Take That!

chewmylegoff

DCodd wrote: »

Let's be perectly clear here. While we all would like people to pay what we think is the "correct amount of tax", there is no such thing. What anybody pays is a mutally agreed compromise.

HMRC are not the moral guardians of correct taxation. Their job is to maximise the revenue for the treasury and are quite happy to recieve more than is owed. It is only these dreaded accountants that challenge HMRC that hold them in check. Granted, some do find overly aggressive ways of avoidance but it is extemely rare, which is why it hits the headlines.

If the Government were truly committed to fair taxation then they would scrap the current tax legislation and rewrite the rules from scratch. Simple and concise tax rules that the vast majority of people could understand with severe punishments for evasion. They won't as it would take longer than their term in Government to orchestrate and even longer to see the benefits, so no personal gain.

Eh?

Tax is binary. It is either due or it isn't. It is easier to work out if your tax affairs are simple - eg a PAYE employee on £30,000 a year with no tax deductible expenditure and no other income can work out exactly what is due very easily. This isn't a compromise between HMRC and the individual.

When you are a millionaire in the entertainment industry with different income and expenditure streams then things become more complicated, but there is still an answer to "what exact amount of tax do I owe". Receipts of money are either subject to a certain tax or they are not. Expenses are either tax deductible or they are not. It may take a court to decide but that is not a "mutually agreed compromise".

Corporation tax is a bit of a different matter cos you can't chuck a company in jail and HMRC therefore has to be a bit more pragmatic about collection.

prowla

chewmylegoff wrote: »

Eh?

Tax is binary. It is either due or it isn't. It is easier to work out if your tax affairs are simple - eg a PAYE employee on £30,000 a year with no tax deductible expenditure and no other income can work out exactly what is due very easily. This isn't a compromise between HMRC and the individual.

When you are a millionaire in the entertainment industry with different income and expenditure streams then things become more complicated, but there is still an answer to "what exact amount of tax do I owe". Receipts of money are either subject to a certain tax or they are not. Expenses are either tax deductible or they are not. It may take a court to decide but that is not a "mutually agreed compromise".

Corporation tax is a bit of a different matter cos you can't chuck a company in jail and HMRC therefore has to be a bit more pragmatic about collection.

Nope, it is not binary, as your post plainly shows.

If a person is paid straight PAYE salary by an employer then it is correspondingly straightforward and income can be taxed at source.

But in the case of an entertainer, where does the boundary between their business, equipment, etc. and their personal affairs lie? And that does not apply just to the highly paid headline entertainers; it also applies to small businesses across the length and breadth of the country. And even to relatively lowly paid self-employed workers.

Further, the Bernie Ecclestone instance shows that there is indeed the capacity for a mutually agreed compromise, and I know that this happens in much more modest cases too.

DCodd

chewmylegoff wrote: »

Eh?

Tax is binary. It is either due or it isn't. It is easier to work out if your tax affairs are simple - eg a PAYE employee on £30,000 a year with no tax deductible expenditure and no other income can work out exactly what is due very easily. This isn't a compromise between HMRC and the individual.

When you are a millionaire in the entertainment industry with different income and expenditure streams then things become more complicated, but there is still an answer to "what exact amount of tax do I owe". Receipts of money are either subject to a certain tax or they are not. Expenses are either tax deductible or they are not. It may take a court to decide but that is not a "mutually agreed compromise".

Corporation tax is a bit of a different matter cos you can't chuck a company in jail and HMRC therefore has to be a bit more pragmatic about collection.

If you are on PAYE the chances are that you are unaware of the tax advantages that you could take to allow yourself to pay less tax. Most people on PAYE below £100k just allow the tax at source to be their default so they don't have to bother with tax management. That is their compromise, a quiet life but once you hit £100k people are far more tax aware as this is the point that you lose your personal allowance. At this point you effectively pay 60% tax on your next £10k.

Our tax laws are a joke and an international joke at that. They are the most complex and convoluted tax laws in the world. If we want UK individuals to be taxed in the UK then we need to make them more straight forward and understandable.

The compromise is how far are you, as a tax payer, prepared to go to pay what you believe the tax laws say you should.

lisyloo

Tax is binary. It is either due or it isn't.

I don't think it's that simple.
DH is self-employed. If he pays himself an income then he has to pay corporation tax.
If he pays himself dividends and put's it in a pension instead then no income or corporation tax is due, so he can choose to avoid it.
Those are simple examples, but it's not simply a case of due or not due - people can make choices.

I do want to defend them a little bit.
They got advice from experts and unless there was anything blatantly obvious for the layperson to see as evasion, then it should be the experts who are penalised i.e. take that should be able to sue their advisor who should be liable for their advice.

I don't think we an individuals should do anything deceptive, but if it's not obvious to us as lay people then it's the expert advisors who should accept the blame for their advice.

antrobus

chewmylegoff wrote: »

Eh?

Tax is binary. It is either due or it isn't.....

You've clearly never had any practical experience of an Inland Revenue/HMRC investigation.:)

Tax should be binary, and it would be if the legislation imposing the tax was 100% clear. But it frequently isn't. So it's not unknown to end up in the situation where HMRC says 'you owe us £1,000,000 please pay up' and the target says 'no I don't' and then suggests (mindful of the potential grief and costs to come whatever the outcome) 'how does £250,000 sound?' At which point HMRC will say (mindful of the potential grief and costs to come whatever the outcome) 'we'll settle for £500,000' and so forth. Eventually a mutually acceptable number is agreed on.

BillJones

chucknorris wrote: »

I realize that it isn't that simple, but leaving holes will always attract those who wish to exploit loopholes.

The government is not "leaving holes"; they are setting out how different sorts of income / profit / capital gains should be taxed, and then finding people coming up with ever more inventive ways to pretend that money in one category is actually in another, or in none of them at all.

A flat tax would probably make this harder, but sadly too many people would scream blue murder if asked to be taxed at a rate that higher earners pay...

chucknorris

BillJones wrote: »

The government is not "leaving holes"; they are setting out how different sorts of income / profit / capital gains should be taxed, and then finding people coming up with ever more inventive ways to pretend that money in one category is actually in another, or in none of them at all.

What I meant was that if the rules were more defined then there would not be room to be inventive which category was applicable because it would be defined. That avenue (hole) would be closed.

princeofpounds

They are the most complex and convoluted tax laws in the world.

I'd beg to differ with that. The USA is streets ahead of anyone on this score.

BillJones

chucknorris wrote: »

What I meant was that if the rules were more defined then there would not be room to be inventive which category was applicable because it would be defined. That avenue (hole) would be closed.

Something I'd favour, especially as it could well mean a flat rate of tax, which would likely be below my current marginal 47%.

onlyroz

prowla wrote: »

But in the case of an entertainer, where does the boundary between their business, equipment, etc. and their personal affairs lie? And that does not apply just to the highly paid headline entertainers; it also applies to small businesses across the length and breadth of the country. And even to relatively lowly paid self-employed workers.

This is true. My dad was a self-employed writer and photographer. For his work he needed computers, printers, scanners, photocopier, cameras, lenses etc. But he also used these for personal use. So does he claim that their purchase is a business expense or a personal one? He also bought a van which he used to go on photography expeditions, as well as for personal use. So should he put the van "through the books"? And how do you distinguish personal vs business mileage? E.g. you go on an expedition to conduct research for your book, but on the way home you stop off to do some shopping. So what proportion of the journey was business mileage? You go out for a meal with a collegue to discuss work, but you also take your family along. What proportion of the meal can you claim for? Etc etc...