IR35 - HMRC's View

[ASB]

Agree that the tax system is a mess. So many exceptions, and little chance of changing anything except to make more special cases.

I do see NI as a tax, not a charge. The days when it was a form of insurance have long gone. As insurance, it would be right to charge it only on those who might effectively be insured; as a tax, it should be levied on all income, like any other income tax. Or ideally merged into general taxation, which is what was supposed to happen with the Unified Tax System in 1971, but the Tories bottled it.

I agree with you about dividends. A consequence of that is that contractors like us should in general not be having our Ltd Cos pay us dividends, because for most of us it is really income resulting from the work that we do, not profit resulting from having invested funds in a company. But rather than attempt to ban it (IR35) I would prefer to make this form of evasion redundant (no escape from NI).

Well, in terms of NI it is of course in reality just a tax. However there is still some (very minor) ring fencing of certain aspects of it. However it is still the qualifier for certain things. Basic pension entitlement, serps, unemployment benefit. There are probably more. I am not for one moment suggesting that this is where the money raised on NI gets dispersed. But it is still the qualifier.

If one were to amalgamate them into a higher tax (and on current rates if we kept the same banding) one would be looking at rates of approximately 48 and 56 percent then this would surely have to mean that one shouldn't have to work for the state pension for example? It would be somewhat "unfair" otherwise.

I do agree with your comments about dividends - in as much as the fact is one is able to effectively recategorise income as return on investment is plain wrong. However the fact remains that this actually makes little or no difference to the tax take under the current system. It does make a significant difference to the NI take. I would never use the word evasion though. It isn't. I didn't pay much in the way of dividends to myself prior to about 1985. It wasn't in my financial interest to do so. I paid lots afterwards.

It was perhaps unfortunate that I could exploit the system to such an extent, but I was doing nothing wrong; legally, ethically or morally. It is the responsibility of the state to set the system to achieve it's objectives and legislate accordingly. The citizen is entirely free to operate within that system in an open and transparent manner. It is not the responsibility of the citizen to operate in a way they think might just happen to meet the legislatures unspoken unwritten objectives.

It is necessary also to be careful about what constitutes profit from labour. The answer to that is surprisingly simple. It's all profit. Certainly in terms of micro business an ability to reclassify this all as investment income and pay it as dividends is initially absurd. But it is really any different to the profits retained or distributed by large corporate? No. The only difference is who is profiting from whose labour. NI on ALL corporate profits perhaps?

In order to be "fair" a unified tax system must apply wholesale across the board. Anything else would be discriminatory (in much the say way as various aspects of the non unified system are). Of course, a major downside of this is that a huge part of any taxation system is social engineering.

[AnthonyQuinn]

On the contrary, it is quite easy to say that is fair. They need it, you can afford it, why would you say it is not fair to help those in need?

What on earth would be "fair" about rich people keeping all of their wealth when other people are in need? That is unfair. And it's not hard to say so.

OTOH if you think there is no such thing as fairness, you are, I am sorry to say, being either so selfish or so stupid that you have rather forfeited the right to object to a fair system. Just shut up and pay up, in other words.

as i have already said, its not about me.

If someone needs something then its fair that they take it from someone who doesnt need it? So i should just take peoples' second porsches and second homes then, shouldnt I? They surely dont need it.

[Tarquin Farquhar]

as i have already said, its not about me.

If someone needs something then its fair that they take it from someone who doesnt need it? So i should just take peoples' second porsches and second homes then, shouldnt I? They surely dont need it.

If they have two and need only one, but you have none and need one, then yes.

[RockTheBoat]

If they have two and need only one, but you have none and need one, then yes.

Here Joseph have mine

[ASB]

Its difficult to say FAIR. Sound much like Alistair Darling. Why is it FAIR that people, provided with the same opportunity to start with, should pay for the upbringing of children of single parents? Or to bail the government out of the hole it has gotten into?

There are several people (not me) who make over 150000 a year who havent got a penny from the government to set up their businesses. Even though it excludes me, it still makes me furious that Darling could say that its FAIR for them to pay 52% to the government.

The more correct term would be, its the LAW. The government is akin to a mafia and will do what pleases the majority. You pay protection money to be able to do honest business here. Simple.

The guy who is earning 30k contributes (including ERs NI) 10.5k. The guy on 150k 75k.

I struggle to find it fair. I think the principle of contribution is fair; but so is the principle of paying for your own choices. With rights come responsibilities, we seem to have lost track of that. Marx would be proud of us.

[Wanderer]

As for fair, if it's legal then it's fair. Full stop.

If they have a problem with people taking dividends then they should scrap NI and raise income tax. Simple. Fair. No IR35 bulltulip. None of this Employers/Employees NI for one man companies to pay.

But they won't. Because the MPs are all company people who are avoiding tax using LTD companies just like the rest of us.

[malvolio]

I would be happy to pay employee's NI on all of my income but I view it as unfair that I would also have to pay employer's NI.

That's because it's not your income, it's YourCo's. Different person )sic) altogether.

The whole logic of this thread is frankly bollocks. If you can't differentiate between corporate and personal taxation, there is no point in arguing about tax rates, and there is no point at all talking about NICs on divis or any other "levelling" mechanisms.

HTH

[meridian]

And get rid of the stupid upper earnings limit on NICs. It is ridiculous that someone on half a million a year pays a lower rate of NI than I do.

So in the interests of "fairness" is it also ridiculous that s/he pays a higher rate of income tax than you do?

What on earth would be "fair" about rich people keeping all of their wealth when other people are in need? That is unfair. And it's not hard to say so.

If they have two and need only one, but you have none and need one, then yes.

Your true colours are showing here despite your name, Tarquin. That's not fairness, it's communism.

[Tarquin Farquhar]

So in the interests of "fairness" is it also ridiculous that s/he pays a higher rate of income tax than you do?

No, progressive taxation is fair. Those with a higher income can better afford to pay a higher rate of tax. My complaint about NI is that the person with a higher income pays a much lower rate of NI, because of the upper earnings limit.

Your true colours are showing here despite your name, Tarquin. That's not fairness, it's communism.

I'm a Farquhing Tarqser

[ASB]

So in the interests of "fairness" is it also ridiculous that s/he pays a higher rate of income tax than you do?





Your true colours are showing here despite your name, Tarquin. That's not fairness, it's communism.

"for each/to each" was only supposed to happen with Marxs ideologoy after a society had reach that utopian point where labour was no longer actually necessary for it to function. Effectively one was to be rewarded for toiling for increased overall social good. Don't think anybody actually quite got there though.