As many of you will have come across in the news, the Sunday Times Rich List was published today and our 33% stakeholder, Mr Mittal, lost £2.4bn in the last year, putting him in at a measly 4th place on the Rich List, with £10bn. I'm sure we're all very sad for him and can pass round the collection buckets soon. More seriously, some of that loss was due - in my limited understanding - to his investment in a concrete company, having made his fortune in steel. When discussing this with a wisened old friend, it got us thinking about our potential, promised and much-pontificated new stadium, which presumably will need plenty of the aforementioned building materials. If Mr Mittal's companies are to provide the steel and concrete, could he be winning on three fronts? Firstly, could he make a killing by placing the order for the stadium with his AnclerMittal, securing a big contract and nice profit? Would this contravene any business laws etc? Secondly, could he then be getting a tidy discount for the stadium, which leaves his stake-holding in QPR at a much higher value than it was when we were in a crummy, beloved old stadium? And thirdly, could he be using debts accrued in building the stadium to avoid tax in his other businesses? Any business bods (we know who you are) care to enlighten me?!
Interesting thoughts. I await the 'self aware business bods' with interest. Just to be pedantic, what you describe there re tax is legal and sensible, not evasion!
Yes, he'll be doing that already with the losses QPR are running up, well his 1/3 of those losses. Fernandes will be doing the same with his share of the losses and his other businesses. In general it isn't really a tactic you'd actively pursue as a businessman though, it's just something you do if you happen to be able to. If you think about your income (I'm going to make figures up now that aren't correct but illustrate the point), if you're earning £10k and that would equal a tax bill of £1k, you're not going to ask for your income to be reduced to £9.5k so that you only have to pay £800 in tax, you'd be £300 worse off yourself. Similarly if you've got a profit making business you wouldn't actively look for loss making businesses to reduce your tax bill as it would reduce your cash in your back pocket as well, but if you happen to own one you'd sure as hell want to get the tax benefit. There are exceptions to the rule thanks to tax benefits offered in certain industries, or if one of the businesses was a hobby or of benefit to your ordinary life. For example, if I had a company turning big enough profits rather than buying myself a sportscar I might set up a company that rents out sportscars to people, and that company could rent me a car but be loss making overall. That way it would be like buying the car for myself out of pretax income rather than after tax. so a car that cost £80k I'd need to earn £80k to pay for, rather than needing to earn over £100k to buy it for myself because of paying over £20k tax on that income. (you do need to do a bit more than that to get away with it, but it's simplified for the illustration)
