The moral debate is an interesting one. Back when I was more naive, on the recommendation of a friend I used an EBT scheme for a few months before seeing the light (largely thanks to this board) and switching to running a Ltd. My bad, I should have done my research and I regret going near the EBT scheme, both because I now have the nagging worry that it might retrospectively be made illegal and land me with a manageable but highly inconvenient tax bill, but also from a moral point of view - looking back it WAS wrong to try and pay virtually no tax.
The trouble is, it's easy to use morality to categorise the extremes of behaviour - i.e. EBT/Offshore = morally wrong, full PAYE = morally right. But when it comes to the finer shades, with everyone's morality tuned by different inputs it's impossible to have everyone draw the line in the same place, and that's where the laws come in to play. You and I may differ in opinion when it comes to whether it's morally acceptable to have a husband/wife owning 50% of the shares, whether it's ok to claim a training course as a tax deductible expense, and so on, but neither of us have the authority to impose their views on others - that's where the law comes in.
Another point on morality - IR35 is there (theoretically) to stop the 'morally unacceptable' behaviour of disguised employment. But, from a moral perspective, even if a contractor is operating inside IR35, why should they pay more tax than, say a shopkeeper who has had the same shop, the same stock, the same customers, the same repeat business, for 20 years? Why should the shopkeeper be fully entitled to operate a Ltd and take advantage of paying a small wage and taking the rest as dividends, but the contractor isn't allowed to? In my mind, the shopkeeper is more of a disguised employee, has less risk, and more future certainty than a contractor that has to find new work every six months, in varying locations, at varying rates, and with little certainty.
I'm not saying shopkeepers should be considered targets for IR35 investigations, just that morality is a difficult yardstick to use in matters like this.
The trouble is, it's easy to use morality to categorise the extremes of behaviour - i.e. EBT/Offshore = morally wrong, full PAYE = morally right. But when it comes to the finer shades, with everyone's morality tuned by different inputs it's impossible to have everyone draw the line in the same place, and that's where the laws come in to play. You and I may differ in opinion when it comes to whether it's morally acceptable to have a husband/wife owning 50% of the shares, whether it's ok to claim a training course as a tax deductible expense, and so on, but neither of us have the authority to impose their views on others - that's where the law comes in.
Another point on morality - IR35 is there (theoretically) to stop the 'morally unacceptable' behaviour of disguised employment. But, from a moral perspective, even if a contractor is operating inside IR35, why should they pay more tax than, say a shopkeeper who has had the same shop, the same stock, the same customers, the same repeat business, for 20 years? Why should the shopkeeper be fully entitled to operate a Ltd and take advantage of paying a small wage and taking the rest as dividends, but the contractor isn't allowed to? In my mind, the shopkeeper is more of a disguised employee, has less risk, and more future certainty than a contractor that has to find new work every six months, in varying locations, at varying rates, and with little certainty.
I'm not saying shopkeepers should be considered targets for IR35 investigations, just that morality is a difficult yardstick to use in matters like this.
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