Is personal tax optional ?

princeofpounds

What can be done in half an hour

Well not much I guess. Agree with the morality play point. But me being me, I like to actually understand my topic and find superficial journalism boring.

Thrugelmir

EIS is hardly risk free investing either. Seen plenty of people lose 6 figure sums on what in principle was a good idea. Getting the traction to turn the idea into a profitable business is another matter entirely.

ViolaLass

wotsthat wrote: »

They pay tax on the income, tax on the consumption and don't have spare cash to take advantage of the available tax breaks. They kid themselves they do this because of their morals and desire to fund essential government spending.

That's a pretty silly comment. We don't eat or pay for gas/elec for vanity or to support the government.

wotsthat

ViolaLass wrote: »

That's a pretty silly comment. We don't eat or pay for gas/elec for vanity or to support the government.

Everything above non-discretionary spending (and some below) requires someone to pay 20% VAT on the spending and is less money that can be invested tax efficiently. My comment was tongue in cheek - I don't think people who spend everything they earn are really doing it to keep the tax take up - I think they're stupid for purposely paying more tax than they need to.

Not knocking it mind. I'd quite like people to save the bare minimum to keep themselves off benefits and blow the rest.

michaels

princeofpounds wrote: »

well, I think you make three points there which are worthy of a thread each:

Great complete answer, I have heard of various vct schemes but that is too close to evasion for my liking.

I have to say I think earnings and tax should be published, the secrecy leads to so much scope for cheating, discrimination etc.

I am considering cutting my hours for a short period, I would lose WTC (although you get 1 month transitional relief) but therefore qualify for free school meals - I wouldn't take this up but I think the kids would then qualify for 6 years of pupil premia and thus having made a 5 digit contribution to the school coffers I wouldn't have to feel guilty about avoiding all the dire pta fund raising events....

wotsthat

PasturesNew wrote: »

Or earn more than £1million a year and pay somebody to make sure your tax is £0

It didn't fully explain how this would work but I didn't get the sense that earning £1m made it any easier to avoid the tax.

The same as mere mortals they needed to deprive themselves of the capital and take a certain level of risk to avoid tax. The advantage is in the scale...

- Michaels has to take his income down to minimum wage to pay no tax. That's going to require a willingness to live on less money and be super tight. A millionaire can live very well on £100k and avoid tax on £900k - it's much less of a hardship

- the size of the price is bigger so costs that would kill off the scheme for someone on £50k might be more affordable for those on £1m.

kabayiri

wotsthat wrote: »

It didn't fully explain how this would work but I didn't get the sense that earning £1m made it any easier to avoid the tax.
...

The sales pitch was pretty simple and clear from the consultant.

Route the vast majority of funds to a limited company via on offshore trust/company combo, and then tap in to the funds in the limited company at any time.

At no point did the discussion turn to risk and reward.

Are we selling he is guilty of gross mis-selling? I find it hard to believe personally.

wotsthat

kabayiri wrote: »

The sales pitch was pretty simple and clear from the consultant.

Route the vast majority of funds to a limited company via on offshore trust/company combo, and then tap in to the funds in the limited company at any time.

At no point did the discussion turn to risk and reward.

Are we selling he is guilty of gross mis-selling? I find it hard to believe personally.

It was sold as simple and clear but there was a distinct lack of detail. I didn't feel as if I'd been told the next step.

He didn't seem like a wide boy and I'd imagine his client list is bigger today than it was yesterday as people seek the next instalment.

chewmylegoff

kabayiri wrote: »

Another week, another tax story from C4 it seems

This week saw actor Greg Wise invite financial advisors into his home to tell him how paying tax was effectively optional.

Two mechanisms were discussed : the use of Trusts and EIS.

It seemed clear he could kill off his tax bill should he choose. HMRC didn't bother to offer up a spokesperson; the pro-tax argument came from a fairly dispirited Tory MP.

It got me thinking. How about a radical system where people got to choose what tax they paid, and all figures were published, browseable by all?

All these attempts at enforcement have resulted in the most complicated tax code in the world.

Whilst you might be able to minimise the amount of tax you pay by investing in an unquoted company and claiming EIS relief, this is a somewhat extreme way to avoid paying tax. obviously you could set up a fraudulent scheme to claim EIS relief on an investment in a company and then recycle the money back to yourself, but that would be a criminal offence. assuming you make an arm's length EIS qualifying investment the chances are you will never see a penny of the money you have invested ever again.

Making pension contributions is a rather better way.

Trusts can help to reduce tax bills in certain scenarios but I am not aware of any mechanism where you could earn taxable income from employment in the UK and then pay it into a trust and somehow claim back the money. You can transfer assets into a trust which may allow you to shield future income from those assets from income tax, but (i) you will probably have to pay a tax charge when you transfer the asset in so and (ii) any distributions from the trust received by someone who is a UK resident for tax purposes are taxable.

It's a myth that rich people don't, in general, pay tax. HMRC data shows clearly that the vast majority of tax is paid by the highest earners. There are some anecdotal examples of rich people going to significant lengths to avoid tax but the arrangements often turn out to be illegal and as HMRC's data shows, income tax is not optional for higher earners - if it was then how come the top 1% of earners are paying approx 30% of all income tax receipts (and the top 0.1% about 11%).

Income tax is optional if you can choose which country you live in and where you will receive income. The reality is that almost no one is in such a position. (Conrad will be along in a minute to tell us how all his clients are earning £250k a year driving taxis but only declare £8 of it as taxable income and use 'home as office' relief to reduce their tax liability to three shillings).

chewmylegoff

kabayiri wrote: »

The sales pitch was pretty simple and clear from the consultant.

Route the vast majority of funds to a limited company via on offshore trust/company combo, and then tap in to the funds in the limited company at any time.

At no point did the discussion turn to risk and reward.

Are we selling he is guilty of gross mis-selling? I find it hard to believe personally.

sounds like a recipe for paying a lot of extra tax to me, as least for the vast majority of people who work for someone else: sticking your UK income into an offshore trust doesn't help you to avoid the taxes that have already fallen due on that income - in fact they are likely to incur an IHT charge in addition to your normal income tax. Then when you get the money back out again it will be taxable again.