- Tax avoidance is the process of dodging taxation law without actually breaking it.
- The company K2, used by comedian Jimmy Carr, works by transferring salaries from mainland investors into a Jersey-based trust which then gives the money back to investors in the form of loans.
- Loans are not subject to income tax.
- Jimmy Carr used the aggressive, but legal, scheme to protect some £3.3 million a year, a Times investigation uncovered. He is said to be one of more than 1,000 beneficiaries who shelter some £168 million from the taxman each year using K2.
The Times explains in more detail how K2 works - and has undercover footage of people who run it.
Comedian Jimmy Carr has admitted he made a "terrible error of judgement" over his tax arrangements.
Jimmy Carr did not break the law, but he exemplifies the feeling that the rich live by different rules than the rest of us.
The Government has re-stated it will crack down on the shady world of tax avoidance. Laws to do so may now be fast-tracked.