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Would you tax dodge?
Obviously we now all know what everyone suspected anyway but would you 'exploit' the rules if you could? Sadly I'll never get beyond the realms of PAYE so such options aren't open but I'm not sure if I actually would given I live fairly comfortably on a below average wage and even a couple of hundred quid more a month would let me buy whatever I wanted. If was on 6 figures onwards, other than expensive cars and cycling holidays, I don't know what I'd waste it on.
I suppose you could give some away to charity from what you'd dodged but you're probably doing the nation more good just paying tax. It's all very well people like Hamilton doing charity work but not paying £3m VAT which could have bought a lot of school book, etc.
I've a couple of self-employed mates who do all sorts of dodges. One races motorbikes as a hobby and manages to pull some scam off that involves sponsoring himself to write something off.
If you're new please join in and if you have questions pop them below and the forum regulars will answer as best we can.
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24 comments
Buying stuff as cheap as you can as a consumer is only available to you if the market allows it, you're not 'cheating' anyone. I've just bought a ND filter for my camera - £7 from China, no image quality loss I can see. Same filter with a brand name is £130!!! OK a UK business doesn't get my £130 but they were never going to get my money at those prices so no loss to the UK really.
Price wars seems fairly rare now and it's only really old stock clearances in tech goods that attract massive savings.
THE SHAME OF OWNING AN OLD IPHONE, MUST BUY NEW ONE! Actually that's a bad example as Apple have prices pretty locked down until something really is a piece of shit that they've ruined with slowdown updates.
Re the ebay thing, if you're registered as a business and/or spend a substantial amount of time buying and selling then the profits should be liable for taxation. 'Hobby' businesses were cracked down upon a few years ago and as many as 14,000 people dealing on Etsy, Ebay, Amazon etc were being investigated. One guy had turned over £1.4M worth of stuff over 6 years and was imprisoned for 2 years for avoiding £300k in tax payments.
Recently I was able to see how much stuff I'd sold on Ebay since I first registered back in early 2002, it came to a fair amount which did surprise me to a degree but when I broke it down it kind of made sense.
My brothers old BMW for one, stuff from sorting out partners folks house after they passed away, my hoard of board games, some quite rare, then the bike stuff including 20+ years of hoarding/collecting, a few high end bikes/frames/groupsets and sometimes bits go for silly amounts, you then buy new stuff and discard old. Sometimes that one thing you need for a restoration or require to complete your steed you end up buying the whole bike and need to get shot of the rest, I've done that a fair few times, even picked up a frankenbike at a street 'boot' sale in Calais because it had this fantastic Brooks Pro that was inscribed in French in the seat. Sold the rest of the bike for far more than I paid for the whole lot but had a lovely saddle.
All that said you can sell to circa £11k/yr before captial gains tax kicks in. You can even sell up to 6 motorvehicles per year without having to declare yourself as a trader.
Whilst most avoid tax in one form or another, the vast majority are small fry, when you have multi billion pound organisations and individuals with large estates that push the boundaries and find loopholes that's where the big amounts are to be found. You only have to look at the shady inheritence tax avoidance by the likes of the Duke of Westminster (much of the original wealth retained by the estate because a Labour government folded on the law back in the 70s) to know that there are rules for the rich and rules for the average joe and no government is prepared to act to do anything to change matters/close loopholes on big corps/mega rich individuals but spend inordinate amounts chasing small sums.
Very few people like paying any more than they can get away with.
Hands up who buys their stuff on the internet?
Keep your hands up if you then visit your LBS to have them fettle some of the parts
you have bought online.
My bike shop charge about £40/hour for labour, I have no qualms taking the bike in on the odd occasion when I don't have time/can't be arsed to set up the drivetrain/brakes when I've bought everything elsewhere.
Nothing to do with tax avoidance though.
Avoid or evade, there's a big difference.
Evading is illegal and it's prevalent. Think about the discount for cash your occasionally offered to save the VAT. It's not just a VAT loss, there's the lost income or corporate tax, the top up benefits being paid as income is under declared. As a 1 job, Paye only person I hate this type of evasion.
Occasionally very wealthy people may evade, usually they're just plain stupid, greedy & badly advised. If you're wealthy, you're on hmrc radar and will in all likelihood quietly cough up if caught. I recall HMRC targeting professionals such as doctors, dentists who were forgetting to declare their private practice income.
To avoid tax is fine and the government offer schemes to help with this.. Isa, pensions etc.
People do it all the time on a small scale:
Cash or barter for services (e.g. I fix neighbour's computer, he fettles my bike)
Importing stuff from abroad and hoping it will avoid import duty/VAT (much, much harder these days)
Buy a bike on C2W and never use it to cycle to work (I know people who've bought kids bikes on Cyclescheme...)
