Why should my MP worry about retrospective taxation on avoiders?

[Old Hack]

I think most of us are borderline with our morality to be honest. If you're paying yourself below what the industry would pay you, and avoiding NI, then morality has to be called into question. Factor in your wife being paid divis as part of you working, and you can see a case for someone wondering if you were inside that conservatory trying to throw rocks out.

Fact is, we should be paying ourselves a whole lot more, and paying our fair share of NI, that's what would be morally right, but we're not. We shift tax so we save money; my wife is a housewive, yet gets paid from my company and takes dividends. I pay myself £4800 a year to ensure I pay almost no NI. This saves me huge amount. Paying my wife a share, and divis, means we both keep under the upper tax threshold as well.

None of this sits right, morally speaking, but it's within the law.

Now what if HMRC remove these laws, for us IT bods, then retrospectively charges us at IR35 levels? They could do it, quite easily.

Just don't be so quick to throw stones; it's the thin edge of the wedge for me, and I think we're all borderline, or the majority of us all.

[speling bee]

So a fair share is paying yourself, a skilled IT contractor, minimum wage? What would you say your wage would be in permie dom?

You're paying minimum wage to avoid paying more NI I suppose? That saves a good 11%

I don't think you've thought through the morality issue personally, if you're choosing to avoid paying NI tax at the correct level. Legal, yes, Moral?

It's a fine line, so I am amazed you've got involved in the argument, to be honest

I don't think the line between 3 - 5% and 30% is fine. Neither do I think that the line between a Ltd company (and I genuinely am outside IR35 whatever the accursed Business Entity Tests say) and a dodgy scheme is fine.

And any time I chat to a contractor collegue who admits to being in a dodgy scheme, they look pretty shifty when they whisper what they do to you.

[speling bee]

I think most of us are borderline with our morality to be honest. If you're paying yourself below what the industry would pay you, and avoiding NI, then morality has to be called into question. Factor in your wife being paid divis as part of you working, and you can see a case for someone wondering if you were inside that conservatory trying to throw rocks out.

Fact is, we should be paying ourselves a whole lot more, and paying our fair share of NI, that's what would be morally right, but we're not. We shift tax so we save money; my wife is a housewive, yet gets paid from my company and takes dividends. I pay myself £4800 a year to ensure I pay almost no NI. This saves me huge amount. Paying my wife a share, and divis, means we both keep under the upper tax threshold as well.

None of this sits right, morally speaking, but it's within the law.

Now what if HMRC remove these laws, for us IT bods, then retrospectively charges us at IR35 levels? They could do it, quite easily.

Just don't be so quick to throw stones; it's the thin edge of the wedge for me, and I think we're all borderline, or the majority of us all.

Remember HMRC can't change the law, Parliament can. And Parliament can legislate for anything pretty much. But... the offshore schemes are at a whole different level. I simply don't think I'm in the conservatory.

That is not to say I wouldn't like to see the tax arrangements changes. Tax divis as other income is the obvious solution IMO.

[Old Hack]

But my point is, you are discusisng morality as well, and is it morally acceptable to pay yourself minimum wage, and collect the rest in tax efficient divs, shared with your wife, to minimise your tax further, and all done, in order to avoid paying you NI?

Is that morally acceptable?

[speling bee]

But my point is, you are discusisng morality as well, and is it morally acceptable to pay yourself minimum wage, and collect the rest in tax efficient divs, shared with your wife, to minimise your tax further, and all done, in order to avoid paying you NI?

Is that morally acceptable?

Yes.

[Old Hack]

I also do not believe you are paying 30%, unless you mean Corp tax, and Income tax?

You said you pay min income tax, and almost no NI. You divi up your income, paying the lowest amount, and what is left is kept in the company, subject to corp tax, yes?

I am sitting here thinking 30% is rather high, I reckon we do between 17-20%, doing pretty much the same.

Can you justify your wife being a shareholder? Or is she income masking for you?

These are genuine questions, for I am pretty much exactly as you are doing, with a couple of bells, and I am interested in your take on the morality of it all.

[Old Hack]

Yes.

I disagree strongly; you're avoiding NI, and masking your earnings. Also strange to hear you're out of IR35, when you've just said you've been at the same place for 36 odd months. Something doesn't add up here.

[Ticktock]

Can you justify your wife being a shareholder? Or is she income masking for you?

I can justify anyone being a shareholder in my company, if I have chosen to sell / give / trade shares in my company to them. Can you justify a nurse being a shareholder in BT, a postman being a shareholder in Apple, or whatever?

[IR35 Avoider]

Lucozade and Brillo, what I don't get in all of this is:

You seem to say that it doesn't matter whether your tax arrangements were immoral, as long as they were legal.

Then, when retrospective legislation is introduced to correct this perceived moral outrage, you seem to object that the retrospective nature of this legislation is immoral, even if it is legal.

I am not, for once, trying to cause trouble. But why would my MP want to help you out when you present a moral argument, when your base position is that morality doesn't matter, just the law?

Morality shouldn't come into it, on either side of the argument. There is only one issue to consider, the rule of law.

The law is what should determine what people are legally sanctioned for doing. That's why the morality of tax avoidance is irrelevant.

The problem with retrospective legislation is that it is the law undermining itself. If we can't know what laws our behaviour today is subject to, the idea of leading a law-abiding life must vanish as an ambition. We might as well do whatever we think we can get away with, as long as we can square it with out conscience. Retrospective legislation is "legal", but it destroys respect for the law, so what is "legal" ceases to matter.

Retrospective legislation is mostly forbidden by human rights law, but there is an execption for tax.

[Robinho]

Gig length has no bearing on IR35.

Why would it?