Taxes. If you could, legally, pay £300 a month less tax, would you?

[The Rivet]

For me out of these threads about tax and avoidance and non payment is one thing, most of us, if we could, would love to pay less tax. However, 80% of the populace are 'tied in'. No way to be self employed or self regulated. Employees paying up front through companies and PAYE. Rich tads pay specialists to avoid paying what would be the nornal percentage for the rest of us! You and are are subject to fines or imprisonment. These 'b****rd* pay to avoid all that. Lesson to be learned? Most of us are just cash cows for the state!

 

[binky]

Tax Avoidance - Managing your financial affairs in such a way as to lawfully avoid tax being due, usually in the form of tax-break incentives.

Where tax is avoided, the avoided tax is not due.

Tax Evasion - Using deception/fraud to unlawfully evade taxes which, with your financial affairs as they are, are due to be paid.

Where tax is evaded, the evaded tax is due.

But in my opinion taxation is theft.

It really isn't that black and white.

When I was an IT contractor, I had a private company which was owned by me, (and my mum), and I was the sole employee.
The company which had contracted for my skills, paid my company, normally through a third party intermediary, (the hated agent).
My company, paid me a "living wage". That is to say, I could cover ALL of my day to day expenses out of the amount of salary I paid myself, including food, fuel, mortgage. Everything.
I paid full personal income tax and NI on that amount of money, which was approximately one third of the amount that my company had as income.
The rest, the other two thirds, built up in the company, until a dividend was due, approximately every 6 months, then the shareholders, Me an my Mum, recieved a dividend on which we paid 20% tax. Legally avoiding higher rate income tax, and National insurance.
(I understand this "loophole" has now been closed by IR35)

Some would say that this arrangement was wrong, but I saw it as an eminently sensible solution to cut my tax bill while still paying my dues.
The Custome and Revenue teams who audited me believed so too. In fact, one girl stayed twice as long as she should have because she believed that I was running some kind of scam by paying too much tax.
It was seen as "fair and reasonable".

For 6 months I worked with another contractor, who shall remain nameless.
He drove some 40 miles a day to reach the office, and had a big flash fancy car. We earned the same, and I couldn't figure out how he could afford such a car.
It turns out, that he, as the managing director of his company, had the power to set the mileage rate that he, as the employee of the company could claim for company mileage. so he set the amount of pence per mile to exactly equal his daily rate divided by 80.
Now you aren't allowed to claim "mileage" to commute to work, so he also declared that his main office was at his place of residence, and that his commute was therefore travelling on business.
In short, he claimed every penny his company was paid, in mileage allowance and paid no tax or NI at all.
This was, to the letter of the law, completely legal and above board.

Her Majesties customs and revenue, in this case, declined to agree. By the time they audited him, he had run this scam for 5 years, and they stuck him with a bill for back tax on the entire amount. Some £120,000, which was a lot of money in 1986.
While "legal". This avoidance scheme was not "fair and reasonable".

I would suggest that sticking all of your money into a third party company, and then taking loans from that company, which are never paid back, or intended to be paid back, and in fact, you haven't the resources to pay them back would not pass the "fair and reasonable" test.
This is what the entertainers and footballers who have recently been in the news do.

Tax avoidance is a grey area, open to interpretation, and that interpretation can, and does, vary.

As a PAYE slave for the past 20 years, I am of course incensed that avoidance is possible, and will decry all those who seek to maximise the efficiency of their tax affairs.
It's NOT FAIR. (But only because I no longer have the opportunity.)

Regarding taxation being theft, in one sense, I agree. Taxation is stealing with menaces. You are required under threat of quite severe punishment to hand over the fruits of your labours.
It is however, a pact which we make with government, in order to live in a structured society.
The key is figuring out when and where that pact ends. i.e. when tax is too much, and this depends on your politics, and what you believe the function of government is for.

 

[Brightonfan1983]

Would I be less moral if, on a trip around the Far East, I asked a few arms dealers to come with me for the ride? Perhaps they could flog a few millions' worth of assault helicopters so that the natives don't become too restless?

 

[dingodan]

It really isn't that black and white.

When I was an IT contractor, I had a private company which was owned by me, (and my mum), and I was the sole employee.
The company which had contracted for my skills, paid my company, normally through a third party intermediary, (the hated agent).
My company, paid me a "living wage". That is to say, I could cover ALL of my day to day expenses out of the amount of salary I paid myself, including food, fuel, mortgage. Everything.
I paid full personal income tax and NI on that amount of money, which was approximately one third of the amount that my company had as income.
The rest, the other two thirds, built up in the company, until a dividend was due, approximately every 6 months, then the shareholders, Me an my Mum, recieved a dividend on which we paid 20% tax. Legally avoiding higher rate income tax, and National insurance.
(I understand this "loophole" has now been closed by IR35)

Some would say that this arrangement was wrong, but I saw it as an eminently sensible solution to cut my tax bill while still paying my dues.
The Custome and Revenue teams who audited me believed so too. In fact, one girl stayed twice as long as she should have because she believed that I was running some kind of scam by paying too much tax.
It was seen as "fair and reasonable".

