Income Shifting Consultation Document

[Troll]

No, there is a set process by which they publish a raft and invite commetns, the comments are assessed and agreed, and are then incorporated into the final draft that will go to Parliament.

However, if you work through the timelines on this one, they have issued it at the last possible moment to meet the 90 day requirment for consultation, and have left effectively no time to discuss and effect any other ideas. Hence PCG and others are adamant that this should not form part of the April 2008 Finance Act since it is a blatant attempt to subvert the Arctic judgement to address an issue that doesn't actually exist (that it is 'unfair' that couples who own a business might jointly prosper from that business when non-couples may not) and that is is drafted in such a way that it cannot be applied, fairly administered or tried in a court of law.

That, incidentally, is a good example of why I push the PCG. Depsite some people's perceptions, it's nothing to do with market share in respect of insurances and IR35, it's all about having the power, authority and presence to represent individuals who would otherwise have no voice.

Fair enough - but the comment "is drafted in such a way that it cannot be applied, fairly administered or tried in a court of law." if you input into the consultation process do you expect to mitigate any of these points ?

Would a better approach be to avoid inputing altogether knowing that the outcome will be full of holes and unenforceable?

[malvolio]

Fair enough - but the comment "is drafted in such a way that it cannot be applied, fairly administered or tried in a court of law." if you input into the consultation process do you expect to mitigate any of these points ?

Would a better approach be to avoid inputing altogether knowing that the outcome will be full of holes and unenforceable?

The basic idea of consultation is to see if the proposal is workable and addresses the issue properly. This one doesn't, since it makes too many assumptions. The concern is that if the logic if the proposal is moved into legislation, it will have so many get-out clauses and subjective assessments - intended to limit the impact to IT Freelances and similar while leaving the average corner-shop owners and plumbers alone (why??) - that every man and his dog would be able to find some kind of escape clause.

This one is a bit of a one-off example of HMG stupidity, but the process is intended both to agree the proposal and define the application of it. This draft doesn't even get close, even if you agree with the basic premise, which nobody outside the Treasury and Gorgon's luncheon club does: hell, even the BBC are being critical of it...

[tim123]

I know that this is not a popular view, but all I see here is Turkeys voting against Christmas and making up spurious reasons why it should be abolished.

The PCG spent 500,000 GBP learning the lessons that (a) the government have the right to change tax legislation and (b) that legislation can be framed to target specific groups provided that it doesn't breach EU laws on competition. I think they are in danger of forgetting this lesson

Arguments such as "it is ambiguous" count for nothing, especially as by the very nature of what this is trying to do, there is bound to be ambiguity that needs to be 'assessed' on an individual basis, arbitrated by the courts if necessary. That IS how the legal system works in this type of case. However you redraft this, that "case by case" assessment is always going to be necessary and attacking it on that ground is going to (rightly IMHO) fall on deaf ears.

I've read the summary of the rules and ISTM that they are reasonably simple and concise. The fact that to operate them you (may) have to 'value' the input of each of the parties is something that is never ever going to be solved in statute. You just have to live with this.

I can see that there are arguments against these rules at the commercial level (which I think we all know that politically, NL couldn't give a toss about), but I can't see any at the legal level (With the possible exception that the actual drafting, which I didn't read, does not match the summary. But if this is the case, I don't think that it is the sort of subject that this board would really be interested in at this point).

And I see nothing in the rules that makes the jobbing plumber exempt.

And before people come up with spurious accusations.
1) I am a contractor.
2) I have never voted for Labour.

tim

[malvolio]

I know that this is not a popular view, but all I see here is Turkeys voting against Christmas and making up spurious reasons why it should be abolished.

The PCG spent 500,000 GBP learning the lessons that (a) the government have the right to change tax legislation and (b) that legislation can be framed to target specific groups provided that it doesn't breach EU laws on competition. I think they are in danger of forgetting this lesson

Arguments such as "it is ambiguous" count for nothing, especially as by the very nature of what this is trying to do, there is bound to be ambiguity that needs to be 'assessed' on an individual basis, arbitrated by the courts if necessary. That IS how the legal system works in this type of case. However you redraft this, that "case by case" assessment is always going to be necessary and attacking it on that ground is going to (rightly IMHO) fall on deaf ears.

I've read the summary of the rules and ISTM that they are reasonably simple and concise. The fact that to operate them you (may) have to 'value' the input of each of the parties is something that is never ever going to be solved in statute. You just have to live with this.

I can see that there are arguments against these rules at the commercial level (which I think we all know that politically, NL couldn't give a toss about), but I can't see any at the legal level (With the possible exception that the actual drafting, which I didn't read, does not match the summary. But if this is the case, I don't think that it is the sort of subject that this board would really be interested in at this point).

And I see nothing in the rules that makes the jobbing plumber exempt.

And before people come up with spurious accusations.
1) I am a contractor.
2) I have never voted for Labour.

tim

The PCG are fogetting any lessons. Perhaps you should read the draft. For one random example, on page 4, comparing "self-employed" against "limited company", the clear inference is that the "profit" for the former is taxed while that for the latter isn't. The minor detail that CT will have been paid is ignored. This whole paper contains such "errors", so we have to conclude they can't make the case for change without lying about the need.

