Tax Avoidance: Are they all at it ?

[Housey]

it was referring to another thread. i dont consider myself worthy at all. i dont do anything now as i dont have the time, or i prefer to spend it with my son. i maybe shouldnt have put that as i knew it might be taken out of context.

i dont mind money going to charity, better than the tax man. i would love to give more but cant afford to now im 4 days a week and mrs has quit work to look after our son.

That is why I picked it apart, it was a poor point in the context of this thread but seems you concur so fair enough. It also sounds like times are tough, like many right now so I can also see why you might have a stronger view of people who are not in such a position but I would really urge you not to make these debates a them an us, for they so often really aren't.

 

[Jambo]

The "scandal" such as in Jimmy Carr's case is that the company is loaning him the money on a permanent basis (i.e. he's never going to pay it back) which is as good as tax free.

The other part of the "scandal" was that his company is registered in one of the Channel Islands, which has much lower taxes for corporations and director's loans.

It doesn't sound like it's the same situation in the BBC case though, is it?

 

[kinobestew123]

Scrap NI and introduce a 30% flat rate tax. get rid of the whole and very complicated tax system.

Please can we get rid of Road Tax and Council Tax in this? They're by far my least favourite taxes.

How long before somebody comes up with a way around the 30% flat rate? The first question would be what is subject to a 30% tax? Income? What if I give to charity? What if I sell my lego unimog for a profit?

 

[Housey]

It doesn't sound like it's the same situation in the BBC case though, is it?

Pretty much, common way of reducing liability.

1) Take a small wage to show tax and NI payments in UK
2) Create off shore companies and use them as billing mechanisms
3) Take loans from off shore companies with no fixed repayment model
4) Take loans in different amounts and variable rates
5) Oddly never pay loans back
6) Dissolve as and when
7) Start again

I simplify but that is basically the process used by many people.

 

[mattyg]

Stolen:

Dear Mr. Cameron,

Please find below our suggestion for fixing the UK’s economy.

Instead of giving billions of pounds to banks that will squander the money on lavish parties and unearned bonuses, use the following plan.

You can call it the Patriotic Retirement Plan:

There are about 10 million people over 50 in the work force.

Pay them £1 million each severance for early retirement with the following stipulations:

1) They MUST retire.
Ten million job openings - unemployment fixed

2) They MUST buy a new British car.
Ten million cars ordered - Car Industry fixed

3) They MUST either buy a house or pay off their mortgage -
Housing Crisis fixed

4) They MUST send their kids to school/college/university -
Crime rate fixed

5) They MUST buy £100 WORTH of alcohol/tobacco a week .....
And there's your money back in duty/tax etc

It can't get any easier than that!

P.S. If more money is needed, have all members of parliament pay back their falsely claimed expenses and second home allowances

If you think this would work, please forward to everyone you know.

Also………..
Let's put the pensioners in jail and the criminals in a nursing home.

This way the pensioners would have access to showers, hobbies and walks.

They'd receive unlimited free prescriptions, dental and medical treatment, wheel chairs etc and they'd receive money instead of paying it out.

They would have constant video monitoring, so they could be helped instantly, if they fell, or needed assistance.

Bedding would be washed twice a week, and all clothing would be ironed and returned to them.

A guard would check on them every 20 minutes and bring their meals and snacks to their cell.

They would have family visits in a suite built for that purpose.

They would have access to a library, weight room, spiritual counselling, pool and education.

Simple clothing, shoes, slippers, PJ's and legal aid would be free, on request.

Private, secure rooms for all, with an exercise outdoor yard, with gardens.

Each senior could have a PC a TV radio and daily phone calls.

There would be a board of directors to hear complaints, and the guards would have a code of conduct that would be strictly adhered to.

The criminals would get cold food, be left all alone and unsupervised. Lights off at 8pm, and showers once a week. Live in a tiny room and pay £600.00 per week and have no hope of ever getting out.

Think about this (more points of contention):

COWS
Is it just me, or does anyone else find it amazing that during the mad cow epidemic our government could track a single cow, born in Appleby almost three years ago, right to the stall where she slept in the county of Cumbria?

And, they even tracked her calves to their stalls. But they are unable to locate 125,000 illegal immigrants wandering around our country. Maybe we should give each of them a cow.
------------------------------------------------------------------------ Also; Think about this ... If you don't want to forward this for fear of offending someone -- YOU ARE PART OF THE PROBLEM! It is time for us grumpy old folk of Britain to speak up!

 

[kinobestew123]

Stolen: How to fix economy

It's an amusing and on face value great idea but when you think about it, it has so many flaws. The main one being imagine all the new slow driving pensioners that would be created!! They'd all be duddering about all day to the shops and back spending their new wealth.

