You’ve been spending too much time reading the Sun if all you can manage is to trot out that rubbish. We all know it’s the very rich that can afford to do the necessary to avoid tax, while the vast majority just pay what’s asked.
Hey, don’t get so personal, accusatory and vitriolic.
I am absolutely not a Sun reader and am professionally very sure of my facts. Gary Lineker is a proven, previous tax dodger and couldn’t come up with a legitimate reason not to pay up the last £5M he tried to evade.
I thought you were better than that.
Apparently I was mistaken.
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HH, maybe time to go back to the fishy forum for a while to calm down…
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Sorry. I was unaware of Lineker’s past use of an LLP to avoid tax. Countless people avoid tax of course, through various means; Lineker is currently the hate figure of the Mail for example, whose owners happily use an offshore trust to avoid tax themselves. Of course, behind most of those signing us to these schemes is a clever accountant doing rather nicely in commission, so it’s not always clear where responsibility actually lies. There are so many opportunities to avoid tax that could be clamped down, leaving a lower burden for everyone else, including those wishing to invest in their pension.
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Nice reply Nigel. I think we can agree that we should all condemn tax evasion throughout society, whether through the use of accountants and fancy pants film schemes. Or “cash in hand” type arrangements when paying a builder or plumber. Where we might disagree is what is a “fair” rate of tax, probably best not to go there…
Apols, but the pedant in me must correct something here.
Tax evasion (inc. VAT fraud) is illegal and subject to serious criminal penalties for those involved.
Tax avoidance, in simplest terms, is bending the tax rules beyond the purpose for which they were intended/drafted e.g. overtly setting up structures to fund film production and getting allowable tax reliefs in the process, but with nothing ever being produced i.e. an entirely false construct. One legal argument in such instances has been that the organiser raised the construct/scheme in good faith and couldn’t predict the outcome!
Obviously, there could be a point in this where if reliefs and benefits are claimed in the full knowledge of a false construct, then the contention of ‘evasion’ arises.
Tax mitigation is a legitimate method of managing your tax position e.g. by using easements and allowable exemptions.
IME, the reputable accountants in the market, focus on the latter 2 areas, as evasion comes with far too many risks for the tax advisor and their client…and there are mechanisms to seek things like ‘pre-clearance’ from HMRC, although every scenario tends to be different.
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Agreed. My response was poorly worded. I wouldn’t bad mouth the accountancy profession, I work closely with some!
My comment related more towards tax evasion schemes, and those that either structure or promote them. The latter group I am sure encompasses some dodgy conmen, slick sales people, and dare I say a minority of individuals from parts of the professional community.
It kinda falls within the old-world definitions of ‘white collar crime’ but that term may be passé now?
Unfortunately, there is a cohort of people out there across all sectors, industries etc, whose moral compasses are inverted. As Terry Smith said during his recent address at Fundsmith’s annual gathering, the only person to guarantee year-on-year growth market returns was Mr. Madoff.
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I once recall attending the second wedding of a friend to someone who had a fair earning potential as well as family interests in diamond mining - one of their acquaintances who worked for HMRC presented a ‘joke gift’ of a book on legal tax avoidance. I’m not sure he actually needed it. This brought certain realities home.
I have written before but there are ways to reduce or even eliminate income tax payments that meet with the approval of HMRC! I have invested in Venture Capital Trusts which give a 30% allowance against income tax and the dividends are tax free. HMRC wrote to me and obviously many others asking if a market research company could make contact with me as the UK government is keen to increase investment using VCT’s in UK start up companies. For me it is a win-win because I like investing in UK companies. Like most investments VCT’s can be risky and not for the faint hearted!
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This is intended as a factual not political comment - but labour have said they will bring back LTA at £1m as soon as they are in power. My wife’s accountant thinks the removal of LTA is just a two year window - ditto the increase in AA from £40k to £60k. One of my wife’s business partners (a full time working GP partner for approaching 30 years) will almost certainly be advised to retire before a change in government and avoid paying tax on a surplus over the LTA. So there might be a lot of retirements in the next couple of years.
On the subject of tax evasion and avoidance, for decades I (an accountant but not a tax specialist) have been taught (I pay to go on tax courses regularly) that avoidance is minimising your tax liability within the rules. Such that payment of pension contributions for example is tax avoidance. The principle is that every taxpayer should have the right to arrange their affairs within the rules so as to minimise the tax payable. The rules then have to be designed so that “minimise” leaves reasonable tax being paid. Why should I have to pay the most ££ in tax on my income by arranging my affairs to suit HMRC?
I do acknowledge that the meaning of the word avoidance is debatable (Dan Neidle the tax lawyer dude who got Zahawi’s dodging into the news recently thinks I am completely wrong in my definition of avoidance - but a whole phalanx of tax accountants disagrees with him) - and I think some people have been trying to change it in recent years from being acceptable to being unacceptable. And some avoidance that claims to be within the rules is bending the rules or breaking them.
