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Nigel Farage was caught up in masses of controversy last week after allegations emerged that he had an offshore bank account to avoid paying tax. The MEP and leader of the UK independence party later admitted the allegations were true, claiming he opened the fund in 2003 to reduce his family’s inheritance tax bills but quickly realised that he had made an “error”.

Farage went on to say, “My financial advisers recommended I did it, to have a trust really for inheritance purposes and I took the advice and I set it up.

“It was a mistake. I was a completely unsuitable person for it. I am not blaming them it was my fault.

“It’s a vehicle that you chuck things in through your life that you don’t need and you build up a trust fund for your children or grandchildren.

“It was called an ­educational trust and could have been used for grandchildren’s schools fees, things like that.

“It was a mistake for three reasons. Firstly, I’m not rich enough to need one and I am never going to be.

“Secondly, frankly, the world has changed. Things that we thought were absolutely fair practice 10 years, 20 years ago, 30 years ago aren’t any more.

“Thirdly, it was a mistake because it cost me money. I sent a cheque off to set it up.”

Leaked documents about Farage’s financial records reveal he transferred his 50% shareholding in Farage Limited after it was founded in 2003 to the Farage Family Educational Trust, based in the Isle of Man.

When quizzed about the Farage Family ­Educational Trust, the politician insisted: “I was not a beneficiary.”

After he was shown a copy of Farage Limited’s accounts from 2004 indicating he owned shares in the city trading firm, he declared: “They are wrong then, aren’t they? I originally had the shares. I gave them away to the trust.”

Asked who set up the trust, Farage replied: “I set it up on behalf of somebody else.”

His brother Andrew, a co-director who owned the other 50% of the company, ­pocketed £969,000 in dividends from the firm.

Farage himself claimed he was “unpaid during that period of time”. He added: “I packed up business completely in 2004.”

But on his Declaration of Members’ Financial Interests for the European ­Parliament dated January 2004, he stated that he was paid for being a director of Farage Limited.

In every annual declaration from 2004 to 2009, he claimed he was paid for “commodity broking”.

Companies House documents show the offshore trust remained a shareholder in Farage Limited until 2011.Where as Farage had insisted the company had been shut down.

It has later been revealed that Farage limited lost a major client in 2011 and owed unpaid corporation tax. Six weeks after the UKIP leader resigned as company secretary, HMRC filed a petition to wind up the company.

These revelations concerning Farage come as David Cameron backed a landmark deal at the G8 summit to crack down on corporate tax evasion. It’s important to note that tax avoidance is not illegal in the UK but figures released by HMRC state that it costs Britain approximately £35billion a year, something Farage has frequently spoken out about. Only last month at the European Parliament he told his peers they had a “common enemy – rich people [and] successful companies [who are] evading tax”.

Additionally on May 21 this year, he attacked European bureaucrats earning £100,000 a year who pay 12% tax under EU rules. Farage said: “It is tax fraud on an absolutely massive scale. How can that be deemed to be fair?
“How can people struggling – the 16 million unemployed in the eurozone – look at these institutions, not only paying people vast sums of money but allowing them tax and pension benefits on a scale not seen else in the world?”

The apparent hypocrisy has proved to be a goldmine for his political opponents. Labour MP John Spellar said: “I know Nigel Farage wants to appeal to disaffected Tories, but copying some of the Tories’ biggest donors by using offshore trusts to avoid tax is taking things too far. It’s typical of UKIP. They talk about how much they love this country, but they don’t even bank here. It’s just hypocritical.”

Farage has a lot to answer for and his double standards and dishonesty are there for all to see. Whether or not his actions will have any immediate effect on his position as leader of his party or UKIP’s popularity is not clear as of yet, but this scandal could provide Cameron with ammunition needed to win back the disaffected Tory voters that Farage has stolen.