 

[Jambo]

Pretty much, common way of reducing liability.

1) Take a small wage to show tax and NI payments in UK
2) Create off shore companies and use them as billing mechanisms
3) Take loans from off shore companies with no fixed repayment model
4) Take loans in different amounts and variable rates
5) Oddly never pay loans back
6) Dissolve as and when
7) Start again

I simplify but that is basically the process used by many people.

Not sure where you are getting that from. The article suggests that staff are using personal service companies and working as freelancers. There is no mention of offshore companies or loans.

I bet a lot of them genuinely are freelancers too.

All seems a bit blown out of proportion to me.

 

[elmarko]

yep and stupidly high tax free allowance. be it 15k, 20k or whatever. Then a percent that balances. Can get rid of most of the tax office and enforcement and save money on that as well.

You see, assuming the loopholes would be closed & all earned income is taxed at this rate I'd also support this (As it would be better than we have at the moment, also the tax free allowance increase would be a significant benefit to those on the breadline) - coupled with an increase in the minimum wage I'd wager most would be fine with it.

I'm really not a fan of high taxation, I'd prefer to follow a system in which the difference in the wages are lower instead - give people enough for them to afford more & we can reduce the support the state has to provide (then reduce the tax rate with the money saved in welfare).

As I've said before, I don't think the rich should be paying such a high proportion of the tax - not at all, if we had less of a massive void in wages the working classes would be paying a significantly larger portion of the total tax.

 

[Fr0dders]

How has public opinion been so screwed on this. You pay what you have to, no more. It's not morally wrong it's not illegal, all these stories are total hyperbole.
If government isn't happy teen change the laws.

I have no idea !

I knew it was common for the premiership footballers, contractors, celebrities etc.. to have tax avoidance schemes that involved setting themselves up as ltd companies.

It came as no surprise to hear Jimmy Carr was using one.

And yet now all of a sudden because of him its become a major political issue ?

 

[Housey]

Not sure where you are getting that from. The article suggests that staff are using personal service companies and working as freelancers. There is no mention of offshore companies or loans.

I bet a lot of them genuinely are freelancers too.

All seems a bit blown out of proportion to me.

This is a common method of tax reduction, I don't need a newspaper to confirm this. Of course many freelances will simply be limited companies, going direct or through contracting companies but the higher paid people will be doing it off shore as that is how it worked for Carr and others.

 

[Dj_Jestar]

Not sure where you are getting that from. The article suggests that staff are using personal service companies and working as freelancers. There is no mention of offshore companies or loans.

I bet a lot of them genuinely are freelancers too.

All seems a bit blown out of proportion to me.

It's not the same as a personal loan. Here's the official description by HMRC:

http://www.hmrc.gov.uk/ct/managing/director-loan.htm

So basically, Jimmy Carr's bank account is actually his company's bank account, but he will be using it as his own. This means it is a director's loan, and thus the money he has been spending is not liable for income tax.

His company is offshore, so is not liable for UK corporation tax. He (or probably more likely, his accountant) has chosen to register his company in a country that taxes corporations and director's loans very lightly.

 

[realBabelfish]

Stolen:

Also………..
Let's put the pensioners in jail and the criminals in a nursing home.

This way the pensioners would have access to showers, hobbies and walks.

They'd receive unlimited free prescriptions, dental and medical treatment, wheel chairs etc and they'd receive money instead of paying it out.

They would have constant video monitoring, so they could be helped instantly, if they fell, or needed assistance.

Bedding would be washed twice a week, and all clothing would be ironed and returned to them.

A guard would check on them every 20 minutes and bring their meals and snacks to their cell.

They would have family visits in a suite built for that purpose.

They would have access to a library, weight room, spiritual counselling, pool and education.

Simple clothing, shoes, slippers, PJ's and legal aid would be free, on request.

Private, secure rooms for all, with an exercise outdoor yard, with gardens.

Each senior could have a PC a TV radio and daily phone calls.

There would be a board of directors to hear complaints, and the guards would have a code of conduct that would be strictly adhered to.

The criminals would get cold food, be left all alone and unsupervised. Lights off at 8pm, and showers once a week. Live in a tiny room and pay £600.00 per week and have no hope of ever getting out.

prison walks... thats a new one. unless you mean the small courtyard with risk of a shiv by a guy with towel on head (not talking foreign here, they use it to disguise themselves)

pensioners dont get free prescriptions? news to me.

bedding washed twice a week?

meals and snacks brought to cells?

pool? education (only if >1 year for most if any)? library is ****. only books from charity shops that didnt sell

lots of prisons dont even have electricity in cells

guards adhere to scrict guidelines?!?! LMAO.

also, they would be allowed a 1 hour visit per month, or a 1/2 hour a week.

i do agree that a lot of old folks homes are ****, but you paint a very distorted image of prison, that is unlike the general reality.

