[News] Loan Charge - another tax avoidance scheme

Papak · Oct 25, 2020

https://www.bbc.co.uk/news/business-54604132

Not heard of this one before reading this article, tbh I have little sympathy for people who do this when it is so obviously morally wrong.

15% deductions from a self employed wage - unlucky...

vegster · Oct 25, 2020

Papak said:
https://www.bbc.co.uk/news/business-54604132

Not heard of this one before reading this article, tbh I have little sympathy for people who do this when it is so obviously morally wrong.

15% deductions from a self employed wage - unlucky...

The companies that tout these schemes seem to making their money though ? I always fall back on the old saying " If it sounds to good to be true, then it usually is "

Papak · Oct 25, 2020

vegster said:
The companies that tout these schemes seem to making their money though ? I always fall back on the old saying " If it sounds to good to be true, then it usually is "

Totally agree, it was something my paternal Grandmother said to me 40 plus years ago and it has stuck and I'm sure kept me out of (at least) some troubles in the past.

beorhthelm · Oct 25, 2020

obvious tax avoidance scheme. this one fell on the side of evasion once HMRC caught up with it, because the loans are not genuine business. pretty sure ive heard of this before with the same amount of 180k owed, because i thought you need to be on a decent salary to be paying that much tax even over 10 years

NooBHA · Oct 25, 2020

This is an Old Scheme and has been closed down for many years.

The guy owes the money so tough shit he has to pay tax which he should have paid years ago.

What is concerning in that Article is Ian Duncan Smith claiming that his Constituents who are affected by thi. That HMRC should not be going after them but should be going after the Administrators of the Scheme.

What sort of deferent would that be to individuals not to enter into them. That would be like saying. Even if you get caught avoiding tax there will be no consequences. Once you do that everyone would be taking the chance hoping not to get caught.

Doesn't surprise me about Ian Duncan Smith though.

Arthritic Toe · Oct 25, 2020

I used to be a contractor and the agent I worked through tried very hard to push me into one of these schemes. They were obviously on a commission and they made it sound like the only way I could take the job was to work through the scheme. I do therefore have some sympathy with those who were drawn in. In my case, I stood firm and told them I worked through my UK limited company, using a trusted accountant who followed the rules. I had been doing this for years and wasnt going to change - take it or leave it. They took it.

With all things tax related, the buck stops with you and the guys who set up these schemes are doing so at no risk to themselves.

vegster · Oct 25, 2020

beorhthelm said:
obvious tax avoidance scheme. this one fell on the side of evasion once HMRC caught up with it, because the loans are not genuine business. pretty sure ive heard of this before with the same amount of 180k owed, because i thought you need to be on a decent salary to be paying that much tax even over 10 years

Sounds a bit like the old Jimmy Carr tax dodge.

Weststander · Oct 25, 2020

About 5 or more years ago I had clients (making big profits) who’d received bumph and persuasive communications from the promoters of these schemes.

With little knowledge of the ins and outs of these schemes, I got the giste and simply said don’t do it.

It’s immoral, risky and now proven to be not legal.

My clients didn’t sign up, instead paying their full whack of tax.

As with the tax avoidance contrived film industry schemes, hard lines I’m afraid. The punters signing up were on far more money than most of us will ever enjoy, yet thought netting just c.60% of a great deal wasn’t acceptable.

Weststander · Oct 25, 2020

Arthritic Toe said:
I used to be a contractor and the agent I worked through tried very hard to push me into one of these schemes. They were obviously on a commission and they made it sound like the only way I could take the job was to work through the scheme. I do therefore have some sympathy with those who were drawn in. In my case, I stood firm and told them I worked through my UK limited company, using a trusted accountant who followed the rules. I had been doing this for years and wasnt going to change - take it or leave it. They took it.

With all things tax related, the buck stops with you and the guys who set up these schemes are doing so at no risk to themselves.

No risk .... and big profits.

Weststander · Oct 25, 2020

NooBHA said:
This is an Old Scheme and has been closed down for many years.

The guy owes the money so tough shit he has to pay tax which he should have paid years ago.

What is concerning in that Article is Ian Duncan Smith claiming that his Constituents who are affected by thi. That HMRC should not be going after them but should be going after the Administrators of the Scheme.

What sort of deferent would that be to individuals not to enter into them. That would be like saying. Even if you get caught avoiding tax there will be no consequences. Once you do that everyone would be taking the chance hoping not to get caught.

Doesn't surprise me about Ian Duncan Smith though.

I’m not an archetypal NSC Tory hater, but have always despised the snake like IDS. Comes across as an arrogant wnkr.

vegster · Oct 25, 2020

Weststander said:
About 5 or more years ago I had clients (making big profits) who’d received bumph and persuasive communications from the promoters of these schemes.

With little knowledge of the ins and outs of these schemes, I got the giste and simply said don’t do it.

It’s immoral, risky and now proven to be not legal.

My clients didn’t sign up, instead paying their full whack of tax.

As with the tax avoidance contrived film industry schemes, hard lines I’m afraid. The punters signing up were on far more money than most of us will ever enjoy, yet thought netting just c.60% of a great deal wasn’t acceptable.

It's incredibly sad that those with the potential to earn fortunes don't have the moral code to accept they have been blessed by their combination of luck and hard work. One of the directors at my store ( who have been pleading poverty all through Covid-19 lockdown ) turned up in a state of the art electric Mercedes last week. I looked at it and realised that I would never ever afford to own that car even in 10 years time when its second or third hand and that I will have to put up with my 6 year old Hyundai i20 for another 3-4 years at least. Still, I pay my miserly small tax and know its going to keep the country going... just.

vegster · Oct 25, 2020

NooBHA said:
This is an Old Scheme and has been closed down for many years.