Your view is not wrong, merely misinformed. If HMG want to penalise couples this is not the way to do it. Sadly, the right way to do it will alienate various sections of society to some extent, and since the target is potenially 1 in 7 of the working population (by HMG's own figures) simple, global rules won't work politically.

This is knee-jerk politics at its worst.

[WotNxt]

Lol

Page 8 Box 1.1

Funny how they conveniently leave out the fact that the company will be paying a large slice of tax on the profits!

Not sure what the current rate is for small companies but when I last calculated one of these it was 20% and so on £60,000 profit:

Corporation Tax = £60000 x 0.2 = £12000

So the actual amounts received by the shareholders would be £24000 easch and not £30000 as stated in the example.

And this is a classic: "If Nina had paid all of the dividends to herself, ..."

Errm ... she cannot do that!

What a bunch of SHEISTERS!

[tim123]

The PCG are fogetting any lessons. Perhaps you should read the draft. For one random example, on page 4, comparing "self-employed" against "limited company", the clear inference is that the "profit" for the former is taxed while that for the latter isn't. The minor detail that CT will have been paid is ignored. ..

You will have to identify the example in a clearer way but I think the point that HMRT are coming from is the view that it has not been 'fully' taxed. In the hands of the SE person, paying tax at the higher rate (if required) is automatic, but if income is distributed as dividend only the lower rate is automatically accounted for.

If this (IMHO purely grammatical) point is corrected your concern will disappear, so I don't see how you can use it as a way of trashing the whole proposal.

Whether or not you think that you should be expected to be paying HR tax on this distribution is irrelevant to the consultation, because the point of this change is to make sure that you DO.

Your view is not wrong, merely misinformed. If HMG want to penalise couples this is not the way to do it. Sadly, the right way to do it will alienate various sections of society to some extent,

They are not penalising couples. They are penalising couples who incorporate (or partnership) a business. Their intention is that couples who do this should be taxed on the same basis that other couples are. Normal employed people cannot income share with a spouse to create a tax saving, individually SE people cannot income share with their spouse to create a tax saving, so the argument is "why should people who incorporate/partnership be able to do so". I for one, struggle to see that there is an answer to to this that doesn't have "but there there are employed couples who do/need this" as a response.

and since the target is potenially 1 in 7 of the working population (by HMG's own figures) simple, global rules won't work politically

I don't know where you found that figure. I saw a number of 65,000 which is approx 1 in 300 of the working population. Perhaps it's 1 in 7 of small (one man) companies you meant?

tim

[tim123]

Page 8 Box 1.1

Funny how they conveniently leave out the fact that the company will be paying a large slice of tax on the profits!

Not sure what the current rate is for small companies but when I last calculated one of these it was 20% and so on £60,000 profit:

Corporation Tax = £60000 x 0.2 = £12000

So the actual amounts received by the shareholders would be £24000 easch and not £30000 as stated in the example.

And this is a classic: "If Nina had paid all of the dividends to herself, ..."

Errm ... she cannot do that!

What a bunch of SHEISTERS!

They are referring to pre-tax amounts, which is the correct way of referring to dividends. Once again, this is a grammetical isssue.

tim

[WotNxt]

They are referring to pre-tax amounts, which is the correct way of referring to dividends. Once again, this is a grammetical isssue.

tim

This is not a grammatical issue at all. It is an issue of conveniently leaving out the corporation tax that is paid in the first scenario which would put a politically inconvenient perspective on the other two scenarios. It is a political issue.

Political motivations are the biggest driver in this rather than fiscal ones.

I don't see HMG making large corporations pay the "right" or "fair" amount of tax. Why is that?

[NotAllThere]

They are not penalising couples. They are penalising couples who incorporate (or partnership) a business. Their intention is that couples who do this should be taxed on the same basis that other couples are. Normal employed people cannot income share with a spouse to create a tax saving...

Sometimes, I have this dream that one day a disparity such as this will be solved by reducing the tax burden on the "normal".

In many european countries, it is the economic unit (i.e. family) that is taxed. Somehow, their taxation system bears the strain. Why did people support the "principle of independent taxation".?

fairer == more tax.

[malvolio]

They are referring to pre-tax amounts, which is the correct way of referring to dividends. Once again, this is a grammetical isssue.

tim

Oh come off it, please. Do you pay as much tax as you possibly can as a matter of principle? Because that is what the intent of NL's whole fiscal policy is based on - they haven't got enough income to pay for their wasteful and pointless programmes, they're running out of borrowing so they need more tax. Fairness and social equality are sod all to do with it.

As for your earlier point about changing inconvenient laws, then fine, they can do so. There is a due process which they are pretending to follow. As usual, they will ignore the incovenient bits of the law (that they passed) when necessary, in this case that the consultation from all sides including HM Opposition, is saying the proposal is unfair and unworkable in practice. We really don't want another five years argument and court cases to make it work, we want simplicity.