K2 scheme sparks tax avoidance debate

A Jersey-based tax avoidance scheme reportedly used by comedian Jimmy Carr has sparked further debate about the difference between unethical tax avoidance and legitimate tax planning. Nick Huber reports.

More than 1,000 people, including Carr, are reported to be using the legal Jersey-based K2 scheme, which is said to be sheltering £168m a year from the Treasury.

Under the scheme, revealed by The Times newspaper, an individual resigns from their company and any salary they subsequently receive is paid to an offshore trust.

Carr said on Thursday that he was no longer involved in the scheme and apologised for a “terrible error of judgement”.

In a statement released via his Twitter page Carr said: "Although I’ve been advised the K2 Tax scheme is entirely legal, and has been fully disclosed to HMRC (Her Majesty’s Revenue and Customs), I’m no longer involved in it and will in future conduct my financial affairs much more responsibly."

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GARR too restricted ...    4 thanks

JC | | Permalink

Is the reason for this because it becomes a bit too close to home for the politicians?

Widen the scope and it may affect them or their families

This is the problem with vested interests

ShirleyM's picture

Who advises, and who has influence?    1 thanks

ShirleyM | | Permalink

I agree with you, JC.

Who advises the government and politicians on tax issues?

Who makes the final decision, and do they have to explain how they arrived at that decision?

Are any of these people promoting, or using, these schemes?

 

Tax avoidance schemes    3 thanks

pturner.aims | | Permalink

Surely as the K2 and many similar schemes hinge on whether the 'loans' are actually loans or not then we could look at whether they are considered by the individual himself to be part of his liabilities and which therefore, should be disclosed when making an application for a mortgage, for example.

It seems to me that you can't have both ways, and that the loans, which for a typical IT contractor who has been using a tax avoidance scheme for several years, could easily exceed £1m should be included in credit rating records. That is of course unless they are not really repayable.

bookmarklee's picture

Remember that...    2 thanks

bookmarklee | | Permalink

...'legal' is not the same as 'effective'

...it can take many months or years before HMRC's challenges become public

...HMRC do explain which arrangements they find most egrecious on the Spotlights page of their website

...To paraphrase Mandy Rice-Davies, "The promoters of schemes would say that wouldn't they" (ie: that their schemes haven't been successfully challenged) even though the window for HMRC to mount a challenge hasn't closed and it can take years to determine the success or otherwise of a challenge.

Mark

Tax avoidance

dimmo | | Permalink

Why doesn't tax law follow substance rather than form?

Comments by politicians about    4 thanks

chris4454x | | Permalink

Comments by politicians about morality (in the context of tax or anything else for that matter) must be the ultimate hypocrisy. Is there any other body of people in this country who people have less trust or faith in than politicians? It is like being lectured on fire safety by an arsonist!

If they don't like tax avoidance then do something about it, or at least accept the blame for not doing anything effective about it up till now. Perhaps it wouldn't hurt them too much to tell the truth, that nobody has to pay any more tax than the law allows for.

The "right " amount of tax is not the " most" tax that HMRC (or their political masters) would like to get their hands on, it is the correct amount that the law says should be paid after allowing for specific statuary deductions to be made. And, by the way, these are not "loopholes" they are deductions allowed by law.

Better still, the Government might grow a pair and stop continually spending billions of pounds which it does not have on services that nobody has any entitlement to expect. If so it wouldn't continually need to desperately search around for ways of raising more and more tax. It would then be able to stop the lunacy of fuel duty increases and air passenger tax increasses. What is next to tax, windows, wigs?!!

What you say is perfectly

chris4454x | | Permalink

What you say is perfectly true. So is the reverse. Just because HMRC says a scheme is ineffective it doesn't mean it is. People have to go into these things with their eyes wide open, and be fully aware of the risks they are undertaking ( because these have been fully explained to them) ,which is a fundamental part of Peak's philosophy in promoting the K2 strategy as I understand it.

Perhaps "legal/illegal" is just a timing difference    1 thanks

dwgw | | Permalink

Mark makes a good point.  I seem to remember the promoters of K2 themselves saying that HMRC haven't agreed any avoidance schemes, other than through litigation, since 2004.  The bland statements that K2 is therefore "legal" is a bit premature, even if the Chancellor's Budget speech threat to act retrospectively and without notice is left to one side.