The guy owes the money so tough shit he has to pay tax which he should have paid years ago.

What is concerning in that Article is Ian Duncan Smith claiming that his Constituents who are affected by thi. That HMRC should not be going after them but should be going after the Administrators of the Scheme.

What sort of deferent would that be to individuals not to enter into them. That would be like saying. Even if you get caught avoiding tax there will be no consequences. Once you do that everyone would be taking the chance hoping not to get caught.

Doesn't surprise me about Ian Duncan Smith though.

Bad move by IDS, he will get slapped down by his fellow Tories. If you go after the administrators of this scheme you don't know where that may lead, that could quickly elevate the investigation to the level where they might be banging on the doors of KPMG, E&Y, Deloitte and PwC !

warmleyseagull · Oct 25, 2020

Slight sympathy with some as they were duped into believing the hype they were mis sold by bandwagon agents, but it is the old adage that: "if it sounds too good to be true, then it probably is."

Others thought they were on to a good thing, saved nothing 'just in case' the advice they were given was BS, and now paying for it. Just as they get no help from furlough. Good; I for one am pleased that putting my employees on PAYE, and paying my taxes without resorting to dividends, has paid off. Smug? Yup.

Baldseagull · Oct 25, 2020

Papak said:
https://www.bbc.co.uk/news/business-54604132

Not heard of this one before reading this article, tbh I have little sympathy for people who do this when it is so obviously morally wrong.

15% deductions from a self employed wage - unlucky...

There is no moral wrong in trying to minimise your tax liability, the moral wrong is in the system that allows certain ways to do it that have no benefit to the country in any other way. Do you have an ISA?

Baldseagull · Oct 25, 2020

warmleyseagull said:
Slight sympathy with some as they were duped into believing the hype they were mis sold by bandwagon agents, but it is the old adage that: "if it sounds too good to be true, then it probably is."

Others thought they were on to a good thing, saved nothing 'just in case' the advice they were given was BS, and now paying for it. Just as they get no help from furlough. Good; I for one am pleased that putting my employees on PAYE, and paying my taxes without resorting to dividends, has paid off. Smug? Yup.

If you have a limited company and take dividends, you can only do so from profits, which will have corporation tax applied, at 19% (until April this year when it dropped 1%) and after your personal dividend allowance of £2000, you will pay dividend tax at 7.5% basic rate, and 32.5% higher rate on that.
Any tax savings are marginal, it isn't a massive tax avoidance method, but can be slightly more efficient, not really deserving of being left unsupported.

beorhthelm · Oct 25, 2020

Baldseagull said:
If you have a limited company and take dividends, you can only do so from profits, which will have corporation tax applied, at 19% (until April this year when it dropped 1%) and after your personal dividend allowance of £2000, you will pay dividend tax at 7.5% basic rate, and 32.5% higher rate on that.
Any tax savings are marginal, it isn't a massive tax avoidance method, but can be slightly more efficient, not really deserving of being left unsupported.

then why do it? you've missed out NI, thats one reason. as someone who supports anyones right to be efficient on tax, i think we should recognise the govenment's right to be efficient with support. the bottom line is government cant differentiate between efficent personal business and regular business, and i dont think anyone thinks will can write an open cheque for all business missed profits.

Hu_Camus · Oct 25, 2020

I can't be the only one who wonders about the madness of the big four Advising HRMC to draw up tax legislation, and selling avoidance schemes to undermine the effort to collect said tax total.
I know its not black and white, but it feels like we've gone through the looking glass, sometimes

Wardy's twin · Oct 25, 2020

Weststander said:
I’m not an archetypal NSC Tory hater, but have always despised the snake like IDS. Comes across as an arrogant wnkr.

that's because he is one

nwgull · Oct 25, 2020

Baldseagull said:
If you have a limited company and take dividends, you can only do so from profits, which will have corporation tax applied, at 19% (until April this year when it dropped 1%) and after your personal dividend allowance of £2000, you will pay dividend tax at 7.5% basic rate, and 32.5% higher rate on that.
Any tax savings are marginal, it isn't a massive tax avoidance method, but can be slightly more efficient, not really deserving of being left unsupported.

Corporation tax is still at 19%, for this year and next.

Savings are a bit more than marginal. I make it 7.3% extra net when paying in divs due to NI avoidance (in higher rate margin). Another advantage is that income has already been taxed at 19% when calculating the thresholds, which is particularly advantageous at the 100K threshold.

Baldseagull · Oct 25, 2020

beorhthelm said:
then why do it? you've missed out NI, thats one reason. as someone who supports anyones right to be efficient on tax, i think we should recognise the govenment's right to be efficient with support. the bottom line is government cant differentiate between efficent personal business and regular business, and i dont think anyone thinks will can write an open cheque for all business missed profits.

Because it can be slightly more efficient, and more flexible for businesses that don't have consistent profits throughout the year, or from year to year.
I agree that we can't just replace profits for all, I am just saying I don't get a sense of "serves them right" towards people that are struggling now because of the way they arranged to receive remuneration from their business, and I think those that feel smug about being supported whilst others are not should maybe be a bit less so.

Some Directors pay themselves an annual salary but only actually pay that in one go, in one month, those that paid their annual salary in the right month were able to claim 80% of that as furlough payments for the furloughed months, with some effectively getting almost 5 times their annual salary paid for 6 months of furlough. This is not efficient support from the treasury. Some self employed people were marginally affected and some have been massively affected, but both get the same level of support, room for greater efficiency there too.

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[News] Loan Charge - another tax avoidance scheme

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