, but that is almost double the amount that Jimmy sheltered…was anyone else aware of this story? Why does Google not pull this up more prominently?
Is it just me that thinks some people get an easier ride than others?
8 Out of 10 Cats
As written about here – there was a broadcast of 8oo10c on June 22nd 2012. At that point the show was still in its topical mode, recording a couple of days before broadcast (see here, re change to show format in S19). What are you talking about? Was the round relating to what had been discussed that week and Jimmy’s tax affairs had virtually been a Top 3 news topic since April.
There had been weeks of press and radio / TV debates and Jimmy was (and still is) the poster boy for tax avoidance. He has even apparently featured in Accountancy training modules.
The show was watched by 2.18m and him allowing the other comedians to rip into him and offering an apology / mea culpa possibly rescued his career. He’s said in podcasts, over the years, that he was struggling to sleep and having panic attacks. He was given medication, but didn’t take it – preferring to have it there as a fallback “if required”.
He’d also said that watching Downton Abbey had distracted him – which is where the seeds for Fackham Hall were sown.
Having said all of that, reading a LOT of comments and articles over the years, the majority of Brits are aware that he did nothing wrong and think it was wrong for him to be singled out and for Cameron to speak about the situation.
Usually, the only people that I’ve seen with a negative response have used the word “evasion”, demonstrating that they don’t know the difference between avoidance / evasion or don’t have the full details of the events. Also, they usually don’t know that he actually LOST money, because HMRC wanted the full amount plus interest back.
Sense of Humour
Over the years he’s tackled it with good natured humour, not that he had a lot of choice. He regularly gets heckled about it and not just from his audience because it’s a go to “quip” on panel shows even to this day.
I’ve seen the odd comment from people that think he’s “making money” from his misdemeanour, by making jokes. He’s a comedian – is he supposed to sulk? Refuse to joke about it?
Current UK Tax Rate
Just FYI – the current UK top band tax is 45% for anyone earning over £124,140. Personally, THAT is something that I find criminal.
Just for clarity (once again) – he paid back ALL of the money “saved”, plus interest, and has paid the top band of tax ever since.
Jersey Were Not Happy!
One final thought…
Interesting details from Jersey’s Government about how the K2 tax avoidance scheme (promoted in the UK) has damaged the Islands reputation – here. It amused me to see them bounce the blame straight back on the UK Government, who noted in Hansard that they were already investigating the scheme, before the press articles.
However, I think it is recognised by those doing business with Jersey that in this case it is the U.K. laws that have allowed the publicised scheme to be promoted by U.K. tax advisers for use by U.K. residents and that Jersey is one of many jurisdictions can find that it is being used in connection with such schemes
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