For 6 months I worked with another contractor, who shall remain nameless.
He drove some 40 miles a day to reach the office, and had a big flash fancy car. We earned the same, and I couldn't figure out how he could afford such a car.
It turns out, that he, as the managing director of his company, had the power to set the mileage rate that he, as the employee of the company could claim for company mileage. so he set the amount of pence per mile to exactly equal his daily rate divided by 80.
Now you aren't allowed to claim "mileage" to commute to work, so he also declared that his main office was at his place of residence, and that his commute was therefore travelling on business.
In short, he claimed every penny his company was paid, in mileage allowance and paid no tax or NI at all.
This was, to the letter of the law, completely legal and above board.

Her Majesties customs and revenue, in this case, declined to agree. By the time they audited him, he had run this scam for 5 years, and they stuck him with a bill for back tax on the entire amount. Some £120,000, which was a lot of money in 1986.
While "legal". This avoidance scheme was not "fair and reasonable".

I would suggest that sticking all of your money into a third party company, and then taking loans from that company, which are never paid back, or intended to be paid back, and in fact, you haven't the resources to pay them back would not pass the "fair and reasonable" test.
This is what the entertainers and footballers who have recently been in the news do.

Tax avoidance is a grey area, open to interpretation, and that interpretation can, and does, vary.

As a PAYE slave for the past 20 years, I am of course incensed that avoidance is possible, and will decry all those who seek to maximise the efficiency of their tax affairs.
It's NOT FAIR. (But only because I no longer have the opportunity.)

Regarding taxation being theft, in one sense, I agree. Taxation is stealing with menaces. You are required under threat of quite severe punishment to hand over the fruits of your labours.
It is however, a pact which we make with government, in order to live in a structured society.
The key is figuring out when and where that pact ends. i.e. when tax is too much, and this depends on your politics, and what you believe the function of government is for.

Now you aren't allowed to claim "mileage" to commute to work, so he also declared that his main office was at his place of residence, and that his commute was therefore traveling on business.

- Sounds like fraud to me.

It is however, a pact which we make with government, in order to live in a structured society

- It can only be a voluntary pact.

 

[kevo]

Going on from US's thread about Jimmy Carr (a good point raised, I might add), I must admit, I'm intrigued to find out just where NSCers' moral high ground starts and stops.

Working on the assumption that you could do what Carr is doing, entirely within the boundaries of current legislation, and pay £300 a month less tax than you do currently, would you do it? Or would you refuse on moral grounds, pay the higher amount, and relax in the knowledge that you're contributing more to British society?

The point about all this is that Carr earns the kind of massive income that most of us can only dream about. Of course the average person would like to pay £300 less tax a month if they could legally do so - who the hell wouldn't? But then 'the average person' has a modest lifestyle - so £300 a month extra would actually mean something.

There is no need for Carr to avoid paying tax. If he paid what he actually should, he would still be a wealthy bugger - it would probably just mean he might not be able to afford the extra Porsche or whatever....

That is what is morally repugnant.

 

[Uncle Spielberg]

But Carr is not paying £300 a month less. He earns £750k or probably more, so should be paying > £350k tax. So he could be dodging 100 times as much as you're asking us. In my current position, I'd save the £300, but equally I know I would happily pay the going rate if I was on his salary.

This.

 

[Bozza]

This. I am not sure of this poll. Carr if he earns £ 500k a year is avoiding around £ 200k a year in taxes not £ 300.

It is estimated that he earns £3.3m a year. So around £900k in tax then.

 

[trueblue]

On the other thread, someone mentioned the Ltd company 'scam'... whereby people in certain industries (the BBC keeps coming up), operate through a Ltd company to pay corporation tax at 20%.

It makes a good story for the Daily Mail but what people don't account for is that in some professions nowadays, there are very few companies that want 'staff'. They don't want to pay holidays, provide sick pay, contribute to a pension or provide any job security.
I know a multi-national company which routinely employs people on 10 month contracts, then lays them off for two months every year - during which time they have very little chance of meaningful work and then effectively need to reapply for 'their' jobs.

In this type of freelance environment, setting up a company is a very sensible and entirely legal way of maximising income. You are, after all, taking all the financial risks and meeting the costs that come with being self-employed. If you're ill or there's no work around, nobody is going to be helping you out. And there's no company pension to bankroll retirement so you need to earn as much as possible while you can - these aren't people who are making fortunes like the 'top' bankers, just ordinary workers.

The politicians can't have it all ways. They've created a legal structure which allows large companies to operate with little responsibility towards their employees. Don't start complaining when those who go it alone then want to use the rules to their advantage too.

(The news about Carr's statement has just broken, admitting a 'terrible error of judgement'. His account rings absolutely true. Financial advisor/accountant says they can legally save you money and you choose 'yes' or 'no'. Who's going to say 'no'?)

 

[Aadam]

On the other thread, someone mentioned the Ltd company 'scam'... whereby people in certain industries (the BBC keeps coming up), operate through a Ltd company to pay corporation tax at 20%.

