[Finance] If you were given a totally legal way of paying less tax would you take it?

Monkey Man · Nov 7, 2017

Westdene Seagull said:
I'm also sure there's many contractors on here that take dividends from their Ltd companies rather than a high salary to reduce their tax liability.

Well that was the way most of us who run small limited companies have operated from day one but now that we're taxed on those dividends there's not much difference. My personal tax bill (if you include my wife's share) is now almost as big as my corporation tax bill.

Bozza · Nov 7, 2017

Monkey Man said:
Well that was the way most of us who run small limited companies have operated from day one but now that we're taxed on those dividends there's not much difference. My personal tax bill (if you include my wife's share) is now almost as big as my corporation tax bill.

...but less than the obligation if you paid you and you alone a full salary from the company?

Monkey Man · Nov 7, 2017

Bozza said:
...but less than the obligation if you paid you and you alone a full salary from the company?

Apparently not, according to my accountant. My company is "tax efficient" in his words, and there's no benefit to taking one approach rather than the other, which I guess is why the system has been equalised.

Bozza · Nov 7, 2017

Monkey Man said:
Apparently not, according to my accountant. My company is "tax efficient" in his words, and there's no benefit to taking one approach rather than the other, which I guess is why the system has been equalised.

Hmmm. If you're doing any of these you will be paying less tax overall than simply paying yourself a full salary:

- Paying yourself a dividend.
- Paying anyone else (such as your wife) a dividend.
- Paying an extra employee (such as a wife or other relative) a small salary.

Charlies Shinpad · Nov 7, 2017

I’m Ltd Company and pay myself what ever my accountant tells me to pay myself and also I pay 20% Tax and at the end of year get a lump sum back into my business account
My biggest bug bear is VAT which I pay quarterly but even that is a bit of a legal dodge as I charge it at the 20% rate but only pay the VAT man at a rate 16%
I can imagine these big earners make serious money out of the VAT alone

GT49er · Nov 7, 2017

Haven't voted, because there is no all-inclusive yes/no answer - it depends on circumstances..
Would I take out an ISA? - yes, I have.
If I won the lottery, would I look for a way to stash it away in a tax haven? No, I wouldn't.
Would I vote tory because they're promising to lower taxes (even if I believed them)? No, I wouldn't.

Monkey Man · Nov 7, 2017

Bozza said:
Hmmm. If you're doing any of these you will be paying less tax overall than simply paying yourself a full salary:

- Paying yourself a dividend.
- Paying anyone else (such as your wife) a dividend.
- Paying an extra employee (such as a wife or other relative) a small salary.

Yes, I'm sure it works out more favourably overall though in my case I don't think paying my wife a salary would help as she already has an income and even as a part-time nurse she now finds herself in the top tax bracket. If her only salary was coming from my business then maybe it would be different.

The new system is quite hard to adjust to because (in my case) I need to find £11,000 by January for my personal tax. The only way I can raise that is to raid the company, which would be in the form of a dividend, which in turn will escalate next year's personal tax. Not expecting sympathy, but for a company of this size, and with personal finances already under big pressure, it's a lot to bear in one go.

FatSuperman · Nov 7, 2017

This is certainly a tricky subject, and I think most 'decent people' would be somewhere in the middle. However I will restate what I said in the other thread; it is incumbent upon the government to provide tax legislation that is fair and enforceable. I tend to think that they don't re-write the whole thing because it is within their and of course the lobbying groups interest to keep it as it is.

This sort of thing (Paradise papers) has always gone on, the only difference is that in the modern age we can find out about it and be outraged.

Here are some numbers, to perhaps help the perspective on this:
HMRC estimates that in 2013/14, differences in 'legal interpretation' cost it £4.9 billion; unregistered paid work cost it £6.2 billion; organised criminal attacks cost it £5.1 billion; non-payment cost it £4.1 billion; the failure of people to take reasonable care with their tax returns cost it £3.9 billion; and honest errors cost it £2.6 billion.
Looking over the last decade, the overall tax gap appears to be steadily getting smaller. It fell from about 8.4% of all tax owed in 2005/06 to about 6.4% in 2013/14, according to the most recent estimates.

Bulldog · Nov 7, 2017

The question was - If you were given a totally legal way of paying less tax would you take it.

So pointing out that some people do jobs for cash is irrelevant as that is not a totally legal way.

In terms of legal tax reduction, i don't think you can reasonably compare a self employed person, small business owner, that is probably struggling to get by, with the super rich.

I don't doubt that the super rich want you to muddy the water, as it helps them hide behind decent people taking their uniform home to wash for a tax advantage of £1 a week, with their multi million pound dodges.

If the law says claiming expenses for a lunch is the same as setting up a new company to move huge sums of money across countries to avoid tax, are the same thing, then the law sir, is an arse, and more evidence if it were needed that the "rich is there to make the law, the law is there to grind the poor"

Vankleek Hill Seagull · Nov 7, 2017

Thunder Bolt said:
People used to try for babies to be born just before April 5th, so they could claim a whole year's child tax allowance (before it became family allowance). All perfectly legal.

