Is it possible to become a millionaire (or near to) through investments?

grey_gym_sock

Aretnap wrote: »

Channel 4 did a rather good job of showing that people who sell you dodgy tax avoidance schemes will tell you all sorts of things about how wonderfully effective they are.

I seem to recall that they did a rather less good job of showing whether or not the schemes the salesmen are selling actually work, or whether they'll stand up to a future HMRC investigation.

I mean, I have no particular knowledge of whether the schemes on offer will mean you get to keep your ill gotten gains entirely tax free or whether they'll just land you with a massive punitive tax bill a few years down the line, but if you believe it's the former just because the salesman said so then I have a great airport parking investment which you might be interested in.

certainly HMRC has successfully challenged some off-the-shelf tax dodging schemes. they seem to be better at that - tackling schemes which are bulk-sold to many moderately wealthy taxpayers - than at taking on the more customized schemes used by big multinational companies.

various new tools have been given to HMRC to help them tackle the bulk schemes. DOTAS (disclosure of tax avoidance schemes) requires taxpayers to reveal (on their tax return) when they're using an off-the-shelf scheme. "follower notices" and "accelerated payment notices" enable them to collect disputed tax sooner.

OTOH, other some new tools have not been used at all. such as the general anti-abuse rule. and more recently, the diverted profits tax. (yes, the latter is very new, but it was nicknamed the "google tax", and it hasn't been applied to google, so who does it apply to?) it appears that these tools are either ineffective - i.e. the way the rules are written, they are unlikely to apply to any taxpayers - or there is no will to apply them.

there certainly seems to be more will to go after smaller taxpayers using dodgy schemes than big companies.

HMRC has also had its budget cut repeatedly, losing lots of experienced staff, with almost all its offices (where taxpayers can actually meet them) being closed down, and a deteriorating phone service for taxpayers. so it's unlikely they have the resources to go after all the dodgy schemes, even if they want to.

HMRC are also proud of winning (in the tribunals/courts) against (something like) 80% of the tax avoidance schemes they challenge. the flipside of that is that, if they're not quite so sure about winning, they'll probably cave in. including in some cases they could have won.

bowlhead99

Glen_Clark wrote: »

bowlhead99 wrote: »

Broadly, this is harder to do in 2016 with a whole swathe of regulations now that didn't exist in 2003, though of course not impossible.

:rotfl:thats always the official line of course.
When did politicians not say they were clamping down on tax avoidance/evasion (same thing but one is legalised one isn't) ?

Yes, politicians always say they are doing something about it but in reality it is hard to investigate the stuff like legitimate reliefs being used in a way other than what was intended by people who can get creative and push the boundaries of the law - like the EIS scheme allegedly used by former ministers per Dispatches. To put a forensic detective onto every rich person to see exactly what happens to all their assets just in case they are being creative with what they do, is somewhat expensive.

So they have to go for low-hanging fruit, which is a relative term because it still requires global cooperation between lots of tax authorities to get anything done, but it's happening. So for example I can't now go and up a bank account or brokerage/custodian account in Andorra or Australia or Monaco or Jersey or Switzerland without the financial institution reporting back to HMRC each year via the local tax authority what my balance is and how much interest or dividends I got. I can't invest into a Cayman hedge fund in my own name without HMRC knowing I've done it.

Even if I create a passive holding company "BH99 Inc" in the British Virgin Islands which then goes and invests in a Malaysian private equity fund, the fund is still going to know I'm the owner of BH99 and report BH99's investment balance and distributions to the Labuan authorities for them to share with HMRC with my name stamped on it. All of this stuff requires a huge amount of compliance and admin work for the financial institutions and lawmakers and tax authorities around the world, and it remains to be seen what manpower HMRC will actually have to sift through the data that starts coming back. But it is all starting to happen, and it is stuff that didn't happen five years ago.
http://www.oecd.org/tax/automatic-exchange/common-reporting-standard/

You will probably scoff and say that making casual tax avoidance many times more difficult is just something that affects the casual tax avoider - and not the creative senior MP or actor who can spend hundreds of thousands on creating the illusion of active operating businesses in multiple jurisdictions to launder his assets, rather than using more affordable passive holding companies which the international banks and insurance companies and investment funds would look through when they do their reporting. Still, it is a start.

The 'big companies paying their fair share' is also something being tackled internationally - as it has to be, otherwise people will continue tax jurisdiction shopping. The 'base erosion and profit shifting' projects - again hammered out by OECD - will result in more information being reported and shared to help governments really understand what international companies and investors are doing with their operations - which is impossible when things have been more 'confidential' in the past. http://www.oecd.org/ctp/beps.htm

Still, I suppose none of this is of interest to you Glen because it is about practical solutions rather than about blaming Geoffrey Howe or Maggie Thatcher for something. I merely mention it for the interest of other readers.

bowlhead99

BananaRepublic wrote: »

You do like your leftie rants, and denigrating politicians don't you? And you are not on good speaking terms with the facts. What is the cause of your resentment?