On a technical point, what has happened to the old Furniss v Dawson principle in all this?  Didn't that establish that, if all steps in a scheme were pre-ordained at the outset, they could be disregarded and the economic reality assessed?  It's not certain to me that K2, from what I know of it, contains sufficient uncertainty as to outcome that it sidesteps the F v D principle.  Surely anyone entering the scheme does so in the knowledge that there is no risk of loss of their money?  It would surely be a sham to claim the trustees could exercise much discretion! 

The litigation will be interesting to follow, although K2 is now surely destined to be legislated against and become an historic anomaly. 

the use of the word 'scheme'    2 thanks

justsotax | | Permalink

perhaps says more than anything.....whenever you see that relating to a tax issue then inevitably it is for one purpose only....to avoid tax....legally or otherwise it is likely to have no commercial relevance.

 

 

nigel's picture

What is the Government saying here?    7 thanks

nigel | | Permalink

There seems to be a continuous stream of bleating and misinformation emanating from the Treasury. Either the so-called "aggressive" tax planning schemes are effective, so the Government needs to change the law, or they're not and they need to pull their fingers out and say so, then everyone will know where they stand.

I recall that we have previously had chancellors and ministers accusing taxpayers of "avoidance" and generally unacceptable behaviour by (a) enjoying the nil rate of Corporation Tax on profits under £10,000, (b) claiming 100% FYA/AIA on capital expenditure and (c) more recently having the audacity to claim tax relief on donations to charity.

How am I supposed to advise my clients? Do I make them aware of tax reliefs and allowances, but tell them that morally they shouldn't claim them?

What about my non-resident clients? Should they be approaching HMRC to see if they can voluntarily pay tax in the UK?

I think this is a very shabby episode, bullying Jimmy Carr into changing his affairs simply because politicians are too lazy to graps the nettle and sort out our appallingly inadequate tax system.

But then, this is a Government that doesn't seem to be able to work out whether one of its own ministers has broken its own ministerial code! Am I alone in getting the impression that many politicians seem to regard the law as something handed down on tablets of stone from on high, something that is beyond them to change or improve upon, let alone re-write?

Don't blame the language    2 thanks

dwgw | | Permalink

Nothing wrong with "scheme" except guilt by association!

EMI scheme, share option scheme, EIS scheme, even plain vanilla film scheme - they're all specifically allowed by statute so as to encourage certain behaviour.

We mustn't think of all avoidance as wrong or having no other purpose.  That's just not true.

Equally, there's no point berating politicians and HMRC for not having prevented this when we all know there's a sector of our profession actively seeking ways around existing legislation.  It's for the courts to interpret the law and for government to legislate against "aggressive" avoidance. 

It would be helpful if there was a bit more clarity when tax laws are made.  But it's naive in the extreme to imagine that simple laws would make the problem go away.  There are two sides responsible for tax complexity.  Suppose the government abolished CGT today.  Does anyone seriously believe that scheme promoters wouldn't then rush to find ways of converting income to capital?  Even simplification can beget complexity!  

 

mydoghasfleas's picture

It's not a timing difference    2 thanks

mydoghasfleas | | Permalink

Illegal/legal is not a question of timing difference.  It breaks down to 3 heads -

1  Illegal is always illegal becuase it is contrary to law and therefore evasion.

2  Legal means it is within the law the split is then whether -

a it works and is therefore effective for the purpose intended

b it does not work and is therefore ineffective.

Using the illegal reference serves to confuse evasion with avoidance.

Michael Meacher's proposed private members bill is a nonsense as it will be covered by the GAAR and the progression of cases including Tower MCashback on commercial purpose.  More to the point, the principle of law is for the accuser to show the accused is guilty; if we take the Meacher approach here, should it be applied to other laws so the burden of proof is that of the accused.  Would you tolerate guilty until proved?

Furniss v Dawson is still relevant but requires a pre-ordained series of steps, one or more of which serves no purpose other than tax mitigation (e.g. inserted for no "commercial" reason - query if reducing a liability is commercial) in which case that step may be disregarded; this is different to dwgw's synopsis.  More to the point, how do you know it is pre-ordained?  The arrangement has a resignation unless the steps in the arrangement are such that he has to resign, there is always the possibility that the resignation does not happen.  Whilst it may be pretty certain that will happen it is a long way from saying it is pre-ordained which is that it is legally bound to happen.

The matter I find most irritating is the time taken to get the matter heard in PA Holdings it was a scheme promoted in 1999.  It took until 2009 to get it to the Lower Tribunal, 2010 to the Upper  Tribunal for an Appeal Court decision at the end of term in 2011.  Why is HMRC allowed to take 10 years to bring it forward.

