Tax Avoidance = Immoral

[Eric Mc]

Even if a person "chooses" to set up as a ltd co and/or a sole trader, HMRC may not agree that the nature of the relationship between his "business" entity and the people he works for constitutes a proper trading arrangement - hence why they invented IR35 for those who operate through limited companies or partnerships.

I've even had a couple of cases recently where the individual was more or less forced to set up a limited company if they wanted to be engaged - which is pretty ropy behaviour in my eyes. Definitely no choice or options open to the individual there - if they wanted the work.

[turbobloke]

Eric Mc said:

Even if a person "chooses" to set up as a ltd co and/or a sole trader, HMRC may not agree that the nature of the relationship between his "business" entity and the people he works for constitutes a proper trading arrangement - hence why they invented IR35 for those who operate through limited companies or partnerships.

Sure, that's the matter of fact bit that follows the matter of choice bit

Eric Mc said:

I've even had a couple of cases recently where the individual was more or less forced to set up a limited company if they wanted to be engaged - which is pretty ropy behaviour in my eyes. Definitely no choice or options open to the individual there - if they wanted the work.

Definitely dodgy behaviour.

As to choice - like you say it's still there, ultimately.

[Murph7355]

ugofirst said:

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

No, you definitely 100% shouldn't have to move. Ever. The government and public coffers should be used to offer you whatever type of employment you want, under any terms and paying you precisely what you want, exactly where you want it.

However, in the real world the less flexibility you are prepared to offer the market, the more you have to STFU and put up with what is on offer. No matter how much other affluent might be able to do otherwise, or how much you think they are given everything they have on a silver platter.

[Eric Mc]

turbobloke said:

Definitely dodgy behaviour.

As to choice - like you say it's still there, ultimately.

Commonly referred to as "Hobson's Choice".

[jonby]

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.

Agree with most of this but what compounds it even more is that a lot of people who criticise 'tax avoidance' seem to fail to grasp that even for someone wanting to play it 100% completely straight, it is far from straightforward

Supposing you are the owner/manager of an SME that employs say 10-50 staff, turnover is single digit millions and net profit is somewhere between a few hundred thousand and a few mil. So the position that a huge number of UK businesses are in

You have the incredibly difficult position of what to take as salary and what to take as dividend. You will be told the salary should be fair and reflect what a typical salary in the sector is. BUt it's not that straightforward - market info on other people's salaries is often difficult and even then, not necessarily reflective of the extra responsibility of being an owner manager (I know you could argue the divi is what reflects the owner bit but that's not entirely true as you can be a shareholder that does not work in the business and still takes divis)

So you get to the position where you determine that somewhere between 50k & 150k is a fair salary - the rest should be divis. So what do you pay as a salary (divis avoid NI for both employer which is effectively you and employees contribution plus have marginal other tax benefits). £100k is the middle ground but it's very arbitrary. £50k is fair. But does that mean £49,999 is not ? It is quite literally impossible to get to an absolute, exact figure of what is right & what is wrong.

It's easy to see why for most people, once they are in that position, it's difficult to do anything other than 'what you can get away with'. Company cars - what business owner runs their car through the business these days - is that tax avoidance or just being sensible ?

So you start to do OK for yourself and pay money into an ISA - that's a scheme that the govt set up & promote solely on the basis you save tax. So when your accountant tells you a couple of years later, when you are doing even better and have more savings each year than the ISA limit, about a different scheme, that also saves tax, when do you start to say 'no' on moral grounds ? (assuming you are told it is fully legal of course)

This is made even worse in the real world because once you are in that position, you will consider yourself 'one of those' who pay fortunes in tax, massively more than the average person, one of the few that genuinely contribute hugely more than you take out, you will see totally unfair taxes like say business rates and most likely not feel very guilty or morally indefensible about legally saving some tax

It's hard enough to decide what's 'tax avoidance' and what is simply telling the taxman the truth to pay the appropriate level of tax, let alone to start talking about 'avoiding tax is immoral'.

[Eric Mc]

I think most people are fairly comfortable with an individual or a business organising their affairs to minimise their exposure to tax. Even the government will approve of their actions if the taxpayer is embarking on a course of action which they want them to follow, such as -

providing for their own pension
driving an environmentally friendly vehicle
investing in their business
taking on new staff

There are many more actions such as the above which can help reduce an individual's or a business's tax bill.