That seems like a question you'll probably wish you hadn't wasted your time asking, because it either won't get an answer, or will get an answer which is a rant about politicians. :cool:

BananaRepublic

bowlhead99 wrote: »

The 'big companies paying their fair share' is also something being tackled internationally - as it has to be, otherwise people will continue tax jurisdiction shopping.

Someone needs to tell Gurgle, Apple and others as they seem not to be aware of this. The truth is that currently it is not being tackled. Rather, HMRC would like to tackle it but have failed.

bowlhead99

Well, something being tackled does not of course mean the tackling has completed and succeeded, yet.

If Apple or Gurgle (ha, see what you did there, sounds painfully like a GlenClarkism...) have a trillion dollars in the bank then a country with half a million residents like Luxembourg will not be quick to turn their business away, and as such it is not going to be easy to get everyone round the table and agree what's 'fair' for all concerned.

Of course the multinationals are well aware of what is going on, and have money in their pocket to spend on advisers to help them keep up with, or ahead of, every step in the game. To an extent, the corporation tax they pay in some jurisdictions is effectively a marketing cost - to pay something and be a 'good corporate citizen' rather than being outed by people who would say bad things about them and encourage boycotts and scare their shareholders. But if their product is good, they are not so worried about the risk of that. And I'm not going to start using Bing, or invest in MSFT, just because they pay tax on their global net income at one more cent on the dollar than GOOG.

racing_blue

Million$baby wrote: »

Is it possible to become a millionaire (or near to) through investments? I am not talking about the already wealthy who can invest 100's of thousands of £, but the man on the street who doesn't have much money to his name but wants to invest wisely and make big returns?

In my view, very possible.

In 2015, the average UK household disposable income for non-retired households was £28,100. But the average household spend was £27,612

So, your average guy might have had £500 to invest.

The average annual return of the S&P 500 since its inception in 1928 has been approximately 10%. Sure, that's America, and the past, but roll with me.

So lets say this average guy makes this average return of 10% on this average annual investment of £500, every year from age 18. Clearly stretching a bunch of assumptions, but just to illustrate the point.

After 1 year he will have £500 * 110% = £550
After 2 years he will have (£550 + £500) * 110% = £1155
After 3 years he will have (£1155 + £500) * 119% = £1820

and so on.

He will pass the £10,000 mark during his eleventh year of investing, the £100,000 mark during his thirtieth year of investing, and the £1,000,000 mark during his fifty-fourth year of investing. In time throw a really big 73rd birthday party, with a free bar and everything.

So while I'm sure there are all sorts of little holes which can be picked in this example, my broad answer is yes. Keep on keeping on!

Apodemus

Glen_Clark wrote: »

Sir Geoffrey Howe started the change when he cut income tax and increased stealth taxes like VAT, shifting the tax burden from the rich to the poor.

Sorry, but I can't accept that VAT is a stealth tax. It is the most visible there is, paid in direct relation to one's consumption and charged at lower rates on goods deemed essentials. It is even paid on Apple's products!

princeofpounds

Someone needs to tell Gurgle, Apple and others as they seem not to be aware of this. The truth is that currently it is not being tackled. Rather, HMRC would like to tackle it but have failed.

A lot of the stuff that is said about 'big companies not paying their share' is, perhaps unfortunately, nonsense.


That is why HMRC have such an appalling record of challenging such schemes - because most of the time, companies are simply working within the framework that governments themselves have created.


But it's such a seductive idea that is passes for gospel truth a lot of the time, people state it as if it is fact - of course international tax companies are tax evaders of the highest order.


If you want to understand these concepts better, you could do worse than look at the following blog thread.


http://www.timworstall.com/category/tax/


He's not a blogger that's always to my taste, but he does follow this issue with a slightly more critical eye than many.

BananaRepublic

princeofpounds wrote: »

A lot of the stuff that is said about 'big companies not paying their share' is, perhaps unfortunately, nonsense.

That is why HMRC have such an appalling record of challenging such schemes - because most of the time, companies are simply working within the framework that governments themselves have created.

Companies such as Starbucks, Amazon and Google are without doubt avoiding paying huge amounts of tax using schemes that are unfortunately completely legal, but not within the spirit of the tax system. As you rightly say, they are working within the current framework, it's all above board, and no crime has been committed. But it cannot be right that a shop on the high street pays more tax than Amazon for the same business practices, thanks to Amazon's 'creative' exploitation of the taxation system. The result will be to drive the other companies out of business, leaving the multinationals as the survivors, and tax takings reduced. Of course Starbucks et al still pay employer's NI and employee's NI and also income tax due on salaries. But corporation tax is dramatically reduced.

N1AK

Scarpacci wrote: »

To become a millionaire from investments is surely out of the grasp of most people without a huge dollop of good luck or rare skill.

I think this position is a little misleading. Obviously to invest you have to start with something to invest. I'm in my early 30s and if I didn't save another penny (including pension contributions) then the money we have currently invested would make my wife and I millionaires by 65 in real terms assuming ~4% above inflation returns.

On the basis that ~16 combined years working has provided us with enough capital that the proportion invested in stocks left alone for another ~35 years will make us millionaires I think it is entirely fair to give investing a lot of the credit.