Tax break imminent for those on high earnings?

[Cyclone]

Yes I know about IR35. Not particularly effective, horribly complex and confusing.

 

But plugs the hole that you appear to think is being abused. (By me apparently, despite you knowing next to nothing about what I do).

[convert]

It's not what we all do unfortunately, e.g. if you choose to set your income at a low level you could avoid income tax altogether. Sure you might pay tax in other ways but it would be simpler, and fairer if the system was consistent and transparent.

 

Perhaps we should remove income tax totally, and introduce service and purchase taxes.

[Cyclone]

Perhaps we should remove income tax totally, and introduce service and purchase taxes.

 

Is there anywhere that operates like that to use as an example?

 

I guess the counter argument is that such a tax is easily circumvented with 'under the counter' transactions.

 

Whereas PAYE is incredibly effective at gathering tax.

[ricgem2002]

"If your income comes from employment, there is very little scope for avoidance. HM Revenue has it pretty well pinned down. Even if your employer might be prepared to go along with a complex scheme, they might find themselves having to pay your tax themselves, and this discourages them!") i wonder who put this in place ( and why paye employees are hardest hit )oh let me think some wealthy person who it dosent affect

you forgot to answer me this cyclone

[ricgem2002]

I've just checked our Avoidance Group pages. In the year 2011 so far there have been 42 new avoidance schemes set up, to HMRC's knowledge.

 

They mostly target very obscure and specific pieces of legislation and as such, I would suggest, are a bit beyond the normal, tax paying public.

i wonder who they will benefit then .are you willing to share these schemes with us ?

[truman]

"If your income comes from employment, there is very little scope for avoidance. HM Revenue has it pretty well pinned down. Even if your employer might be prepared to go along with a complex scheme, they might find themselves having to pay your tax themselves, and this discourages them!")

you forgot to answer me this cyclone

 

Aren't the tax laws voted in by parliament..? Do MPs come under PAYE?

[ricgem2002]

Aren't the tax laws voted in by parliament..? Do MPs come under PAYE?

yes id like to know that too?

[I1L2T3]

Aren't the tax laws voted in by parliament..? Do MPs come under PAYE?

 

They're amongst the worst if news reports are anything to go by. Meg Munn's husband helped a few of the Labour ones out. Dozens of Labour MPs were recieving personal tax advice.

 

Peston:

"In other words, there is a fine line between taking advantage of tax breaks explicitly created by the government to meet some kind of economic or social purpose and taking cynical steps to deprive the state of its due."

 

http://www.bbc.co.uk/blogs/thereporters/robertpeston/2010/09/is_avoiding_tax_immoral.html

 

Many MPs clearly crossed that line. Peston does make the very valid point that it is very difficult to draw the line. Where any individual draws it is subjective but no individual is compelled to drive their tax down to the absolute minimum.

[I1L2T3]

You might have heard of IR35, this law was introduced deliberately to stop the scenario you partially describe, that of setting up a ltd company but continuing to act as an employee.

There is no issue with a business continuing to just employ one person, that's perfectly valid and it's what many people running all sorts of businesses do,small shops, gardeners, builders, plasterers, tradesmen of all kinds and small service providers, entirely legitimate. and small service providers, entirely legitimate.

It's not been possible to simply create a ltd company, stay with your employer and avoid tax for at least a decade though.

You have to be genuinely self employed, work for multiple clients, without any of the benefits a real employee would have and equally without any of the protection.

The higher take home pay could be considered to be compensation for the risk that my contract could be terminated tomorrow, that I have to hire an accountant, take out business insurance, pay my own expenses, pay for my own pension and pay for my own holiday time... Of course the law doesn't spell that out, but that's certainly one way of looking at it.

 

Indeed, I'm well aware of the downsides of being self-employed re: sick pay, holiday pay etc... etc...

 

You will of course be aware that for individual traders the ltd company route is not the only one. Sole traders for example have a kind of salaried tax regime more akin to an employee. So many of your small shops, gardeners, builders, plasterers, tradesmen of all kinds set up as sole traders will be paying their fair share, although I'm aware many of them are a headache for the tax man. The advantages of the limited company are succintly described here:

 

"Tax-wise, limited company directors have the potential to pay less tax, as they can pay themselves small salaries and high dividends (which are free from NICs), whereas sole traders pay themselves a salary which is liable for NICs as well as income tax."

 

http://www.bytestart.co.uk/content/19/19_1/limited-company-or-sole-t.shtml

 

Dividends under £300k are taxed at 20%

 

[Cyclone]

you forgot to answer me this cyclone

 

If you'd asked a question there'd have been more chance of an answer.

 

Clue, questions finish with one of these '?'.