Eleven million tax avoiding documents..

[Bob Arctor]

I have in the past wondered WHY dividends are not just treat the same as any other income. It would simply things, it wouldn't be a massive hike in tax and it would reduce the dislike that some people feel (which I suspect is mainly down to ignorance).

 

Hmm, this might be a good idea. What about, for companies with shares, replacing corporation tax with a tax on dividends? The problem with corporation tax is that shareholders have an incentive to pressure boards into aggressive tax avoidance because the less corporation tax is paid, the more money there is to pay in dividends to shareholders. If the tax was on dividends would that make it harder to dodge the taxes?

 

Berberis says that tax is 20% of profits; ho ho, if only that were the case for every company, eh? An alternative would be to calculate the amount of corporation tax actually paid on profits in the UK and then levy a sliding scale tax on dividends to make up the difference between that and 20%.

[Cyclone]

Hmm, this might be a good idea. What about, for companies with shares, replacing corporation tax with a tax on dividends?

That's pretty much all companies (with a few exceptions that make up a minority of companies).

 

The problem with corporation tax is that shareholders have an incentive to pressure boards into aggressive tax avoidance because the less corporation tax is paid, the more money there is to pay in dividends to shareholders. If the tax was on dividends would that make it harder to dodge the taxes?

Companies have many options to dispose of profit that doesn't include dividend. So by removing CT you'd massively reduce government income.

For example (and this is just a quick one I've thought of), if CT were gone, but DT increased, my company could pay me up to the limit of the 20% tax band as salary, then put the rest into a private pension, I'm pretty sure my overall tax bill would fall.

Or it could just keep the cash in the company until I wind the company up, at which point entrepeneurs relief applies to the CGT and I pay only 10% (this is actually a good option at the moment in fact, but slightly less beneficial than putting the money into pension, but gets it in my hands immediately instead of in 20 years).

 

Berberis says that tax is 20% of profits; ho ho, if only that were the case for every company, eh? An alternative would be to calculate the amount of corporation tax actually paid on profits in the UK and then levy a sliding scale tax on dividends to make up the difference between that and 20%.

 

The difficulty there is working out "profit in the UK". Starbucks buys beans from abroad (it has to, we don't grow coffee). They can arrange that purchase to be from Starbucks NL who charge them a huge amount for beans. Entirely legal, but now Starbucks UK makes no profit and Starbucks NL makes a profit on the transportation of beans.

 

Edit - If starbucks does that of course, then it can't disperse any funds to shareholders of starbucks UK because it has no profit to disperse (and dividend can only come from profit obviously). In reality of course starbucks UK is entirely owned by the parent starbucks US, as is Startbucks NL which did make a profit. An extra wrinkle though is that the profit can't go "home" to the US, because then it will attract US tax, Apple have this problem at the moment, lots of cash offshore, can't bring it home without a HUGE tax bill.

 

---------- Post added 13-04-2016 at 08:57 ----------

 

Dont forget, a Dividend is only 80% of the profit from a company (the other 20% is tax) and from this new tax year, dividends are also taxed at 7.5%.

 

Until you reach the higher tax threshold.

 

It's not that big a change tbh.

 

You can play with some numbers here

 

http://www.itcontracting.com/calculators/2016-2017-dividend-tax-increase-calculator/

 

For someone running a personal services company, paying themselves £11k salary (gross) and £28,247 dividend (net) (taking them right up to the limit of lower rate tax). In 15/16 they will be £1663 worse off. With a total take home of £36399 after tax. (FYI that's equivalent to a gross PAYE salary of £49875

 

Surprisingly though once you pass that ideal value, it doesn't get worse much quicker.

Pay an extra 20k on top of that ideal value, and the difference between 14/15 and 15/16 will be £2225, and that's now an income equivalent to a gross PAYE salary of £75,000 (Which for comparison would pay £19200 tax a year, compared to £8000 personal tax and approx 12000 corporation tax through the services company)... (Which just goes to show that the overall level of taxation is actually pretty close now).

Edited April 13, 2016 by Cyclone

[foxy lady]

Trust me I'm not enjoying this.

 

I want our politics to be cleaner but this all looks as murky as hell.

 

It seems that Jeremy Corbyn not only got fined for submitting his tax return late. He also left blank the earnings from pensions despite receiving a pension of around £10,000 per year since 2014.

[I1L2T3]

It seems that Jeremy Corbyn not only got fined for submitting his tax return late. He also left blank the earnings from pensions despite receiving a pension of around £10,000 per year since 2014.

 

Justhelps prove the point. Politics needs cleaning up.

[RonJeremy]

And now it gets serious...

http://www.thedailymash.co.uk/politics/politics-headlines/nick-clegg-publishes-nectar-points-statement-20160412107952

[ricgem2002]

It seems that Jeremy Corbyn not only got fined for submitting his tax return late. He also left blank the earnings from pensions despite receiving a pension of around £10,000 per year since 2014.

just goes to show some labour mps are as forget full as tory ones:hihi::hihi:

[I1L2T3]

just goes to show some labour mps are as forget full as tory ones:hihi::hihi:

 

Or just as crap

[spilldig]

It seems that Jeremy Corbyn not only got fined for submitting his tax return late. He also left blank the earnings from pensions despite receiving a pension of around £10,000 per year since 2014.

 

Good grief. I would hope that HMRC aren't so lax as to not know about that anyway, or we really are up the proverbial creek.

[Cyclone]

Good grief. I would hope that HMRC aren't so lax as to not know about that anyway, or we really are up the proverbial creek.

 

How do you expect them to know if it isn't declared?

[JFKvsNixon]

And now it gets serious...

http://www.thedailymash.co.uk/politics/politics-headlines/nick-clegg-publishes-nectar-points-statement-20160412107952

 

He could be in trouble, he hasn't declared his Starbucks loyalty card!

Edited April 14, 2016 by JFKvsNixon