IHT - part of the problem. What about carousel fraud?

nemo183

I realise this post is a tad off-topic, and whilst I applaud Martins comments on IHT, at the same time I think it's important to understand the degree to which our tax system is now being lead by the ease with which some taxes can be collected, as opposed to the lip service and spin that disguises just how inept our system has become in other areas.

Gordon Brown is laughing all the way to the bank with the £4 billion he'll collect in the next fiscal year from IHT. The roots of this tax go back to 1796, and from then until about ten years ago the treasury and Inland Revenue have utterly failed to deliver. This tax, which has always been aimed at the very, very rich has proved impossible to collect. The reason? The rich can afford to employ very clever experts who have proved most successful at finding loopholes in every new attempt to close them.

However, in the last ten years, house prices have risen four times faster than IHT allowances. More and more people have fallen prey to IHT. Not the super wealthy, but just the well-off. And before anyone starts to feel a bit smug, just how long might it be before IHT is "reformed" to include anyone who has left a house which is worth more than they bought it for?

At the same time, in the next fiscal year, the country will kiss goodbye to at least £2 billion in VAT revenue via a crime called either "carousel" or "missing trader" fraud. It would be great to say that this is a recent and very complex swindle that took years to dream up by a small group of criminal masterminds, which in turn makes it almost impossible to solve.

The truth is that it has been going on for around ten years, and a child of ten could understand how it works - namely, VAT is charged for a product and then never paid to HM customs and excise. Despite the fact that C&E now say they have over 1000 people working to stop this, simple maths will suggest this is not enough. And heaven help anyone who asks the number of people they have prosecuted and convicted, and the amount of money recovered.

A cynic might say "Well, why bother? It's much harder to catch these criminals than to just sit back and take the wheelbarrows full of IHT to the bank - especially since, if the IHT is late or missing, since we are dealing with law abiding people, and know where they live, we can just role round and collect it"

Tiggs_2

your argument is the same as speed camera campaigners who say "dont catch speeders...catch robbers, their worse"

What is your back ground to know that the tax has been impossible to collect from the very rich? The idea that someone with a few million can use laws and loopholes not avalible to everyone is nonsense in the most part.

The reason the rich pay less than they may otherwise do is because they are clever enough to plan for it - thats not to say they pay no tax, they pay far more than everyone else, despite their planning.

IHT is a tax that the wealthy plan for and minimise and the less wealthly moan about and pay because they prefer moaning to planning it seems.

nemo183

On the whole I find myself in agreement with the sentiment of the points you raise.

Your point about speed cameras is interesting, although in this case I'd suggest that the argument would be between those people caught speeding and who have taxed and insured their car, and are easy to catch and fine, as opposed to those driving on switched plates with no documents or licence.

The point I was trying to make was that society only works because we accept that the rules and laws that govern us are fair, and applied to everyone.

It just seems to me that little by little, in many different areas of life, a subtle change is taking place that is replacing natural justice with convienence. Another way of putting this might be to say that instead of facing up to to the route causes of difficult issues, we are allowing accountants and other bean counters to implement superficial solutions that meet our current obsession for short-term financial fixes.

Since my last post I note that the VAT shortfall from carousel fraud would actually appear to be £8 billion for the current year. Given it's been going on for at least ten years, the total loss could easily be £30 billion.

In any normal world, the Head of Customs and Excise, plus other key people, would have simply been sacked on the spot for failing to deal with this disgraceful state of affairs. Instead, in an effort to be seen to be doing something, they have taken draconian measures against a number of high profile companies - some of whom have been given leave to sue the government for damages. At the same time, one can't ignore the possibility that in some grotty little room within C&E, a small group of people may well be considering the "Blue Sky" thought that this massive shortfall could be fixed by a tiny increase in VAT.

System

"IHT is a tax that the wealthy plan for and minimise and the less wealthly moan about and pay because they prefer moaning to planning it seems."

Ok Tiggs, as one of the middle income people who is really cheesed off at paying more than our fair share and to avoid me moaning can you tell me exactly what I have to do to ensure, should anything happen to me and my dh, my kids don't have to pay IHT?

Oh and how much is it going to cost me to do this and is there a moneysaving way to do it without paying an arm and a leg to accountants and solicitors?

Sorry I feel a moan coming on anyhow

We are comfortably off in that we have a nice house and car but we do not have a huge amount of disposable income like the seriously wealthy.

We are entitled to nothing bar a small amount of tax credits and child benefit and sending my eldest to university is costing us a small fortune because due to means testing she is entitled to nothing bar the minimum student loan which just about covers her rent but not her tuition fees or living expenses. My youngest is hoping to do the same next year and tuition fees have rocketed so that's more money we will struggle to find which the poor don't have to and the rich can sniff at.

We pay a fortune in rates (council tax) because of the value of our house and not the number of people living in it.

We are going to be paying water rates based on the value of our house also because the powers that be have decided the people of Northern Ireland don't have the same rights to a water meter as the rest of the UK.