 

 

fpurves's picture

Now we are - Guilty until proven innocent!    1 thanks

fpurves | | Permalink

Putting aside  tax avoidance, evasion or planning.... my concern is that Labour MP Michael Meacher's proposed bill seems to be intent on changing the basis of our legal system from "innocent until proven guilty" to " guilty until YOU can prove your self innocent".

 

A dangerous principle to set - I am sure you will agree??

ShirleyM's picture

Doesn't that apply now?    2 thanks

ShirleyM | | Permalink

Where tax is concerned, we already have to prove that an expense, or decision, is necessary for business, and that we are not avoiding tax, we are making a sound business decision .... to move our funds offshore maybe?

Isn't this why we keep invoices and such like, so we have proof of innocence?

 

Guilty Until Proven Innocent - A dangerous precedent

Wayne Pulman | | Permalink

I must agree entirely with the comments made by fpurves. The law of the land is simple - innocent until proven guilty. It is very concerning that goverments now seem to feel that the taxation system is one where the basic principle should be reversed. In no other part of the legal system would this be allowed.

There is an outcry when human rights are supposedly abused, with a whole industry of human rights lawyers and activists lining up to support the supposed victims. Where are they now? Do they not believe in innocent until proven guilty. I guess theres no fees in it for the lawyers and the activists are generally left wing zealots, so they aren't going to worry about the law when it comes levying taxes on succesful people.

Moving on I am afraid that I have no faith in HMRC to judge anything honestly. One only has to see the distorted view of the tax system that they present to innocent tax payers and their agents to understand exactly what their agenda is.

This approach by the goverment and others only encourages me to offer even more tax solutions to my clients.

 

 

 

I wonder who else is on the list...    5 thanks

justsotax | | Permalink

maybe Sir Bob Geldoff....perhaps we should just make a law that all members of such schemes should be published.....at least then those in the public can decide how they shop on the basis of the scheme members who clearly feel the british tax system is unfair on them.

Publicishing members of schemes .....    1 thanks

Wayne Pulman | | Permalink

justsotax seems to be in the same camp as the government and others here.

What is being said is that those in authority can decide to disclose the personal affairs of individuals who have done nothing illegal, as they see fit. This approach could be applied to any sector of society.

Perhaps we should publish a list of those people who the government decided were thinking of committing a crime but decided against it. By justsotaxs' logic that would be a good idea because people could then decide if they wished to deal with someone who was considering committing a crime.

We are not talking here about the "fairness" of the British tax system, we are talking about the government using one set of legal principles for all matters except tax where they can decide to make up the rules as they go along.

 

 

Ever signed a contract as an employee with an    1 thanks

justsotax | | Permalink

accountancy firm disclosing if you hold shares in the clients indirectly, or indeed if you do work on the side.....nothing different....

 

I am just suggesting that if i am going to be preached to on matters of the UK i would like to understand the persons situation/involvments.  Of course as someone has already pointed out we don't actually know if this scheme is legal as it hasn't been challenged yet.

 

 

 

 

 

The reach of the tax man - Reith Lectures.    2 thanks

harryhoundog | | Permalink

As our GDP has increased since the 1960s the politicians have sold off large areas of wealth creating industry and nearly doubled the percentage of the GDP that needs to be funnelled through state spending.

That is before we consider the totally unfunded promises and future borrowing requirement being piled on our children & grandchildren.and being left off the national balance sheet.

Give the Reith Lectures a listen - I am sure the Harvard professor can explain far better than I can.

THIS WILL DO THEM NO GOOD    2 thanks

P2 | | Permalink

Wayne Pulman says above:-

"What is being said is that those in authority can decide to disclose the personal affairs of individuals who have done nothing illegal, as they see fit. This approach could be applied to any sector of society."

All of this does them no good.  Innocent people, acting within the current rules and regulations (legally as they stand) are seen to be "demonised" by those in power - who will be next?

It is not just in my role as an accountant and tax adviser to the entertainment industry that this makes my blood boil, but also as a Mancunian and fan of Take That!   

If HMRC wants the Government to change things - they have the power to put forward suitable proposals for change.  Only by observing due process can they hope to have the backing and support of the people of this country.

 

Let us have some clarity

harryhoundog | | Permalink

Don't they do something like this in Sweden?

A good precedent unfortunately is the ruling that naming the recipients of "single farm payments" and the amount of tax bribe handed out, infringes the right to privacy - so perhaps those with tax avoidance schemes should follow that precedent.