That's not really a scam though is it.

 

[Lord Bracknell]

This isn't really a good poll. What would be better is a lower percentage. £300 to someone earning £1,000 a month is worth a lot more then to someone earning £4,000 a month

The truth is that these sorts of tax avoidance schemes are only available to folk who earn considerably more than £1,000 a month.

And that's the scandal.

 

[Aadam]

The truth is that these sorts of tax avoidance schemes are only available to folk who earn considerably more than £1,000 a month.

And that's the scandal.

Which makes this poll moot.

 

[Triggaaar]

It is estimated that he earns £3.3m a year. So around £900k in tax then.

£3.3m sounds a lot more accurate than the £750k I saw online. Where are you getting the £900k from, wouldn't a normal tax payer would be paying 50% on most of that, so about £1.6m tax?

 

[Dick Knights Mumm]

Which makes this poll moot.

And looking like an attempt to defend what Jimmy Carr now thinks is indefensible.

 

[trueblue]

That's not really a scam though is it.

No it's not. But the Government and their supporters in the press would like you to believe it is so they can whip up some public outrage and distract from far more important issues.

 

[father_and_son]

I seem to be alone here... I both like Jimmy Carr and don't have a problem with what he's done.

I'm sure that the decision for this scheme wasn't really his own. He will have said to his accountants "do anything legal to reduce my bill". They will have told him of the existence of this loophole and he'd have said yes. Although he's a bright bloke, I don't think he's a tax expert and will have only had a passing knowledge of what this scheme actually did.

From what I've read, he's banked £3.3M in this scheme and paid about 1% tax on that... £33,000 in tax (a not inconsiderable sum of money).

He's self employed and in a unstable job, so there are lots of very straight forward things he would be doing to limit his liability... Entreprenurial Tax schemes, pension schemes, tax deductibles on all sorts of things, etc etc. So in reality he would have been paying no more than 10% in tax, even if he hadn't been using "loopholes" but just exercising his full allowances.

If I could reduce my tax bill, legally, I would.

 

[34064 Fighter Command]

Of course to a certain extent the agreement to live within a structured society ( and pay your 'dues' ) is only a voluntary pact. But there are very good reasons as to why that pact exists.

Your taxes help pay for the Army, Navy and Air Force. In the event that a foreign power invades you are relying on them to defend you and your property. And if you choose to not agree to such a voluntary pact then any 'right' you have to ensure you or your property are not (mis)appropriated are null and void.

In fact, the very definition of a nation state is one where persons agree to collectively enter a voluntary pact to pool their resources, and thereby agree to be bound by the standards and laws of the structured society that results. The requirement to contribute to that structure financially through the tax system is of necessity, not choice.

 

[ManxSeagull]

It is not called tax avoidance; it is tax management, been going on for years and will continue unless the loopholes are closed.

 

[Uncle Spielberg]

I seem to be alone here... I both like Jimmy Carr and don't have a problem with what he's done.

I'm sure that the decision for this scheme wasn't really his own. He will have said to his accountants "do anything legal to reduce my bill". They will have told him of the existence of this loophole and he'd have said yes. Although he's a bright bloke, I don't think he's a tax expert and will have only had a passing knowledge of what this scheme actually did.

From what I've read, he's banked £3.3M in this scheme and paid about 1% tax on that... £33,000 in tax (a not inconsiderable sum of money).

He's self employed and in a unstable job, so there are lots of very straight forward things he would be doing to limit his liability... Entreprenurial Tax schemes, pension schemes, tax deductibles on all sorts of things, etc etc. So in reality he would have been paying no more than 10% in tax, even if he hadn't been using "loopholes" but just exercising his full allowances.

If I could reduce my tax bill, legally, I would.

Yes but £ 3 267 000 net is not to bad to live on either. So you don't find the fact us mortals and people like Teachers and Nurses have to work until the end of April paying taxes each year before they earn money for themselves and Carr trousers 99% of his gross earnings and stops contributing tax by the 4th of January every year ?

 

[Dick Knights Mumm]

I seem to be alone here... I both like Jimmy Carr and don't have a problem with what he's done.

Not even Jimmy Carr is standing with you there.

 

[father_and_son]

Yes but £ 3 267 000 net is not to bad to live on either. So you don't find the fact us mortals and people like Teachers and Nurses have to work until the end of April paying taxes each year before they earn money for themselves and Carr trousers 99% of his gross earnings and stops contributing tax by the 4th of January every year ?

Not even Jimmy Carr is standing with you there.

US: Controversially, I actually believe that the tax regime should be based on a sliding scale (as it is) but with an upper cap, so that if you earn over a certain amount, you actually stop paying any tax on it. I also think the tax-free allowance should be raised to remove lots of people from paying any income tax and that the loss in revenue from these two factors should be gathered instead from a higher sales tax (exempting food and certain other goods). Tax consumption rather than effort.

DKM: I'm sure he really doesn't care. I understand he's already incorporated references to it in his current show. Like all embarassing things, the concern comes with not the doing, but the getting caught!