It also looks as though despite paying huge amounts of tax and national insurance when we become old and require nursing care from the state, that we have already paid for, our kids might have to sell our home to pay for it. That's one way of avoiding the payment of IHT I suppose but it still means our children, who will have a tough enough time getting on the property ladder, will lose out.


It would be very helpfull if someone could indicate to me and others in the same position exactly how we can protect what we have scrimped and saved for in the same way the rich can.

Tiggs_2

nemo183 wrote:

Your point about speed cameras is interesting, although in this case I'd suggest that the argument would be between those people caught speeding and who have taxed and insured their car, and are easy to catch and fine, as opposed to those driving on switched plates with no documents or licence.

but its not - in that example one person breaks the law the other doesnt. With IHT planning the wealthy dont break the law, they just plan.

heres an example....Mr Rich drives in a 30mph at 50mph and sees a camera, he slows down. Mr Muppet drivesin a 30mph at 40mph and doesnt slow down....he then gets a tocket and moans about how the bloke doing 50mph got away with it!

Tiggs_2

Pam17 wrote:

Ok Tiggs, as one of the middle income people who is really cheesed off at paying more than our fair share and to avoid me moaning can you tell me exactly what I have to do to ensure, should anything happen to me and my dh, my kids don't have to pay IHT?

No, thats what i do for my clients.

System

Yes Tiggs that's exactly my point and you didn't tell me how much it would cost me.

Middle Income families don't necessarily have enough money to employ someone like yourself. They have all the outgoings and tax burdens I mentioned in my post without the disposable income the wealthy have. So in order to avoid the death tax that is IHT what do I sacrifice?

Perhaps we all should downsize to a smaller/cheaper property and spend our equity (if we have any) living the high life. But then where would the less well off people live if we start buying housing which they can just afford. Should I tell my kids that since the interest rate on my mortgage has gone up and my rates have increased by 10% and the cost of the electric and gas has risen that I can no longer afford to sub their educational aspirations?

This off course is a bit of an overreaction but I'm sure many middle income families feel the same. We are fortunate to have quite a good income and strive to provide a good standard of living for our children. We pay huge amounts of tax and national insurance. We pay into pension schemes which the government plunder. We try to ensure we will be comfortable in our old age and to leave our children a legacy which will help them in their adult lives but the government just keeps on using us to subsidise everyone else.

The only way it seems we can do anything about it is to employ someone like yourself and as I said above you won't tell me how much it will cost me.

margaretclare

Pam17 wrote:

Perhaps we all should downsize to a smaller/cheaper property....

Well, this is certainly an option if the house you live in becomes too big/too difficult to maintain/too inconvenient as you get older and once the children have left home - this is the stage in between living as a family and needing nursing care, as you put it.

The only way it seems we can do anything about it is to employ someone like yourself and as I said above you won't tell me how much it will cost me.

I am a great believer in getting a professional in to do the work that I can't do myself. Not that I 'leave it to the experts' - I ask questions and make sure that I understand the answers. Skiduck, in another thread, has suggested that our replacement boiler and heating system might cost between £2,500 and £3,500. This is fair enough. Without knowing your particular set of circumstances I would doubt that anyone can tell you exactly 'what it will cost you' in an open forum like this. Why not send a PM and ask more specific questions, or at least ask for the best way to contact a similar professional working in your area?

Margaret

Tiggs_2

Pam17 wrote:

Yes Tiggs that's exactly my point and you didn't tell me how much it would cost me.

Middle Income families don't necessarily have enough money to employ someone like yourself.

I didnt tell you how much it would cost for you to use me because its not relevant, i work with a certain type of client and they are not found on forums like this. I dont post here for business.

Back on track.....how far have you got with your search for an adviser on this issue? Have you have any initial meetings yet? have you discussed costs with anyone? Have you even thought of discussing it with anyone????

Middle income familes with insufficient funds to do any planning probably dont need to worry about IHT! The nil rate band provides a couple with well over half a million before IHT is an issue - is that you? If it is....dig deep and find someone like me, if not...chill out.

T

A_Nice_Englishman

Tiggs wrote:

I didnt tell you how much it would cost for you to use me because its not relevant, i work with a certain type of client and they are not found on forums like this. I dont post here for business.

I thought these forums were for the mutual exchange of advice. I try to offer advice in my areas of expertise in the hiope that when I ask for advice in things I know little about others will reciprocate. What is your motive for posting, Tiggs?

EdInvestor

IHT doesn't kick in for a couple under 570k - going up to c.600k next year.You need to hold your home as "tenants in common" and each partner leaves his/her half to the children in trust. This arrangement will also minimise the amount of assets the council can take if one partner needs care: the home cannot be taken while a partner is living in it.

BTW only 6% of estates attract IHT and only 4% of over 60s need nursing care.And to make the 4-5-6 rule complete, only 5% get Alzheimers/dementia.Many people worry themselves about these issues for nothing.