And all those actions would be encouraged and even lauded by the government,.

What they DON'T like is when the tax avoidance is activated PURELY with a view to minimising tax ESPECIALLY when the transactions undertaken may be so complex and convoluted that it may not be possible to even know what really happened.

It's one of the dilemmas of tax avoidance. The government introduce a tax saving scheme to encourage a certain form of behaviour. the scheme is then exploited to such an extent that it is no longer clear if it is achieving what the government wanted or being used in the manner they envisaged. I've seen quite a few such schemes closed down over the years.

[jonby]

Eric Mc said:

I think most people are fairly comfortable with an individual or a business organising their affairs to minimise their exposure to tax. Even the government will approve of their actions if the taxpayer is embarking on a course of action which they want them to follow, such as -

providing for their own pension
driving an environmentally friendly vehicle
investing in their business
taking on new staff

There are many more actions such as the above which can help reduce an individual's or a business's tax bill.

And all those actions would be encouraged and even lauded by the government,.

What they DON'T like is when the tax avoidance is activated PURELY with a view to minimising tax ESPECIALLY when the transactions undertaken may be so complex and convoluted that it may not be possible to even know what really happened.

It's one of the dilemmas of tax avoidance. The government introduce a tax saving scheme to encourage a certain form of behaviour. the scheme is then exploited to such an extent that it is no longer clear if it is achieving what the government wanted or being used in the manner they envisaged. I've seen quite a few such schemes closed down over the years.

There is plenty that fits into your two extremes (providing for a pension at one end, putting money into a complex scheme which is patently set up for no reason whatsoever but to avoid tax). But people rarely go form just doing the former straight into the latter. They would normally start by doing something in the middle ground, i.e. that's a touch grey, that is tax beneficial which is what makes them look at it in the first place but where saving tax isn't the sole reason. Once you've done that and you then a year or two later look at the more complicated systems, where you should draw the line, legally & morally, can be extremely difficult.

[Corpulent Tosser]

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

I would like to get the same day rate as I am working in my home town and in my own bed every night, but life is not like that, I work away from home for a month at a time, often in stty locations, but that is my choice. Your choice, currently, is to stay in employment in your town.

We all have choices.

[Eric Mc]

jonby said:

There is plenty that fits into your two extremes (providing for a pension at one end, putting money into a complex scheme which is patently set up for no reason whatsoever but to avoid tax). But people rarely go form just doing the former straight into the latter. They would normally start by doing something in the middle ground, i.e. that's a touch grey, that is tax beneficial which is what makes them look at it in the first place but where saving tax isn't the sole reason. Once you've done that and you then a year or two later look at the more complicated systems, where you should draw the line, legally & morally, can be extremely difficult.

That is precisely why HMRC struggles to close even some of the hairiest schemes down.

[iphonedyou]

Corpulent Tosser said:

I would like to get the same day rate as I am working in my home town and in my own bed every night, but life is not like that, I work away from home for a month at a time, often in stty locations, but that is my choice. Your choice, currently, is to stay in employment in your town.

We all have choices.

Exactly. Bloody right it's reasonable to expect a move in town.

I moved from Belfast to London just for another PAYE gig. Many of my colleagues made similar moves. You make sacrifices to get where you want to be.

Entitlement complexes get you nowhere.

[Rovinghawk]

ugofirst said:

I actually agree that Avoidance is immoral

Ever bought duty free?

ugofirst said:

as its only certain sections of society that can get away with it.

In this particular case, only the section that travels outside the EU can get away with it.

[turbobloke]

Rovinghawk said:

ugofirst said:

I actually agree that Avoidance is immoral

Ever bought duty free?

Or had an ISA, etc.

Those types of avoidance which those who oppose avoidance are likely to have used, aren't 'bad' avoidance they're 'good' avoidance. S'obvious

[iphonedyou]

Guam said:

Indeed and lets not mention the good working class types that Work outside of their regular employment for cash in hand, or worse do side jobs during their employers time for cash, or those who get mates to bring fags and booze back from a channel dash saving lots of tax on their ill gotten

The list is endless, but lets focus on the legal means that those who can take advantage do so and pillory them by all means.

