Request for Action

[tim123]

The issue is that they are now deliberately legislating to tax those that followed their advice. It's kind of like them giving everyone free cigarettes for years, getting them addicted, and then taxing them heavily.

Don't be silly, that analogy doesn't stand up for 5 micro seconds.

So you got a tax break last year that you don't get this year.

You didn't do anything special to get that break (you have the company because you wanted Limited Liability and a wrapper for any IPR that you own), so you don't need to undo anything now that the break no longer exists.

And yet, if they divorce, they are entitled to an equal split. And if they sell the company, they can pool their tax allowances to lower the tax burden, but you can't share it when you run the business.

But you ignored the question once again.

This arguement ONLY applies to couples that have incorported. So it goes nowhere in answering, why should incorporated and unincorporated couples be treated differently?

tim

[ASB]

You're right - married couples should be allowed to pool their tax allowances. Then there's no loophole for people to exploit - everyone can do it regardless of their employment status or source of income. I'd even extend that further - each person can pool their tax allowance with one person that they nominate. Dead easy, no loopholes.

Of course, this used to be the case. I can't remember when it changed but it used to be that a couples income was taxed jointly. They didn't get two sets of allowance though, there was a married couples allowance which was approximately half of the single persons. The problem with this was it pushed couples into higher tax bands more easily (and there were many more bands then).

It does seem to me as though a couple ought to be taxed together, on the basis that they get twice the allowance, and importantly twice the basic rate band etc.

I pay a lot of 40% tax - a penalty for being in a reasonably well paid job of course - my wife has plenty of "spare" basic rate. We ought, in my view be able to utilise this. It would need some tinkering with rates of course, but would largely get rid of the ludicrous situation we have where you can still claim benefits in the form of tax credit up to a *household* income of approximately 60k (i.e. 90% of households).

Given most benefits are means tested on household income it seem "only fair" that households should be taxed on the same basis.

Not likely to happen of course, since that removes a large layer of state control.

[ASB]

This arguement ONLY applies to couples that have incorported. So it goes nowhere in answering, why should incorporated and unincorporated couples be treated differently?

tim

It's really simple. They shouldn't be.

[tim123]

There are two simple answers actually - bin S134c so we can operate as sole traders and so sit inside a known, acceptable taxation framework and raise the zero band tax rate to £12k.

Except that people grossing over 100K wouldn't become SE, because with income splitting and payment via dividends not attracting NI it is ALWAYS better to be incorporated.

All accountants advise their SE clients that they would be financially better off incorporating once their income has sustained a certain level, as it would be professionally negligent of them not to do so. IIRC that figure is under 60K, so it's a no brainer for someone on 100K.

tim

[TheFaQQer]

Don't be silly, that analogy doesn't stand up for 5 micro seconds.

So you got a tax break last year that you don't get this year.

You didn't do anything special to get that break (you have the company because you wanted Limited Liability and a wrapper for any IPR that you own), so you don't need to undo anything now that the break no longer exists.

I disagree with it being a tax break that they are taking away. A tax break implies that this is something that is straightforward to deal with - the new legislation means that those impacted need to either give their shares back to the business, or sell them on, or otherwise change the structure of the business. This is not as easy as a "you used to get a married persons allowance, now you don't" changing of the tax breaks.

But you ignored the question once again.

This arguement ONLY applies to couples that have incorported. So it goes nowhere in answering, why should incorporated and unincorporated couples be treated differently?

I don't think they should be treated differently. They should be treated the same. And the best way to do that is to allow them to pool their allowances, as they can under CGT rules. Why can I pool it under CGT but not under income tax?

[tim123]

I disagree with it being a tax break that they are taking away. A tax break implies that this is something that is straightforward to deal with - the new legislation means that those impacted need to either give their shares back to the business, or sell them on, or otherwise change the structure of the business. This is not as easy as a "you used to get a married persons allowance, now you don't" changing of the tax breaks.
?

But they are changing the rule in a way that you don't need to do anything structural to your comapny. The spouse can keep the shares and be distributed a divident with the new rule will calculating the tax as if this wasn't the case.

I don't think they should be treated differently. They should be treated the same. And the best way to do that is to allow them to pool their allowances, as they can under CGT rules. Why can I pool it under CGT but not under income tax?

I don't disagree with you. I only disagree with focusing the problem with this legislation as an attack on family taxation.

tim

[hugebrain]

Nobody really objects to paying taxes as long as they are paying them on the same basis as everyone else in the same position.

I do. Communist retard.

[malvolio]

This arguement ONLY applies to couples that have incorported. So it goes nowhere in answering, why should incorporated and unincorporated couples be treated differently?

tim

Just going back to that point, at the time I set my company up my other half was sharing the same level of financial risk that I was; that I wouldn't make any money at it and the house went if I got it wrong. You can't separate a couple in the same way that you can a commercial partnership in terms of risk, so why not in terms of reward?

[ratewhore]

The problem with simplifying the tax system is that it will then need less staff to run. Less staff to run mean less people with a direct dependency on maintaining NL in govt.

So no chance will they do it as it messes up their plans to make the majority of the country dependent on their policies...

[Ardesco]

So that's the old, "The rule was like this 15 years ago so it can't be changed now" line. Sorry. governments are entitled to change their mind, there's no statute or case law that says they can't.

In any case, the critical point is that this form of incoming shifting is only available to couples who "incorporate". The SE person can't income share with their spouse, the employed person can't income share with their spouse.

The moral argument that needs a reply is not "why should couples be allowed to income shift", it is "why should this tax break only be available to those people who package their employment up in an incorporated company when it is not available to couples that don't"?

And please don't give me the guff about the spouse sharing the risk. In any family unit where only one person works, and that person works in a high risk job, the spouse shares the risk of the partner failing at that job and the whole family having no income.

There are probably a million or more couples out there taking a similar risk to a contracting couple who have no possibility of income sharing to mitigate that risk. ISTM that the risks of being a contractor, where you are placed in assignments using agency contacts, is far far lower than the risk taken by someone entering Self Employment where they have to find their own work, or a person being promoted to a sales role for the first time.

tim

I don't deny that they can change rules, but this change has come across as a spiteful knee jerk reaction to the Arctic Systems loss where the court proved that the government had got it wrong.

My wife spends a large amount of time on my business doing invoices and accounts and supporting plan B and C. Unfortunately Plan B and C aren't bringing in anywhere near what I bring in through contracting at the moment. I am now going to be penalised for paying my wife because of this. My wife has invested as much time, money and effort into my company as I have, yet if I pay her a dividend this is now going to be classified as my earnings and taxed accordingly. How is this fair?

The big issues that I have is that income shifting legislation is going to affect me even though my wife is doing valuable work for my company, if she didn't do it I would not have time to run Plan B and Plan C as well (or if I could the service would be tulipe because I wouldn't have enough time in the day to do everything that needs to be done).

I also firmly believe that as a married couple you should be able to join together your tax allowances and take full advantage of them. Look at the number of single parent families and families where the parents are not married at the moment. Tax breaks to encourage the family unit can only be a good thing IMHO!