HMRC Consultative Document - marketed tax avoidance schemes

[centurian]

I think the "they'll come after all 1-man companies" comments are rather silly. Running through a company often has tax benefits but avoiding tax is generally not the reason for opening a company. Whereas using a tax avoidance scheme is clearly done for specifically that purpose; HMRC have a thing about "aggressive avoidance" which is conveniently quite vague.

Not for many years (at least 5 years, I reckon), but it probably is on the HMRC long term wish list. The new rules appear to allow HMRC to take a case they have won in court (Dragonfly etc.) - and unilaterally come to the decision that your situation is similar to said case - and you get a bill for the money. And you can't appeal - you have to pay up - and then take them to court to prove them wrong to get your money back.

Now at the moment, this only applies to DOTAS schemes (which partly applies to BN66 depending on when the person used the scheme). But is it really that much of a stretch to expand it to other tax avoidance measures.

[smalldog]

I think the "they'll come after all 1-man companies" comments are rather silly. Running through a company often has tax benefits but avoiding tax is generally not the reason for opening a company. Whereas using a tax avoidance scheme is clearly done for specifically that purpose; HMRC have a thing about "aggressive avoidance" which is conveniently quite vague.

on the basis that the government introduced IR35 to try and drive 1 man co's out of business and into a PAYE model I dont see it as silly at all. What I do find silly (actually rather sick) is people not affected by this coming to the thread to essentially gloat over the current situation (present company excluded).

IMHO HMRC and the government/s (whoever is in power over the new few years) are not done with small LTD's/contractors yet. Happy to stand corrected and be interesting to see what happens next now that retro seems to be the norm. Im in full time employ now so the future of LTD's/contractors doesnt affect me. I would also never gloat over someone elses misfortune unless it personally affected me.

[Laxmi]

Limited Company <> avoidance!

I just want to state that Limited companies are not Tax avoidance vehicles,
be they single person or not. They are a legitimate way to conduct business and since we cannot be sole traders or self employed it's the only way highly skilled people can work, else it's climbing a ladder and loosing your skills => permihood. They are in no way the same thing it's a completely different mind set and working practice - lets not confuse them.

[OnYourBikeGB]

I just want to state that Limited companies are not Tax avoidance vehicles,
be they single person or not. They are a legitimate way to conduct business and since we cannot be sole traders or self employed it's the only way highly skilled people can work, else it's climbing a ladder and loosing your skills => permihood. They are in no way the same thing it's a completely different mind set and working practice - lets not confuse them.

... provided IR35 doesn't apply.

[nickersan]

Anyone remember Ken Livingstone getting accused of tax avoidance because he ran his office through a limited company?

It was nonsense, but in the current climate, anything that's not PAYE is considered avoidance to the man-in-the-street (and if they're happy the Government and HMRC can do what they like).

Obviously there's some tax advantages to being a Ltd.Co just like there's tax advantages to, say paying into an ISA or pension.

The point is, that if it's within the rules, then whether it provides an advantage or not, it's NOT avoidance.

Obviously it helps if the rules need to be clear, simple and applied consistently, which is far from the situation at present where they're confusing, complex and can seemingly change (even retrospectively) depending on the direction of the economic/political winds or even the inspector looking at your accounts.

Thankfully we now have an Office Of Tax Simplification so all this worry will soon* become a thing of the past...

* by soon I mean, probably not in my lifetime

[nickersan]

... provided IR35 doesn't apply.

And that's the problem, it's impossible to know if IR35 applies or not ahead of drawing the short straw and getting inspected.

[Laxmi]

Law is the law - well except in the UK

Anyone remember Ken Livingstone getting accused of tax avoidance because he ran his office through a limited company?

It was nonsense, but in the current climate, anything that's not PAYE is considered avoidance to the man-in-the-street (and if they're happy the Government and HMRC can do what they like).

Obviously there's some tax advantages to being a Ltd.Co just like there's tax advantages to, say paying into an ISA or pension.

The point is, that if it's within the rules, then whether it provides an advantage or not, it's NOT avoidance.

Obviously it helps if the rules need to be clear, simple and applied consistently, which is far from the situation at present where they're confusing, complex and can seemingly change (even retrospectively) depending on the direction of the economic/political winds or even the inspector looking at your accounts.

Thankfully we now have an Office Of Tax Simplification so all this worry will soon* become a thing of the past...

* by soon I mean, probably not in my lifetime

The Law should be the Law irrespective of Climate (in a real democracy) - let's not forget who got us into this mess - banksters aided by the Government not Montpelier users.

[nick4notax]

a dose of realism?

I just want to state that Limited companies are not Tax avoidance vehicles,
be they single person or not. They are a legitimate way to conduct business and since we cannot be sole traders or self employed it's the only way highly skilled people can work, else it's climbing a ladder and loosing your skills => permihood. They are in no way the same thing it's a completely different mind set and working practice - lets not confuse them.

Well, far be it from me to contradict you. Problem is, a personal service company IS a tax avoidance vehicle. What ones personal career objectives are or are not is irrelevant; you trade through a PSC as to do the other (become an employee) will mean you do the same job for less return. The difference in the return is partly (mostly) funded by the advantageous tax rules governing corporations. What else is it, if that is not tax avoidance? Oh, and I'm all for it, assuming we still have our freedoms, liberty, etc (not certain of that since last budget!!)

Sorry if I sound sarcastic but the fact is such operations are under threat because they serve no purpose to government over and above permie life yet provide reduced tax receipts to government. Every government has tried to tap such activities or stop them.

Anyway, I'm all for scheme users and limited company operators, but let's not try fooling anyone further by suggesting ltd company operators are some holier-than-thou group who just want to remain in their technical niche without having to butt-kiss up the greasy management pole. Even if that might be one of the reasons, its far from the most compelling one: dosh!

I'm afraid I'm old fashioned in that I regard tax avoidance as being incorrectly labelled from its proper name: tax planning!! If the activity is wrong, then blame the law, not those that choose to operate within the law. I'll end this with a popular quote from Lord Clyde (said in 1929)
‘No man in this country is under the least obligation, moral or otherwise, so as to arrange his legal relations to his business or to his property as to enable the Inland Revenue to put the largest possible shovel into his store’

[nickersan]

Well, far be it from me to contradict you. Problem is, a personal service company IS a tax avoidance vehicle. What ones personal career objectives are or are not is irrelevant; you trade through a PSC as to do the other (become an employee) will mean you do the same job for less return. The difference in the return is partly (mostly) funded by the advantageous tax rules governing corporations. What else is it, if that is not tax avoidance? Oh, and I'm all for it, assuming we still have our freedoms, liberty, etc (not certain of that since last budget!!)

Sorry, but could disagree more strongly about the 'same job' bit.

A perm and a contractor may well do almost identical work but they do so on very very different terms. Both the perm and the contractor derive value from the terms in different ways - the perm in terms of security, benefits, holidays, etc while the contractor gets paid more and can therefore choose what's his or her priorities are.

What the employer/client gets is a flexible workforce and so having a mix to contract and perm is of benefit to them.

In a world were the job-for-life doesn't exist, it's important to have a mix of the two and trying to pretend all of one or the other would work in modern business is crazy.

[Laxmi]

Not an employee disguised or otherwise!!!!

I think we've killed the Argument about Limited Companies PSC not being anything like Perm employment.
Best get back to BN66.