Its the stink of hypocrisy that winds me up with these discussions.

Its not just the middle and upper classes who seek to avoid tax at every turn (or even evade it).

Going abroad on Holiday lets bring Aunty Mabel some gin back and 400 smokes shall we.

Plus we are going on holiday sod the allowances and see what we can get away with (that piece of Jewellery bought at the destination just wear it back dear and bin the receipts and the boxes).

Give me a break there is almost no one that hasn't been "at it" to some degree over the years imho!

Or maybe I am just a cynic!

Yeah but rich people, innit. Fair game.

[Eric Mc]

turbobloke said:

Or had an ISA, etc.

Those types of avoidance which those who oppose avoidance are likely to have used, aren't 'bad' avoidance they're 'good' avoidance. S'obvious

And you don't think there is any difference?

[Mrr T]

turbobloke said:

Rovinghawk said:

ugofirst said:

I actually agree that Avoidance is immoral

Ever bought duty free?

Or had an ISA, etc.

Those types of avoidance which those who oppose avoidance are likely to have used, aren't 'bad' avoidance they're 'good' avoidance. S'obvious

I do agree that avoidance is not illegal but I also suggest it can be immoral.

Where there are arrangements which may give rise to a tax benefit there is widely accepted test of primary purpose.

This asks "what is the primary purpose of the scheme". If the primary purpose of the arrangement is commercial and tax benefits are secondary then the scheme is morally justified. If the primary purpose is to reduce tax then it is not.

So if we apply it to say tax relief on pensions payments. The primary purpose is to save for your retirement. Not the tax relief. The same could be said of ISA, Even duty free is never the main purpose of a trip.

The Film Tax Relief scheme was introduced to encourage investment in UK film making. Film making was viewed as risky so the tax benefit helps offset the risk.

Companies set up to manage such investments. Some I am sure where genuinely looking help those investing in film manage the investment in a tax efficient way.

However, a number of others set up investment schemes which looked to minimise the risk to film production but maximise the tax benefits.

I claim no specific knowledge of how the schemes where structured but I I understand they where never marketed as film investment schemes but as tax reduction schemes.

So these schemes are I thing quite different to the other tax reliefs.

I am quite glad when I find the great and good are caught out.

[ellroy]

Mrr T said:

I do agree that avoidance is not illegal but I also suggest it can be immoral.

The Film Tax Relief scheme was introduced to encourage investment in UK film making. Film making was viewed as risky so the tax benefit helps offset the risk.

I am quite glad when I find the great and good are caught out.

I cut the quotes back to the bits that, I feel, matter.

Firstly utter hogwash, morality has nothing to do with tax and my morals may very well be very different to your own. To confuse the two things is a purely political way of making a point to the masses. What gives you the right to question my morals if i've done nothing illegal? Don't like the law? Change it.

Agreed it was introduced to encourage investment, Ingenious, made Avatar, Life of PI etc etc, their problem is that they made too much money they didn't try to cheat the system and HMRC don't like the fact they they're saving as much tax as they did. HMRC in this case being greedy, don't like it? Give guidance to the scheme makers, they've asked enough times for it.

The last point is the telling one really, isn't it? Envy, pure and simple. I find that morally wrong as do most guardians of morality, the Church anyone? Though shalt not covert they neighbours ox ring any bells?

Edited by ellroy on Monday 2nd February 15:47

[turbobloke]

Mrr T said:

turbobloke said:

Rovinghawk said:

ugofirst said:

I actually agree that Avoidance is immoral

Ever bought duty free?

Or had an ISA, etc.

Those types of avoidance which those who oppose avoidance are likely to have used, aren't 'bad' avoidance they're 'good' avoidance. S'obvious

I do agree that avoidance is not illegal but I also suggest it can be immoral.

Where there are arrangements which may give rise to a tax benefit there is widely accepted test of primary purpose.

This asks "what is the primary purpose of the scheme". If the primary purpose of the arrangement is commercial and tax benefits are secondary then the scheme is morally justified. If the primary purpose is to reduce tax then it is not.

