We’d like to remind Forumites to please avoid political debate on the Forum.

This is to keep it a safe and useful space for MoneySaving discussions. Threads that are – or become – political in nature may be removed in line with the Forum’s rules. Thank you for your understanding.

📨 Have you signed up to the Forum's new Email Digest yet? Get a selection of trending threads sent straight to your inbox daily, weekly or monthly!

Asking for a friend .... actually, not, asking because I’d never thought folk w/could do this ...

13

Comments

  • bostonerimus
    bostonerimus Posts: 5,617 Forumite
    Sixth Anniversary 1,000 Posts Name Dropper
    edited 21 November 2019 at 12:09AM
    @bostonerimus Moral deamons are exercised in many ways in the UK in my own experience. Ask many self employed People if they choose to pay income tax or use the tax efficiency of CGT on dividends and you’ll see it ... I see few who pay what an employed person does ... generally as they pillory the big tech companies for their shameless sidestepping of tax too. I know there’s differences in other areas but it’s really not a level playing field out there.

    Of course, everyone pays what they’re due to pay within the UK’s tax jurisdiction, so no one is doing anything wrong - no ?

    Personal fibre, and the strength of the moral compass will direct the steps that folk take.

    I may live in different circles to you, but I know many who will side step taxes soon as look at you, some even brag about how little they pay - in some cases bragging to have paid zero in tax for seven consecutive years, whilst living the high life with booze fueled weekends and foreign holidays as far afield as Australia .... whilst saying the ‘rich’ should pay more.

    Don’t get me wrong, I pay close to £90k a year in income tax and the only tax rebate I receive is for gift aid donations. It rankles me to witness such selfishness and hypocrisy, but truly, the world we live in is not quite as philanthropic as we’d love to believe at times. TD

    The critical point in your question is that you are proposing a "tactical divorce". The only reason for it would be tax avoidance and so I would say that doing it would certainly attract the attention of HMRC inspectors and it would get my inner daemon very agitated and it is obviously causing agitation at your end otherwise why ask the question?

    I had a similar issue a few months ago when I did my inheritance tax planning. I researched all the wrinkles and in the end just following the rules was the easiest both morally and from a paperwork perspective. I will use the law to reduce my tax, but I'm not going to contort myself or it to do that and I'd put a tactical divorce firmly in the contorting category.

    Why don't your friends do what I'm doing? ie give as much away to heirs within the tax rules while alive and coming up with a charitable donation plan too. I view charitable donations as directed taxation. I'm very liberal so I don't really want my tax money going to nukes and oil company subsidies, so I'd rather it went to ACLU, my local independent cinema, Green Peace and Medecins San Frontieres. But I imagine there will be considerable tax on my pot when I die and I accept that...people need to be more Zen when it comes to tax and money.
    “So we beat on, boats against the current, borne back ceaselessly into the past.”
  • I'm often amazed at people's lack of moral deamons. If it feels wrong then it usually is.

    I think it feels wrong, that for every £100 earned between £12,500 and £50,000, the government collects, around and about, £59. (At least on the first two dips.)

    Rises to around £65 per £100 for the next band starting at £50K.



    Dip 1:

    From the employer
    £100*13.8% erNI = £13.80

    From the employee before being paid
    £100*12% eeNI = £12.00
    £100*20% IT = £20.00
    Leaves £68.00.

    Dip 2:

    From the employee after being paid
    £68.00*20% VAT = £13.60

    Of course lower VAT rated things and things with excise duty will mess with this last figure.
    Conjugating the verb 'to be":
    -o I am humble -o You are attention seeking -o She is Nadine Dorries
  • I think it feels wrong, that for every £100 earned between £12,500 and £50,000, the government collects, around and about, £59. (At least on the first two dips.)

    Rises to around £65 per £100 for the next band starting at £50K.



    Dip 1:

    From the employer
    £100*13.8% erNI = £13.80

    From the employee before being paid
    £100*12% eeNI = £12.00
    £100*20% IT = £20.00
    Leaves £68.00.

    Dip 2:

    From the employee after being paid
    £68.00*20% VAT = £13.60

    Of course lower VAT rated things and things with excise duty will mess with this last figure.

    But is taxation wrong in the same way as getting divorced to explicitly avoid that taxation?
    We can argue about the relative merits of various taxation levels, but is it right to engineer a divorce in bad faith to avoid those taxes.

    I'd say the bad faith divorce could be an issue in a few ways.

    1) If you are religious then breaking the marriage vow for money is surely wrong.
    2) Even with the agreement of both parties it might cause a rift in the relationship beyond the divorce. Also agreement might also lead to conspiracy charges which might increase the penalties.
    3) How would the ex-couple live after the divorce. If they want to stay together would they be looking over their shoulder for a tax inspector?
    4) I think it's tax avoidance and should get them prosecuted.

    So is the worry and lawyers and planing and scheming really worth it for just money?

    When I see people planning schemes like this I know that they aren't really rich in the ways that matter most and that financial freedom only occurs when you stop worrying about money. That's what I'm trying to do.
    “So we beat on, boats against the current, borne back ceaselessly into the past.”
  • ...
    When I see people planning schemes like this I know that they aren't really rich in the ways that matter most and that financial freedom only occurs when you stop worrying about money. That's what I'm trying to do.
    This exactly. Once I actually retire I hope to relegate concern for my finances strictly to a background maintenance task, it's taken way too much of my attention for the last few years while I got everything in order.
  • I think there is a high risk that a woman who if financially dependant on a wealthy husband, might well feel that her new found financial independence gives her the opportunity to start a new life without him, especially if she feels that money trumps any feeling he has for her.