Westdene Seagull said:
My Dad has always blamed me for losing him a load of money by being born a day later than I was meant to ..... on the 6th April !

Guilty as charged. My mother was very happy with me being born on the 5th. :thumbsup:

Chicken Run · Nov 7, 2017

AmexRuislip said:
I think there's people that already do this, those of the Jeremy Kyle culture!

The people on his show are work shy, not tax shy[emoji23]

Simster · Nov 7, 2017

studio150 said:
I find it somewhat comical that a lot of people are saying that they wouldn't go down the route of paying less tax via a completely legal arrangement as they find it morally wrong.

Perhaps you should look at the position of being in the position of being paid a significant amount of money, but that the UK tax regime has returned to the wonderful days of Harold Wilson's Government and a top rate of 98%.
Would you then be willing to say earn £2m a year, but see £1.96m disappear in tax (yes I know the tax would be less given bandings but cant be bothered to work it out)

I would suggest that peoples position would shift completely and they would be looking to mitigate their tax liability as much as possible.

What sort of crap argument is that? We don't have 98% tax NOW and the chances of it ever rising beyond 50-60% again is surely minimal because not enough people would ever vote for it!

seagulls4ever · Nov 7, 2017

Your poll is too simplistic so I can't answer.

Plus, don't the papers reveal that there are instances for legally questionable avoidance?

Bold Seagull · Nov 7, 2017

Jean-Baptiste Colbert, the finance minister of Louis XIV, likened the art of taxation to: "plucking the largest amount of feathers from the goose with the smallest possible amount of hissing".

Tyrone Biggums · Nov 7, 2017

Tax is legalised theft.

Avoid tax wherever possible by any means.

Kaiser_Soze · Nov 7, 2017

The individuals named in the papers are a smoke screen aimed at diverting attention. Lewis Hamilton saved roughly £3.3 million in tax. After the Irish Government closed loopholes in their corporatie tax system, Apple proactively sought to move the financial aspect of their Dublin based arm to a jurisdiction that would allow them to pay less tax, the Isle of Man.

We're getting f****ed by the likes of Apple, Amazon not by individuals like Jimmy Carr, Hamilton and the cast of Mrs Browns Boys.

Official Old Man · Nov 7, 2017

Regarding THAT aircraft.
Lewis claimed back the VAT. Am I missing something here in that all self employed, and I expect he is in some form, claim back VAT on transport. I have a van which I claimed VAT. So an aircraft is a bit bigger but it is the same thing in a way. What they say is he used it for 'social use', in which case a percentage must be repaid.

Thunder Bolt · Nov 7, 2017

studio150 said:
I find it somewhat comical that a lot of people are saying that they wouldn't go down the route of paying less tax via a completely legal arrangement as they find it morally wrong.

Perhaps you should look at the position of being in the position of being paid a significant amount of money, but that the UK tax regime has returned to the wonderful days of Harold Wilson's Government and a top rate of 98%.
Would you then be willing to say earn £2m a year, but see £1.96m disappear in tax (yes I know the tax would be less given bandings but cant be bothered to work it out)

I would suggest that peoples position would shift completely and they would be looking to mitigate their tax liability as much as possible.

Simster said:
What sort of crap argument is that? We don't have 98% tax NOW and the chances of it ever rising beyond 50-60% again is surely minimal because not enough people would ever vote for it!

It was 95% not 98%. Listen to the lyrics of the Beatles song Taxman.

Should 5% appear too small,
Be thankful I don't take it all.

McTavish · Nov 7, 2017

Tyrone Biggums said:
Tax is legalised theft.

Avoid tax wherever possible by any means.

Tax is the best way to finance a civilised society.

Pay your fair share!

(which may not be the same as the least you leaglly can).

DavidinSouthampton · Nov 7, 2017

I remember the good times said:
Regarding THAT aircraft.
Lewis claimed back the VAT. Am I missing something here in that all self employed, and I expect he is in some form, claim back VAT on transport. I have a van which I claimed VAT. So an aircraft is a bit bigger but it is the same thing in a way. What they say is he used it for 'social use', in which case a percentage must be repaid.

I think the point was there was NO EVIDENCE of it being for work use, that it was purely a pleasure/leisure thing. Therefore the full amount of VAT is due.

My son-in-law is a Customs Officer, and used to have a speciality in VAT. It was fascinating once reading his VAT manual and talking to him about it. There was a whole section about VAT on Range Rovers and similar vehicles. They could only be VAT exempt if they had no windows in the back - not "blacked out" but filled in - and if there were no seats in the back. This was purely because so many people had tried to fiddle it, claiming a VAT exemption when the main purpose of the vehicle was personal use.

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