Tax Avoidance = Immoral

[Corpulent Tosser]

While the thread titles uses the word avoidance, the article linked is about clamping down on tax evasion, one being legal the other not.

My opinion is that if there are legal methods of avoiding tax which are open to me I will use them, and I do.
Whether it is maximising ISAs, pension contributions, working through my own limited company it is all above board and why would anyone pay more tax than they have to ?

[NicD]

Corpulent Tosser said:

While the thread titles uses the word avoidance, the article linked is about clamping down on tax evasion, one being legal the other not.

My opinion is that if there are legal methods of avoiding tax which are open to me I will use them, and I do.
Whether it is maximising ISAs, pension contributions, working through my own limited company it is all above board and why would anyone pay more tax than they have to ?

Completely agree, but the article is about a scheme the proponents claim is avoidance but is actually (in HMRC's view) evasion. This is rather common and what the shyster lawyers and accountants get paid the big bucks for.

[AstonZagato]

NicD said:

The second post on this thread (page 1) expresses it pretty well

'I don't think you grasp the difference between paying what you owe, and exploiting loopholes that shouldn't exist, but are impossible to eradicate.'

They are possible to eradicate. The government chooses not to because it is interested in promoting a specific behaviour. For instance, it created a tax code to encourage investors in films. This was to help the British film industry.
As usual, the law of unintended consequences takes over and people use it to a far greater extent than they would like.
The government has a few options:

• they can abandon the scheme
• they can tighten the wording of the scheme
• they can resort to the courts to create case law that tightens the scheme
• they can brief against those that use the scheme they created to demonise those who acted rationally and within the law

The government has chosen the last two because it is less embarrassing than admitting that they were incompetent in designing or wording the idea in the first place. It takes less time than cleaning up our ridiculously complex tax code.

It is lazy government and lazy thinking.

Furthermore the people who used these avoidance schemes, failed or not, are not guilty of tax evasion. If they were then jail would beckon. They have interpreted the hugely complex tax code in one way (usually backed by any number of eminent tax QCs) and the tax authorities have interpreted it in another. As long as they pay their tax with back dated interest, the matter is closed.

[Eric Mc]

AstonZagato said:

But the thread is about tax avoidance, which is perfectly legal and moral. It is not about tax evasion which is illegal / immoral - and always has been. The parts of the tax code which allow avoidance are generally created by the government to encourage behaviour that they find important - saving for retirement, increasing savings rates, investing in film production, entrepreneurship etc. Just because someone else takes advantage of them (and someone else does not) does not make them immoral. The quarrel should be with the government which created the tax avoidance possiblity rather than the person exercising their legal right to use it.

As I said earlier, if you push it too far, you get told you have done so and are required to make full restitution including interest. If you haven't pushed it too far than you have only done what the government expected (and presumably) wanted you to do.

And right at the margins where the excessive pushing of margins for wealthy clients it is not always clear whether the pushing has gone too far or not. HMRC will TRY to stop excessive pushing but their track record in actually bringing some of these exotic schemes to an end isn't that good.

[PurpleMoonlight]

Eric Mc said:

HMRC can close down "legal" avoidance schemes - if they can convince the courts that the scheme doesn't really do what the scheme creators thought it would. It doesn't make the scheme illegal, it just means the scheme didn't work.

No one will go to jail having used such a scheme. All they will have to do is pay the tax they thought they had avoided - with interest and possibly penalties.

If HMRC can convince the courts - which doesn't always happen.

Haven't the goalposts moved on this recently?

Now, HMRC can deem a scheme not appropriate and levy tax, and the people in the scheme would need to apply to court to establish that it is.

[NicD]

PurpleMoonlight said:

Haven't the goalposts moved on this recently?

Now, HMRC can deem a scheme not appropriate and levy tax, and the people in the scheme would need to apply to court to establish that it is.

Is that a bit like the over arching Human Rights legislation? Sounds a rather good idea, and fixes some of the drafting problems.

[98elise]

ugofirst said:

I actually agree that Avoidance is immoral as its only certain sections of society that can get away with it.

Do away with PAYE and make everybody Self Employed with the same options to avoid tax as the rich then perhaps it might become a little more palatable.

Of course at that point I suspect other issues will rear their head.

You are completely free to go self employed or set up your own ltd company and start trading. All legal tax avoidance is available to everyone.