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The subject of avoidance or evasion is political. When the PM and the former PM and the former chancellor of the exchequer, along with mp’s of all parties take part in tax avoidance schemes then it can not be otherwise.
Re Mr Lineker. If the scheme he took part in was illegal, he would be in jail as per Lester Piggot. The fact is the scheme has not been proven to be illegal by HMRC. Is it moral? I don’t think so and I think that all such schemes should be closed, but that isn’t the law as it stands.
As you say, what’s been said is likely to drive some behaviours (best left here) — and, I suspect, the national cohort of IFAs will be contacting their clients sharpish post the publication of the new rules, due 23rd March?
Many of the tax avoidance (not evasion) schemes I’ve come across ‘the man on the Clapham omnibus’ would unquestionably regard as ‘evasions’ but they often aren’t deemed so because of the use of basic constructs, which are amplified and utilised in areas of taxation and with individuals, which could never have been envisaged when the Rules (‘R’) were laid down.
One challenge is, as @bruss kinda highlights, is that if you close some of these ‘loopholes’ and ‘interpretations’ down, such are the numerous variations on a theme, you can end up removing the original good intent of what the Rules were intended to deliver/allow/even encourage.
Some tax relief structures require 3rd-party finance and many lenders (mainstream banks) now require huge DD and ‘proof of acceptability’, with their own tax people ramping all over the detail too, as they want to stay ‘good friends’ with HMRC, and not be involved with anything which might generate reputational taint for them/their customers who may use same (perhaps by intro from their wealth management business).
IHT benefit from pension funds too - if that suits a persons circumstances
Could I ask members a general SIPP question, looking to transfer my daughters stakeholder pensions to a SIPP provider, I set the stakeholder pensions up for them when they were both born, we then left the UK.
Would now like to transfer monies from current UK provider to a SIPP fund, whilst my daughters are British citizens they dont have a NI number as they left the Uk as babies, problem is I haven’t been able to find a SIPP provider who will open an account without a NI number, and im not sure if this is a legal requirement or just a providers preference, Anyone know of a provider who doesn’t require a NI number?
I always understood avoidance to be legal and evasion to be illegal
I guess the devil is in the detail
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I suspect you may not find one as the bedrock data for tax reporting is the NI number as I understand things e.g. as I understand, drawings from a SIPP provider are subject to taxation at source (PAYE), and alike any PAYE arrangement in the UK, they will also require an HMRC feed with a tax code (founded on NI data).
NI numbers are also required for ISAs too IME.
Thank you for the input, it is a bit of a conundrum as it seems they may be 'stuck" with the current fund provider until they draw down in a few decades time ( assuming the children dont return to the Uk for work purposes in the future.
ISA’S are not on the table for them as I understand they need to be UK tax resident to have an ISA.
The problem for many of those DB scheme members is that they are not actually contributing anywhere near £40k or £60k personally but are getting stung by the ‘notional pot growth’ which is derived from calculations as you suggest and has in the past been subject to use of different CPI values for calculating growth within a 12 month period. So someone on paper on 100k might pay 13.5% as automatic pension contributions in a year (employer contribution in addition of coure), they could well end up with hefty AA tax charges due to some modest pay increments or promotion from a lower salary.
Another issue (NHS anyway) is the fact that many higher paid employees cannot dierctly control the pension input without jumping hoops.
There are tiered pension contributions based on salary (used to be flat rate of 6% years ago). I’ve heard it said that tiered contributions would have been fairer for final salary schemes but not for the newer CARE based ones since 2015.
Because their pension contributions are automatically made on all pensionable pay components, if an employee is aware they may be at risk of a breach of the AA thresholds and a seemingly punitive tax charge, the only way to reduce the pension input to reduce AA liability either involves leaving the scheme (and some loss of in service benefits) or reducing hours to directly decrease pensionable pay. Some leave/rejoin the scheme doing a so-called hokey-cokey.
Add in the ridiculous ‘band’ where there is loss of personal allowance at the rate of £1 for every £2 earned, there is no wonder that clinicians in particular have either cut their hours or do not want to do additional non-pensionable work as increasingly many are simply valuing their free time and better work-life balance.
There are of course smaller numbers of individuals who do so much work that they whizz past the 25k band where the personal allowance is lost, get maximum AA tapering but are so far down the line those things balance out for them . I don’t think this applies to the majority where getting hit by some of these ‘bands’ just means much higher taxation than they feel is worthwhile (62% or more in the case of loss of personal allowance).
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My daughter took on a partnership in a GP practice a couple of years ago. The tax implications of this are bizzarre, and so far her tax burden has far more than wiped out any financial advantage of partnership, although that should change over the next year or two. She is of course aware of the pension situation, and her long term financial plan is based around ensuring, in as far as it’s possible, that she retires (at least from the NHS, if not altogether) before any such restriction kicks in. There is a high chance that she will look at a career change, possibly out of medicine altogether, in large part because of this issue.
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…and as for how those calculations are decided upon I gather that many feel that the existing multipliers used for notional growth are far too low and should be higher - another area which could be up for reform along with minimum retirement ages for schemes.