Was the High Income Fund deliberately set up to avoid tax?
The High Income Fund was established in 1995 and Lloyds says it “was not tax motivated”. However, the fund would have been covered by the EU savings tax if Lloyds had not routed the money through China. The Lloyds’ subsidiary in Hong Kong which makes the payments was set up just two weeks before the tax became law in 2005. And the banker we filmed told us that moving the money to Hong Kong and back was a “paper transaction” which was designed to “get round” the EU tax. Regardless of the bank’s intent, the High Income Fund gives wealthy customers the opportunity to avoid the EU tax and keep their savings secret from the Inland Revenue. This means it can also be used to evade tax in the UK. Is this legal? At the moment, the EU savings tax only applies if the income is paid out in a country that has signed up to the tax directive, which China has refused to do. Lloyds is therefore exploiting a legal loophole which, in practice, could enable customers to avoid or even evade tax. The Europe