Even as PAYE you can pay into a pension scheme, an ISA, take out an off set mortgage etc, all legal avoidance schemes.

PAYE has its own benefits (including access to actual benefits) that self employment doesn't have, its your choice as to what you want to do.

[Eric Mc]

PurpleMoonlight said:

Eric Mc said:

HMRC can close down "legal" avoidance schemes - if they can convince the courts that the scheme doesn't really do what the scheme creators thought it would. It doesn't make the scheme illegal, it just means the scheme didn't work.

No one will go to jail having used such a scheme. All they will have to do is pay the tax they thought they had avoided - with interest and possibly penalties.

If HMRC can convince the courts - which doesn't always happen.

Haven't the goalposts moved on this recently?

Now, HMRC can deem a scheme not appropriate and levy tax, and the people in the scheme would need to apply to court to establish that it is.

HMRC have been moving goalposts in this area for decades. The 1984 Furness V Dawson case was a landmark tax avoidance case and set the scene for the modern approach to such schemes.

[Eric Mc]

98elise said:

You are completely free to go self employed or set up your own ltd company and start trading. All legal tax avoidance is available to everyone.

Even as PAYE you can pay into a pension scheme, an ISA, take out an off set mortgage etc, all legal avoidance schemes.

PAYE has its own benefits (including access to actual benefits) that self employment doesn't have, its your choice as to what you want to do.

1st line in HMRC's guidance on self employment "Being self employed is not a matter of choice, it's a matter of fact"

[NicD]

Eric Mc said:

HMRC have been moving goalposts in this area for decades. The 1984 Furness V Dawson case was a landmark tax avoidance case and set the scene for the modern approach to such schemes.

just Wikied that;

In any case where a predetermined series of transactions contains steps which are only there for the purpose of avoiding tax, the tax is to be calculated on the effect of the composite transaction as a whole.

[ugofirst]

98elise said:

You are completely free to go self employed or set up your own ltd company and start trading. All legal tax avoidance is available to everyone.

No its not. As an employee who's only source of income is working for an employer for 40 hours a week that is deemed by the revenue to be a PAYE situation from which my employer is not allowed to treat me as self employed.

Otherwise I'd turn self-employed tomorrow.

[Corpulent Tosser]

ugofirst said:

98elise said:

You are completely free to go self employed or set up your own ltd company and start trading. All legal tax avoidance is available to everyone.

No its not. As an employee who's only source of income is working for an employer for 40 hours a week that is deemed by the revenue to be a PAYE situation from which my employer is not allowed to treat me as self employed.

Otherwise I'd turn self-employed tomorrow.

But working for an employer 40hrs/week is being employed, if you want to be self employed get yourself a contract position or start a business.

[ugofirst]

Corpulent Tosser said:

ugofirst said:

98elise said:

You are completely free to go self employed or set up your own ltd company and start trading. All legal tax avoidance is available to everyone.

No its not. As an employee who's only source of income is working for an employer for 40 hours a week that is deemed by the revenue to be a PAYE situation from which my employer is not allowed to treat me as self employed.

Otherwise I'd turn self-employed tomorrow.

But working for an employer 40hrs/week is being employed, if you want to be self employed get yourself a contract position or start a business.

Because it's the only game in town.

[Dr Jekyll]

NicD said:

The second post on this thread (page 1) expresses it pretty well

'I don't think you grasp the difference between paying what you owe, and exploiting loopholes that shouldn't exist, but are impossible to eradicate.'

Dead right I don't. How am I supposed to determine what is a 'loophole', or whether or not it 'should' exist.

There are those who argue that tax relief on pension contributions 'shouldn't' exist, does that make pension contributions immoral?

Paying the exact legally determined amount of tax you owe rather than a higher amount the government might prefer is only immoral if you assume that all money morally belongs to the government and we should be grateful for anything they allow us to keep.

[AstonZagato]

Dr Jekyll said:

NicD said:

The second post on this thread (page 1) expresses it pretty well

'I don't think you grasp the difference between paying what you owe, and exploiting loopholes that shouldn't exist, but are impossible to eradicate.'

Dead right I don't. How am I supposed to determine what is a 'loophole', or whether or not it 'should' exist.

There are those who argue that tax relief on pension contributions 'shouldn't' exist, does that make pension contributions immoral?

Paying the exact legally determined amount of tax you owe rather than a higher amount the government might prefer is only immoral if you assume that all money morally belongs to the government and we should be grateful for anything they allow us to keep.

