How can I avoid tax

Is there anything that a PAYE employee can do to avoid or minimise tax. I already have the usual ISAs but surely there are other things that can be claimed.

I have several self-employed friends and am amazed at the creative accounting they use (the following examples are all well known, you should here some of the others):
- they "employee" their wife and other family members rather than giving out house keeping.
- the new TV, camcorder etc. in their living room is claimed to be for business purposes
- getting home and office decorated at same time - all billed to office
- getting central heating oil for home and office at same time - all billed to office

KDH
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Comments

  • johnllew
    johnllew Posts: 1,928 Forumite
    What they are doing is evasion not avoidance and they can get banged up for doing it. I suggest you tell the Revenue all you know. Why should they be getting away with it? Do you like subsidising them?

    The Inland Revenue Fraud Hotline is 0800 788 887

    The VAT Evasion Hotline is 0800 59 5000
  • gus
    gus Posts: 23 Forumite
    The amount of deductions from income that PAYE employees can deduct is restricted to expenses incurred in performing necessary duties of the job. Things are different for those who are self employed.

    Of those things listed it is possibly a bit hasty to say it is tax evasion. Self emplyed traders who carry out work at home will be able to claim some expenses for a whole variety of home expenses as long as they relate to their trade or profession. If however someone is claiming something you know that is not related to their trade then they are putting themselves at risk and by all means alert the Revenue.

    Ways to save tax:

    Pensions
    Gift Aid
    Investment in EIS/VCT shares
  • System
    System Posts: 178,077
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    Johnllew, do you honestly think I am going to shop my mates ? :):) I was talking to one of them last night and showed them this ... his answers were

    1. Of course I employee my wife ... she did stick a stamp on an envelope for me once. After all what is good enough for IDS (any many other MPs) is good enough for me

    2. Large items: borrowed from the office since our own broke. Small items: kept in the house for safe keeping (more secure than the office)

    3.&4. prove it

    Don't shoot me ... I am only the messenger ... and lets be honest, given half a chance everyone would try to screw the taxman. I just can't see how to do it when I am PAYE.

    KDH
  • System
    System Posts: 178,077
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    Gus

    What are EIS/VCT shares ?

    KDH
  • jg
    jg Posts: 32 Forumite
    Johnllew, do you honestly think I am going to shop my mates ?

    You and everyone else pays more because of this attitude.
    lets be honest, given half a chance everyone would try to screw the taxman. I just can't see how to do it when I am PAYE.

    Let's be honest and admit that you aren't? But it's ok because you think everyone else is dishonest, too?
    Titch :)
  • johnllew
    johnllew Posts: 1,928 Forumite
    3.&4.  prove it
    It's been done - like the farmer who claimed the cost of a swimming pool and put it through his accounts as irrigation expenditure and got caught. I wouldn't associate with thieves like your mates - that's what they're doing; stealing from you and me. I hope they do get banged up - it's only a matter of time.
  • System
    System Posts: 178,077
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    Community Admin
    jg, not my job to shop people (there are enough whingers and grasses in this world). As a contractor in my place of work told me (this is as close as I can remember) "If I filled in my tax return and put a big circle around some numbers with arrows pointing into it and then added the word 'fraud' at the tail end of each arrow, the tax office still would not spot it". I did however point out to him about the introduction of IR35 (or something similar) - he was slightly less amused.

    If I remember right there was a crackdown on contractors because they earned vast sums of money and paid very little tax (by bedning the rules). One of the main ways was to pay yourself minimum wage and take the remaining monies as dividends - probably very much an over simplification. But as several contractors said to me at the tme the amount lost thorugh individuals 'bending' the rules was negligible compared to the amounts lost through big corporations and banks 'bending the rules'. The government is very aware about this but instead goes after the easy fodder instead of the big institutions that finance their campaigning.

    I agree with the sentiments of my mate. All our MPs etc. (allegedly) employe their wives and other family members to make sure they use up every last penny of the 'over inflated' allowances that they are 'entitled' to. I can not see the difference with what my mate does.

