2019 tax charge - consultation preparation

[SomeDude]

So I am intellectually dishonest, nice.

But people who stand up in court and claim without blushing that getting paid for normal job via offshore trust which then loans back money without interest and intention to repay is perfectly legal normal thing, no 40% tax due Sir, double taxation agreement blah blah blah - they are all intellectually honest.

Well I am glad I am not one of them even if it earns me the title of being "intellectually dishonest".

And what's the big difference between these people, and those "getting paid for normal job via one-man limited company, from which they pay themselves minimum wage and take the rest as dividends, putting all they can think of into company expenses to pay less tax"? Since both these ways are/were legal (otherwise loan schemes wouldn't be STILL called "tax avoidance schemes", as avoidance is - by definition - legal), and only after years of sitting on their hands HMRC/HMG decided that one is "immoral"?

[Old Greg]

And what's the big difference between these people, and those "getting paid for normal job via one-man limited company, from which they pay themselves minimum wage and take the rest as dividends, putting all they can think of into company expenses to pay less tax"?

One group is subject to retrospective legislation to make them pay more tax and the other isn't. Now try to figure out why that is.

[AtW]

And what's the big difference between these people, and those "getting paid for normal job via one-man limited company, from which they pay themselves minimum wage and take the rest as dividends, putting all they can think of into company expenses to pay less tax"? Since both these ways are/were legal (otherwise loan schemes wouldn't be STILL called "tax avoidance schemes", as avoidance is - by definition - legal), and only after years of sitting on their hands HMRC/HMG decided that one is "immoral"?

A few things very different:

1) Ltd route gets Govt 80% of taxes vs 100% PAYE case, where as scheme users paying as low as 3.5% - you are not even in the same league, stop comparing yourself to Ltds.

2) Ltd route is moral, legal, commonly used - it's the intention of Parliament that dividends are not subject to NICs - there is no artificiality of using Ltds for contracting, in fact it's the best choice for individual from all other structures - sole trader, partnerships.

It's like on motorway - a lot of people exceed speed limit of 70 mph, but those who take the piss and do over 100 mph end up losing their license.

[DonkeyRhubarb]

And what's the big difference between these people, and those "getting paid for normal job via one-man limited company, from which they pay themselves minimum wage and take the rest as dividends, putting all they can think of into company expenses to pay less tax"?

It's a matter of degree.

With the schemes, the Exchequer gets very little. (In fact, the promoters get more money than the Exchequer)

It's a bit like breaking the 30mph speed limit. 40mph is bad but 60mph is a lot worse.

[Dylan]

One group is subject to retrospective legislation to make them pay more tax and the other isn't. Now try to figure out why that is.

One is harder to police as there isn't an easy list to pick people from?

In terms of morality there is no difference between using a scheme and pretending you are in a B2B relationship when the reality for 90% of contractors is that they are permies in disguise, or is there?

[DonkeyRhubarb]

In terms of morality there is no difference between using a scheme and pretending you are in a B2B relationship when the reality for 90% of contractors is that they are permies in disguise, or is there?

There is if you ask that question on a Contractor website.

[SomeDude]

One group is subject to retrospective legislation to make them pay more tax and the other isn't. Now try to figure out why that is.

I know exactly why that is - because government needs money, so it's performing simple money grab from people who look like easy target. Let's just hope that in a few years the other group will not become target of some more "legal retroactive, not retrospective, law", when more money will be needed. After all, directors of LTDs are all known and disclosed to HMRC, same as people using DoTAS schemes were for many long years, before HMRC decided to make their move.

[AtW]

In terms of morality there is no difference between using a scheme and pretending you are in a B2B relationship when the reality for 90% of contractors is that they are permies in disguise, or is there?

I reckon Ltd contractors now (with new higher tax on dividends) will be making more money to Govt than if they all became PAYE permies - being a contractor allows to command higher rate, plus many would take less holidays, less sick days etc.

So, Govt is actually making more money overall. Can you say the same for the schemes?

I know exactly why that is - because government needs money, so it's performing simple money grab from people who look like easy target. Let's just hope that in a few years the other group will not become target of some more "legal retroactive, not retrospective, law", when more money will be needed. After all, directors of LTDs are all known and disclosed to HMRC, same as people using DoTAS schemes were for many long years, before HMRC decided to make their move.

That's what you don't get - people in Ltds honestly pay going rate for taxes, so the Govt always got leverage to increase tax take by increasing tax on dividends, something they've just done.

Govt does not have such leverage over scheme users, in fact the higher the taxes the more people want to dodge them completely, so it's imperative for Govt to stump very hard on these people, otherwise tax raising strategies will fail. So it's not about getting money from you, contrary to what you think you are not an easy target, but there is no choice really.

[Old Greg]

One is harder to police as there isn't an easy list to pick people from?

In terms of morality there is no difference between using a scheme and pretending you are in a B2B relationship when the reality for 90% of contractors is that they are permies in disguise, or is there?

If you are inside IR35 but declaring yourself outside that is also wrong, as will be discovered if HMRC get hold of you. But I wouldn't say there is no difference. I would be interested in your evidence for the 90% statistic you offer.

[Dylan]

Ltd route gets Govt 80% of taxes vs 100% PAYE case, where as scheme users paying as low as 3.5%

Like saying but the items I stole from the shop were only low value so the crime is different.

The tax take is either 100% of what it should be or it isn't, or are you saying it is ok to pretend to be in business when you clearly aren't with the sole intention of reducing tax? Not aimed at you specifically as no idea on your personal circumstances but head over to other areas of this very website to see the reality of contracting, reality is most are just disguised employees and should be going via an umbrella or paying PAYE on all they earn. There are some exceptions and you may be one but the whole thing is a joke.