Don't declare profits from eBay sales (also rare now that the fees are so high)
etc.
all this is a speck of cosmic dust compared to the galaxy-sized avoidance schemes the ultra-rich use, but if we all did it it would soon mount up.
Paying cash, not declaring the profits and avoiding VAT if regisered are evasion.
Doing something in exchange for another service if neither of you run a business e.g. fixing bikes/computers, whether it is VAT registered or not , isn't either.
That is tax evasion
That is tax evasion
That is tax evasion.
You clearly don't now the difference between evasion and avoidance.
Though neither do some of these people in the schemes, and some caught up in the past haven't been rich it is due to the fact they are temporary workers who have had to work through agencies.
Anyway evasion, like in the examples you gave above, is about breaking the law. Avoidence is doing something the law hasn't stated is illegal.
One reason people get away with large scale tax avoidance is due to the size of the UK tax code. Other countries have smaller tax codes which make it very clear what you can and can't do.
The ebay example isn't, necessarily evasion, not if it's your own used possessions you are flogging off. It depends how long you've had them and whether you bought them with the intention of selling them.
(Seems to me that can be a grey area, depending as it does on what was in the person's head during the transaction, and on whether the state deems it worth the effort of pursuing...though I've always found ebay sales far far more trouble than they are worth - usually better to just give the damn thing away to a charity shop or something).
And I'm not entirely sure the distinction between evasion and avoidance is as clear cut as you imply. One reason people or corporations get away with large-scale avoidance (or is it evasion?) is that if you are rich and powerful enough you can afford better lawyers and accountants than the government can, and the state is grateful for anything you concede to give them so doesn't take a hard line and risk an expensive long-drawn-out fight they might not win.
Unlike for the little guy, who lacks the power to negotiate from a position of strength, so is more likely to be categorised as an 'evader' right from the start.
Edit - though I suppose the little guy can get away with it for the opposite reason - because the sums involved are so tiny it's not worth the state's while to bother with it.
This, and bluebug's point about the complicated tax law, goes a long way to explaining where we are now.
It should be clear-cut, where 'avoidance' is the legal, government-sanctioned stuff; 'evasion' is everything else. 'Avoidance' is tax planning open to everyone; 'evasion' is everything else, and illegal.
But that isn't the case; avoidance or 'avoision' has come to include the grey loopholes. The situation we have is that we have defined the illegal stuff as Evasion, and everything else is not technically illegal: that's all lumped under 'avoidance'. It's bad law.
We had the same thing for legal highs for years; the government constantly chasing the deifnition of chemical compounds (which could change overnight) as illegal, rather than defining what is legal and not worrying about defining 'everything else'. They sorted that, so there is political will at least to clamp down on high kids. Not quite so much to clamp down on aristocrats and oligarchs being above the law.
My point is that most people I know will have done one or more of these things. Same as most people speed, download illegal content online, and so on. Its a national pastime. We're a nation of lawbreakers because the risk of being caught is so small.
Its no different in the corporate world, other than that the numbers are much, much bigger.
I don't!
It's like with Mrs Brown's Boys: it's a travesty. Technically, it might not be illegal - but come on, it should be.
And you know they also funnelled £2m through Mauritius.
feckin boom!
I wouldn't, no. Governments need money to fund infrastructure and help the less well off get by. If you're enterprising, or lucky, enough to be seriously wealthy, man the fuck up, pay tax, and don't be a c*nt. I wouldn't own an Apple product if you held a knife to my throat - how much money do these assholes actually think they need?!
the joy of Apple is that they are sitting on an absolute mountain of cash, in other countries, but don't pay dividends to their shareholders because it would cost too much in tax to repatriate the money. Fucking idiots.
Without tax there is no civilisation. That, of course, is what a lot of tax avoiders want. They would love to be able to do anything they want, without restraint. Until an even bigger shit than them comes along and squashes them.
Pensions and ISAs are legitimate and sound ways of government subsidising saving and future income, in order to offset against future generations being more dependent upon the state, and to encourage saving at a time when personal debt is at pretty frightening levels.
Employing someone whose business model is to understand and exploit tax loopholes is completely different, even if it is technically legal.
A massive part of the problem is that the gamekeepers become poachers and vice-versa. There's a revolving door between consultancies and HMRC, and people who've worked at HMRC and know a bit about the extent of the law can generally make more money exploiting that privately - and many do.
I don't have much to do with HMRC, but I do with the FCA (through banking) and it's similar. There are two main problems with the situation.
1: knowledge and skills necessary to run rings round the regulators and legislators end up in private companies. Result: those skills are exploited by big money, which predictably runs rings round the regulators and legislators.