    What is honesty ? Avoiding tax may be 'bending' the law but to those that criticise that, so is having a mobile phone glued to your ear while driving; as is exceeding the speed limit.... but then given half a chance everyone does it (I don;t don't do the mobile phone bit because I wouldn't have one of them near me ... if it is important enough people will get hold of me). Therefore if you have ever broken a speed limit then you are as guilty of being dishonest (and don't give me any of the 'its totally different' rubbish).

    Lets get back to the main point of this thread. As a PAYE tax payer what can we do to minimise the amount of tax to be paid. Emphasis going on the 'nothing illegal' but how can we bend the rules.

    KDH
  • jg
    jg Posts: 32 Forumite
    What is honesty ?

    The old Pontius Pilate line. That's exactly what he said. Next, you'll be washing your hands and saying, "I am innocent of the blood of this man," while giving the order for an execution.

    Sorry, I don't accept the premise of most of your response. Your mate is responsible for his own actions, and the fact that others may be getting away with something is no excuse.

    The banks, etc., are paying huge amounts of taxes, and the regulators are all over them. Several have paid huge fines recently for minor paperwork violations that hurt no one.

    Anyway, as to legal approaches, what does your employer do about pensions? If they don't have a good scheme for you, you could approach them about something like the following.

    My employer offers a salary sacrifice scheme. I give up some of my salary, and it is paid into a stakeholder pension by my employer. That way, I don't have to pay either NI or income tax on that money. Even better, they save NI on that portion of my income, so they pay the NI that they save into my pension as well. Best of all, they match my contribution (up to a certain level).

    So, if you pay £100 / month into such a pension, it saves either £22 or £40 (depending on whether you are basic or higher rate taxpayer). It also saves you on NI -- £1 if you are above the threshold, £11 if below.

    If you can get your employer to pay their NI savings into it, that's an additional £12.80. So for a typical basic rate taxpayer, you now have £112.80 in your pension, and it cost you £67 in net pay. If higher rate, it probably cost you £59.

    If you can get them to match your contribution, you would have £212.80. Some will match double (£2 for every one you contribute), which would mean you would have £312.80 for a cost of £67 or $59.

    The benefit doesn't necessarily stop there. Anything that your company pays into a pension for you is not considered income for the purposes of calculating child tax credit/WFTC. So if you have children, reducing your salary (by putting it into a pension) may increase the amount of tax credit you can get.

    None of this is "bending" the rules, the rules are there to encourage people saving for retirement. It doesn't help if you can't afford to sacrifice salary, but it sounds like, if you have the ISAs, that you have a little room to operate in.

    By the way, I don't speed or use my mobile while driving. I'm not under PAYE, and due to special circumstances I could cheat a lot -- but don't. There are more important things than a few extra pounds -- like a clear conscience and the respect of my wife and family.

    There is a difference between 5 mph over the limit on a motorway with no one around and tax (or benefit) cheats. The former hurts no one, the latter means more to pay/less benefits available for those who are honest. But I don't do either one. And there are more honest people out there than a lot of people seem to think.
    Titch :)
  • johnllew
    johnllew Posts: 1,928 Forumite
    Avoiding tax may be 'bending' the law
    No it isn't - avoidance is perfectly legal and no bending is required. Evasion is illegal and can lead to imprisonment. I'm sure that the hairdresser recently sent to prison for tax evasion didn't ring entries in his tax return - treat the Revenue with disdain at your peril. Interesting reading here: http://www.inlandrevenue.gov.uk/bulletins/tb35.htm#anchor496582
     As a PAYE tax payer what can we do to minimise the amount of tax to be paid.  Emphasis going on the 'nothing illegal' but how can we bend the rules.
    In view of your attitude as a citizen of this country, I'm pleased to say there is very little a PAYE taxpayer can do to mitigate his liability.
  • Aussie
    Aussie Posts: 65 Forumite
    I have a company van, van, fuel, tax etc. paid for by the company.
    Clothing and other costs with the job paid by the company.
    So when i fill out my tax return i will have nothing to claim for and will expect nothing back off the tax department.
    Don't tell me that this is true.
    Who cares if it is only a couple of pounds--



    [move]I want a rebate[/move]


    Please................................
    :D :D
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