Jimmy Carr has been severely criticised for his tax arrangements (Reuters)
Jimmy Carr has been severely criticised for his tax arrangements (Reuters)

David Cameron has branded Jimmy Carr's tax arrangement's "morally wrong" following reports the comedian only pays one percent income tax.

The Times reported that Carr used a legal tax avoidance scheme allowing him to save around £3.3 million a year.

The schemes channel money through the Jersey-based company K2, which then returns the money through a loan which is not subject to income tax.

Carr is reported to be one of more than 1,000 beneficiaries who swerve paying some £168m from the taxman using the K2 scheme.

Speaking to ITV at the G20 summit in Mexico, the prime minister said: "I think some of these schemes - and I think particularly of the Jimmy Carr scheme - I have had time to read about and I just think this is completely wrong.

"People work hard, they pay their taxes, they save up to go to one of his shows. They buy the tickets. He is taking the money from those tickets and he, as far as I can see, is putting all of that into some very dodgy tax avoiding schemes.

"That is wrong. There is nothing wrong with people planning their tax affairs to invest in their pension and plan for their retirement - that sort of tax management is fine.

"But some of these schemes we have seen are quite frankly morally wrong.

Carr spoke out against the claims in public for the first time during a show in Tunbridge Wells, Kent.

After an audience member yelled out "You don't pay tax" during the show, Carr responded: "I pay what I have to and not a penny more", The Times reported.

A spokeswoman for HMRC said: "This scheme (K2) was already under investigation by HMRC. If, as is alleged, it depends on the use of loans it will not work.

"HMRC are looking into this. If the scheme does work technically, HMRC will challenge it in every way available to them.

"Government does not intend anyone, no matter who they are, to get away with paying less than they should."

There are now claims members of the pop group Take That have also invested £26m in a similar scheme which HMRC believe to be a way of avoiding tax.

Singers Gary Barlow, Howard Donald, Mark Owen and their manager Jonathon Wild are thought to be among 1,000 people who contributed £480m to 62 partnerships in music industry investment schemes that serve as tax-shelters.

Carr famously lampooned Barclays Bank over its tax arrangements during a sketch routine for Channel 4's Ten O'Clock Live.

Mexico G20 Barclays