According to those who hold that particular perspective perhaps, but the moral perspective in terms of finance and tax clearly isn't singular. To others, with no malign intent, tax is legitimately seen as not a moral issue in itself, so avoidance isn't either. If it's lawful then it's acceptable.

Mrr T said:

I am quite glad when I find the great and good are caught out.

To others, me included, nobody has been caught out, there has merely been a clarification of the position on tax with regard to how arrangements are made. I don't defend people who evade tax and I would expect those participating in avoidance (as almost all people do in one form or another) to abide by final decisions and act accordingly if what was previously a case of avoidance would become evasion if continued. It's purely transactional.

[Mrr T]

ellroy said:

I cut the quotes back to the bits that, I feel, matter.

Firstly utter hogwash, morality has nothing to do with tax and my morals may very well be very different to your own. To confuse the two things is a purely political way of making a point to the masses. What gives you the right to question my morals if i've done nothing illegal? Don't like the law? Change it.

Agreed it was introduced to encourage investment, Ingenious, made Avatar, Life of PI etc etc, their problem is that they made too much money they didn't try to cheat the system and HMRC don't like the fact they they're saving as much tax as they did. HMRC in this case being greedy, don't like it? Give guidance to the scheme makers, they've asked enough times for it.

The last point is the telling one really, isn't it? Envy, pure and simple. I find that morally wrong as do most guardians of morality, the Church anyone? Though shalt not covert they neighbours ox ring any bells?

Edited by ellroy on Monday 2nd February 15:47

I agree morality is not about tax. But tax can be about morals.

If some one comes to you and says I have a scheme which exploits Film Tax Relief, it involves no risk of loss on making a movie but will reduce you tax bill. You have a choice its up to you whether you take it or not.

Since the scheme is only available to the rich it then means the rest of us have to pay more tax.

As far as I am concerned if you take part then do not expect any sympathy if it goes wrong.

As for the position of Ingenious I cannot comment as I do not know. I would say if a movie is successful those who financed the initial development should make a lot on money. If they did I expect HMRC would be quite happy to tax that income and would not be worried about Film Tax relief since its clear the scheme was about making a movie.

The Film Tax schemes which are being challenged normally seem to involve an investment most of which is returned to the investor as a tax free loan, or invested in deposits to pay off the loan, with minimal amounts being invested in movies.

[turbobloke]

Mrr T said:

Since the scheme is only available to the rich it then means the rest of us have to pay more tax.

If that's so then it's therefore available to anyone, simply become rich enough. A similar misunderstanding around bendy 'fairness' considerations relates to multinational companies. If some businesses or onlookers think wider opportunities of various kinds - including taxation options - are available 'only' to multinationals, then get cracking, succeed, expand, become one. Totally fair as it's open to any business to do so.

Perhaps the key issues are talent (individual) and business acumen (corporate) applied in ways that lead to success, and - Who Dares Says - envy.

Also the rest of us don't have to pay more tax, for starters the government could spend less, in keeping with what it receives in tax.

Mrr T said:

As far as I am concerned if you take part then do not expect any sympathy if it goes wrong.

Whoever said that participants expect either sympathy (or the opposite, to be 'fair').

Is there a quote with somebody asking for sympathy?

Not forgiveness, that's for trendy lefty comedian tax avoiders getting bad press and wanting another shot of positive PR.

[jonby]

The Revenue regard the instances highlighted on this page of the thread of being 'immoral' (i.e. where it's done solely for the tax advantage) as being within the letter but not the spirit of the law. They still class as avoidance (therefore legal) but are part of what they are attempting to clamp down on

As others have said, it's difficult to have too much sympathy with those expressing outrage at taxpayers who legally avoid tax when there are others who deliberately break the law through tax evasion by working in the black economy - for instance what percentage of domestic cleaners declare their income ?

I'm sure some will say 'but the tax avoiders are rich and they can afford to pay tax' - I'll contra that with 'rich people using tax avoidance schemes are probably still paying tax that is far more than average, at least they are net contributors AND not breaking the law'. Personally, whilst it will never ever become law, I quite like the idea of a tax cap which is occasionally suggested. I'm not sure any individual should ever pay more than £1 million in any given year in tax (and no, I'm nowhere close so it wouldn't help me)