This.

[Corpulent Tosser]

ugofirst said:

Corpulent Tosser said:

ugofirst said:

98elise said:

You are completely free to go self employed or set up your own ltd company and start trading. All legal tax avoidance is available to everyone.

No its not. As an employee who's only source of income is working for an employer for 40 hours a week that is deemed by the revenue to be a PAYE situation from which my employer is not allowed to treat me as self employed.

Otherwise I'd turn self-employed tomorrow.

But working for an employer 40hrs/week is being employed, if you want to be self employed get yourself a contract position or start a business.

Because it's the only game in town.

Then you are stuck as an employee, there are other towns though.

[ugofirst]

Corpulent Tosser said:

ugofirst said:

Corpulent Tosser said:

ugofirst said:

98elise said:

You are completely free to go self employed or set up your own ltd company and start trading. All legal tax avoidance is available to everyone.

No its not. As an employee who's only source of income is working for an employer for 40 hours a week that is deemed by the revenue to be a PAYE situation from which my employer is not allowed to treat me as self employed.

Otherwise I'd turn self-employed tomorrow.

But working for an employer 40hrs/week is being employed, if you want to be self employed get yourself a contract position or start a business.

Because it's the only game in town.

Then you are stuck as an employee, there are other towns though.

Thats the point though. Should I have to move town to get the same 'opportunities' to legally avoid paying tax on my income as the affluent do? Surely what's good for one strata is good for all no?

I'd like to take advantage of my wife's personal (unused) income tax allowance too

[98elise]

ugofirst said:

Corpulent Tosser said:

ugofirst said:

Corpulent Tosser said:

ugofirst said:

98elise said:

You are completely free to go self employed or set up your own ltd company and start trading. All legal tax avoidance is available to everyone.

No its not. As an employee who's only source of income is working for an employer for 40 hours a week that is deemed by the revenue to be a PAYE situation from which my employer is not allowed to treat me as self employed.

Otherwise I'd turn self-employed tomorrow.

But working for an employer 40hrs/week is being employed, if you want to be self employed get yourself a contract position or start a business.

Because it's the only game in town.

Then you are stuck as an employee, there are other towns though.

Thats the point though. Should I have to move town to get the same 'opportunities' to legally avoid paying tax on my income as the affluent do? Surely what's good for one strata is good for all no?

I'd like to take advantage of my wife's personal (unused) income tax allowance too

So are you saying there are no self employed people or ltd companies in your town? It seems like you want the benefits of being an employee AND the benefits of being self employed?

I'm a Ltd Company contractor and for the past 2 years my work has been in Exeter, 200 miles from home. On friday this work finished and now I have no income. There is a thread running in Jobs and Employment where a contractor has been without work for 3 months. I've been in the same position. You take the rough with the smooth.

As I said before, there is nothing stopping you from going out on your own and becoming self employed.

Also just to clarify, avoiding tax doen't mean paying no tax. I pay VAT, Corporation Tax, NI and Income Tax. I can mitigate some tax by paying dividends instead of salary, but both are subject to normal income tax levels of taxation.

[98elise]

Eric Mc said:

98elise said:

You are completely free to go self employed or set up your own ltd company and start trading. All legal tax avoidance is available to everyone.

Even as PAYE you can pay into a pension scheme, an ISA, take out an off set mortgage etc, all legal avoidance schemes.

PAYE has its own benefits (including access to actual benefits) that self employment doesn't have, its your choice as to what you want to do.

1st line in HMRC's guidance on self employment "Being self employed is not a matter of choice, it's a matter of fact"

Agreed, I didn't mean he could opt to do his current job as self employed. He was free to leave and set up as self employed or as a Ltd Company

[turbobloke]

98elise said:

Eric Mc said:

98elise said:

You are completely free to go self employed or set up your own ltd company and start trading. All legal tax avoidance is available to everyone.

Even as PAYE you can pay into a pension scheme, an ISA, take out an off set mortgage etc, all legal avoidance schemes.

PAYE has its own benefits (including access to actual benefits) that self employment doesn't have, its your choice as to what you want to do.

1st line in HMRC's guidance on self employment "Being self employed is not a matter of choice, it's a matter of fact"

Agreed, I didn't mean he could opt to do his current job as self employed. He was free to leave and set up as self employed or as a Ltd Company

Exactly, it's a matter of choice and then fact.