2: bit more subtle this one: it leads to a dilution of thinking. Banking staff that cut their teeth at the sharp end of deals and, sometimes, running rings round the FCA, join the FCA and dilute that culture. It used to be a bit more 'good guys/bad guys' - there was a bit of a feeling that we, in banking, would push boundaries on behalf of our customers and company (of course there were scrotes who went way beyond), and it was understood that the regulators would try to police it. It's all a lot more collaborative now, with consultations and the FCA often seeming sheepish about imposing regulations, even EU edicts. Result: the overall culture is a bit more grey, when really, it needs to be more black and white.
Example: some of the credit crisis conspiracy theories about Goldman Sachs, the 'vampire squid' getting its tentacles into governments everywhere, that somehow it's a plan. It isn't -
it doesn't need to be. So many people in the US government have worked for Goldman, and even in Europe we have Mario Draghi, Mark Carney, Petros Christodolou, Romano Prodi; in Oz, Malcolm Turnbull. That's just one (admittedly influential) bank.
So, people that share a fairly narrow view of capitalism and the global economy end up in prominent law-making and decision-making positions throughout the world; that view becomes pervasive, which benefits Goldman etc, and the people that should be driving change can't entirely be trusted to see that offshore tax havens are A Bad Thing. Even if the UK were to take a stand, it's going to take a huge cultural shift to counter that view.
Being poor there's no point, being rich you shouldn't.
There are times though where you can see what Jimmy Carr et al are doing. They pay someone to look after their finances and are told they can use their money one way and pay £50k or another and pay £500k, they take the obvious option.
The big problem is looking both forwards and backwards - some say 'fine but if they need an ambulance then don;t send one' - well it doesn't quite work like that and also the likes of Lewis Hamilton will probably have his own jet and off to a private hospital. However, it's all the other stuff, he was probably born in an NHS hospital, schooled on taxpayers money and not to be deliberately controversial his less fortunate brother has potentially benefitted massively.
In short, no I wouldn't dodge it.
David Mitchell sums it up well here https://www.youtube.com/watch?v=xc8epam4NyY
There are shades of tax dodging, I pay into a pension and avoid tax that way, but I wouldn't use some offshore account tax dodge
but your pension may well be invested in ways that are, remember even councils stuffed lots of their spare cash in icelandic banks before the last stockmarket crash because of "better returns". so forgive me for rolling my eyes whenever an MP is wheeled onto tv to complain about tax avosion (its a word look it up
) with their expenses, trust funds and family company share holdings, its every Englishwoman's (and man's), right to avoid paying tax wherever that could be achieved within the boundaries of the law.
If we dont like the outcomes of those tax laws, change or campaign to change them, dont just bleat about the outcome.
and no I dont do gift aid.
Avoision, but yeah, I agree. The laws need a huge reboot.
But morally, it stinks. It is only ever open to the wealthy, those who claim to not need the state. But by being here, or making their fortune here, or raising their kids here, they are taking advantage of a liberal society, with low crime rates and relatively high levels of education, and that is only possible through massive outlay from the state.
Even if you never touch the NHS, or the police, or the fire service, or state schools, that all those state-funded services exist, and are reasonable, serves to make this a safe country to be wealthy in. The wealthy benefit, not least because these services placate the masses to such an extent that they haven't nicked your mansion and stuck your head on a spike. Some threaten to leave, when Labour get in, or when 50% is introduced, but they never do, because they want to stay here, instead of taking their wealth and not using the state in Azerbaijan or Namibia. And keeping 'here' the here they like costs a ton of government money.
Everyone capable should pay their way or fuck off.
(do you do cycle2work?)
Assuming you have savings and investments, would you save via an ISA?
Not much point any more, not since the introduction of the Personal Savings Allowance... saving accounts are now paid gross interest (and you can earn £1k interest tax fee).
https://www.moneysavingexpert.com/savings/personal-savings-allowance
You can combine the PSA with an ISA as well, but if you have that much to invest it can probably be made to work harder for you*.
Edit - footnote: * Work hard, play hard - since the money would be probably be resident on a caribbean island
Are you equating a national government-backed savings vehicle with offshore shell companies which are set up to obfuscate the beneficial owners, to take funding for a particular activity, 'employing' you as an adviser, and making 'investments' and 'loans' based on your 'advice'?
Or maybe Apple funnelling profits via an office where nobody works?
That's the only reason I can think for you mentioning it. That you think it's similar.
It's all very well hypothesising, do I begrudge your self employed mate racing bikes and sponsoring himself? Not really, he's probably just a pixel in the scheme of things.. the 1%'ers will have us all obsessing about each other doing harm when it's only really the 1%'ers who are 99% of the problem.
Capitalism at the ugly end, taking off the many for the benefit of the few.
For balance, I'll add that unless I was in a situation where 'dodging some tax' was an option I don't think it'd be honest of me to sit on a high horse about it. I'd morally know the right thing to do, but I'd probably still run with the loophole and blame the system to justify it. Fixing that is a 'interpretation of the law issue' which means you need to 'spell all the rules out', cross the t's and dot the i's... or it doesn't count = loophole.