 

[estebanrey]

If you want to earn a wage without paying anything in income tax become a professional gambler. It's the only 'profession' I know where you can pay absolutely nothing without having to set up a myriad of complicated schemes.

Quite risky though.

 

[Fr0dders]

This is a common method of tax reduction, I don't need a newspaper to confirm this. Of course many freelances will simply be limited companies, going direct or through contracting companies but the higher paid people will be doing it off shore as that is how it worked for Carr and others.

Well yes theres that too, have your company registered in Jersey where there is no corporation tax at all !

 

[KNiVES]

Tax avoidance is legal, you are more than welcome to participate in it yourself.

 

[Floogie]

What makes you think they are not legal? As you even say your self below, they are "exploiting unlegislated gaps that exist". That isn't illegal as far as i'm aware.

There is a legal precedent called the Ramsey principle which states that any introduction of artificial pre-ordained transactions which serve no purpose than to minimise tax liability are unlawful. The problem is as its only a legal principle, and not a legal rule, it doesn't stretch that far. Consequentially the overall aim of the principle can be defeated or not even pursued due to the legal burden it places on the HMRC to pursue a judgement through the courts (even though some tax avoidance schemes meet that criteria as outlined within the principle).

Unlegislated gaps are therefore these lack of judgements or the lack of political will to turn this principle into a broad general anti-avoidance rule (and not like the narrow-focused shambles of a GAAR which the Conservatives propose).

Why must it be done through tax instruments provided by UK law? That's your opinion, which is not shared by many including me. I have no problem with people utilising gaps in legislation. The current legislation says that tax advisors must disclose to the government details of schemes they are promoting. Presumably this has been done for the schemes that the majority of the rich are using.

Just because they are disclosed does not mean they are legal. Often these schemes go uninvestigated or pursued for a legal judgement.

I highly doubt that this is the case if the scheme has been set up and properly administered by a professional firm. The professional firms owe a duty of care to their clients and if the client was found to be falling outside of current legislation then that firm would be liable for the bad advice they gave. As such, the majority of firms are very careful about the approaches they take. As I said above, these schemes are disclosed to the government anyway.

I'm sure PricewaterhouseCoopers and many other accountants that were propogating the schemes in the recruitment industry have that same duty of care. Doesn't mean much in practice though.

I think we have got confused here, I agree that the government has been tightening the tax system and will continue to do so. What I wrote probably wasn't clear enough.

Tightening the tax system in what way? By reducing jobs in HMRC? Making dodgy deals with Swiss banks? Cooking up a daft GAAR rule with pro-avoidance accountancy insiders so narrow in focus it serves to legitimise all schemes that fall outside it?

The best way in my opinion of plugging gaps to begin with is to catch people clearly evading tax, i.e. not paying any at all. This is the biggest challenge.

Except after the deal the Conservatives did with the Swiss banks its obvious they have no desire to chase the most wealthy tax evaders...

 

[Dj_Jestar]

https://en.wikipedia.org/wiki/The_Ramsay_Principle

It's fraudulent Capital Gains reporting to evade (not avoid) capital gains taxation.

In summary, companies that had made substantial capital gains had entered into complex and self-cancelling series of transactions that had generated artificial capital losses, for the purpose of avoiding capital gains tax. The House of Lords decided that where a transaction has pre-arranged artificial steps that serve no commercial purpose other than to save tax, the proper approach is to tax the effect of the transaction as a whole.[1]

 

[Pudney]

I'm sure PricewaterhouseCoopers and many other accountants that were propogating the schemes in the recruitment industry have that same duty of care. Doesn't mean much in practice though.

In fairness (and supporting your post) when firms give the "proposals" to interested parties generally the first thing they should say is "there is a risk that HMRC will attack this and it won't work".

Ba da bing, duty of care issue solved.

 

[Floogie]

https://en.wikipedia.org/wiki/The_Ramsay_Principle

It's fraudulent Capital Gains reporting to evade (not avoid) capital gains taxation.

You missed the best bit directly underneath the paragraph you quoted:

The decision is not limited to capital gains tax, but applies to all forms of direct taxation, and is an important restraint on the ability of taxpayers to engage in creative tax planning.

 

[Dj_Jestar]

Fair play, but it's about tax evasion via fraudulent means, not tax avoidance.