    Also having avoided one tax they could get clobbered by IHT should one of them die after they have divorced and lost their spousal exemption.
  • But is taxation wrong in the same way as getting divorced to explicitly avoid that taxation?

    You don't find the government acquiring an equivalent marginal 65% tax rate on someone on the minimum wage morally repugnant, and that nothing should be done to try and mitigate it?

    (For the record, I don't agree that the proposal in the OP is in any way 'right' or 'correct', merely that one shouldn't let one's affairs get in the state where such actions are the only way of keeping the government's usurous hands of one's hard-earned money in the first place.)
    Conjugating the verb 'to be":
    -o I am humble -o You are attention seeking -o She is Nadine Dorries
  • Albermarle
    Albermarle Posts: 28,907 Forumite
    10,000 Posts Seventh Anniversary Name Dropper
    financial freedom only occurs when you stop worrying about money
    I agree that the main advantage of being financially comfortable is that you do not have to worry about money in the same way that the majority have to .
    You see many posters on this forum who clearly have more money than they could ever reasonably spend , fretting about paying a bit of extra tax in 10 years time or similar.
  • Albermarle
    Albermarle Posts: 28,907 Forumite
    10,000 Posts Seventh Anniversary Name Dropper
    You don't find the government acquiring an equivalent marginal 65% tax rate on someone on the minimum wage morally repugnant
    No - the tax take in the UK is actually lower than average for most similar First World countries .
    In fact looking at the state of public finances/ spending needs it should probably be a bit more . Although that is open to debate of course.
  • Malthusian
    Malthusian Posts: 11,055 Forumite
    Tenth Anniversary 10,000 Posts Name Dropper Photogenic
    There were truly surprised at the lack of moral judgement ... it reaffirmed their faith in people but made a wider societal judgement that “those with a pension problem, listen well and share thoughts”. They said their family (small or no pensions) trotted our the standard ‘you’ve got to be earning it to be paying it’ line to them and weren’t much help.

    It doesn't reaffirm faith in people, just faith in people who hang around the Pensions website of a site called MoneySavingExpert. If they want a second opinion they could try asking a Momentum forum.
    The advisor for the change charged them around £8k to do the TVAS and set up the SIPP.
    More than reasonable for a liability of that size, though it doesn't answer the question of whether it was a good idea.
    sandsy wrote:
    And if it didn't, they should consider complaining, first to the adviser then to the Financial Ombudsman if the initial complaint doesn't achieve anything. A successful complaint resulting in redress might pay the tax bill and then some - saving the costs and moral questions of divorce.

    I wouldn't count on it paying the tax bill. FOS awards for stuff that happened before 1/4/19 are only binding up to £160k. If they want more than that they'll have to go to court.

    Redress over a £2.5 million transfer would sink most small advisers (a different matter if it's SJP or another big national). If the adviser liquidates and the bill isn't covered by PI they'll only get £50k from the FSCS.

    And note that you can't take your £160k and then go to court for the rest - someone tried this and the court's decision was that taking the FOS award constituted settlement. You can go to the FOS, be offered £160k, decline it and go to court. And it's likely to be a good idea because the FOS is a consumer champion and the courts will likely take the side of the FOS unless it committed a clear error.

    So you could conceivably be offered £160k, decline it, go to court for however many hundreds of thousands, win, at which point the adviser liquidates (because they could afford £160k but not hundreds of thousands) and you end up with £50k, minus court costs.
  • Malthusian
    Malthusian Posts: 11,055 Forumite
    Tenth Anniversary 10,000 Posts Name Dropper Photogenic
    You don't find the government acquiring an equivalent marginal 65% tax rate on someone on the minimum wage morally repugnant, and that nothing should be done to try and mitigate it?

    Point of information, the marginal tax rate on minimum wagers is anything up to 90%, due to withdrawal of benefits.

    The only mitigation strategy in that position is benefit fraud and the grey / black market.
    Albermarle wrote: »
    No - the tax take in the UK is actually lower than average for most similar First World countries .

    A lot of First World countries have youth unemployment north of 25% (which is why lots of their young people come to the UK) and are not a model for the UK to follow. Unless you want to retire at 60 and live off the earnings of younger citizens, but tbh, if you haven't learned enough French or Spanish to ace the civil service exams by now, you are probably better off sticking with what you've got.
    In fact looking at the state of public finances/ spending needs it should probably be a bit more . Although that is open to debate of course.
    No, the state of public spending suggests it needs to be lower. If I go into any business and receive terrible service, I'm not going to improve the service by handing them even more money.

    Most public services are designed to exist in permanent crisis (any organisation that claims to offer high-quality service to everyone for free will always be in crisis) and will burn up as much money as the nation is willing to shovel into them. This was tested to exhaustion by Gordon Brown.
This discussion has been closed.
Meet your Ambassadors

🚀 Getting Started

Hi new member!

Our Getting Started Guide will help you get the most out of the Forum

Categories

  • All Categories
  • 352K Banking & Borrowing
  • 253.5K Reduce Debt & Boost Income
  • 454.2K Spending & Discounts
  • 245K Work, Benefits & Business
  • 600.6K Mortgages, Homes & Bills
  • 177.4K Life & Family
  • 258.8K Travel & Transport
  • 1.5M Hobbies & Leisure
  • 16.2K Discuss & Feedback
  • 37.6K Read-Only Boards

Is this how you want to be seen?

We see you are using a default avatar. It takes only a few seconds to pick a picture.