Sunlight is the best disinfectant?

currently its legal...fine...but    3 thanks

justsotax | | Permalink

consider this....the next time Terry Wogan is demanding donations because the money isn't rolling in fast enough for children in need perhaps reflect on the £10k or so that he is picking up for doing a few hours work on that Friday night.  Now he may well donate this to charity (although i am not aware that he has previously), and 'technically' he is doing nothing wrong as this is paid out of the BBC.....but does that sit comfortably with you?....it doesn't with me....the thought of a kid raiding his piggy bank for a tenner in change whilst those preaching the virtues of charities get a kick back questionable at best.

 

As for take that - i don't mind their music.....but i wonder what their view is on illegal downloading of their music....or perhaps the downloading that 'technically' is not illegal yet....but is questionable.....do you think they are happy....do you think they haven't taken legal advice to get those sites/places shut down.....

 

 

Erm, a little Hypocrytical perhaps?!?    1 thanks

Robkoster | | Permalink

It is ironic that David Cameron has spoken out against this when  it was his own family are neck deep in the tax dodging mud.

Just found this online on the Daily Record website:

'DAVID Cameron was last night branded a hypocrite for condemning comic Jimmy Carr's tax avoidance as morally wrong while his inner circle are involved in similar dodges.

Super-rich Tory backers Lord Ashcroft and David Rowland avoided paying tax in Britain but the Prime Minister still handed them prestigious jobs.

His father-in-law Viscount Astor holds property in an offshore company, George Osborne has a family trust and Andrew Mitchell invested in a tax haven.

They deny tax avoidance but Labour's John Mann said: "Are these people morally wrong too?"

I know cutting and pasting from articles only shows part of the overview, but what i have selected are stone cold facts. It is going to be interesting to see how this develops.

 

 

A couple of things    1 thanks

mackthefork | | Permalink

“There are commercial reasons for trading through a limited company (limitation of liability, some people take company's more seriously, etc),” said James Hellyer. “What's the commercial reason for putting your assets in an offshore trust and loaning them back to yourself?”

So it would be okay to have a company for this reason, but not if you didn't care about any of this and only wanted to save NICs?  I think paying less tax is a genuine commercial reason, and that anyone who disagrees just doesn't see why.

"Labour MP Michael Meacher has tabled a private members bill in the House of Commons that would outlaw any financial transaction whose primary intention is tax avoidance or evasion rather than a genuine economic purpose.  

The proposed bill would transfer the burden of proof, from HMRC having to prove that a transaction was really a disguised tax avoidance device, to a company having to prove that it had a genuine purpose, Meacher said.  

“If HMRC believed for good reasons that it was really for tax avoidance purposes, they could declare that the transaction was null and void and it would be for the company, if they so chose, to challenge that decision in court,” Meacher wrote in his blog.  "" "

I predict this idea will be even less successful that IR35 and even more expensive and time wasting.

The main issues in this story are firstly how did an individuals tax affairs become public, someone should be fired for this, and secondly all the outraged people who can't believe things like this are legal (at the top of government for christ sakes) should all pay a little more tax than they legal need to as they clearly expect others to do so.

Stories like this come out and every MP gets wheeled out Hannibal Lecter style to have a go at accountants, the point is you have to do the best for your client or you are not doing it right.  Anyway these schemes are pretty much all dreamt up by barristers.

Regards

MtF

Hmm I heard a female news reporter a couple fo days ago....

mackthefork | | Permalink

The "right " amount of tax is not the " most" tax that HMRC (or their political masters) would like to get their hands on, it is the correct amount that the law says should be paid after allowing for specific statuary deductions to be made. And, by the way, these are not "loopholes" they are deductions allowed by law. 

 

Refer to pension contributions and saving in ISAs as "tax avoidance".  The term is used deliberately because they know most people listening will not know this is legal.  There can be no morality to making sensible provision to reduce your taxes.

Regards

MtF

@mtf...i can see it now    2 thanks

justsotax | | Permalink

HMRC officer : 'so can you please explain why you did not disclose any of these cash payments you received for work done...?'

 

Plumber : 'yes, as it reduced my tax liability i thought this counted as a genuine commercial reason for using a scheme'

 

There is quite a difference between taking sensible provisions to reduce your tax with the law and using a scheme which cannot be guaranteed to 'avoid' tax as its status is only backed by tax lawyers opinion, until tested in court.

 

 

dbowleracca's picture

What's the actual cost to the exchequer??    2 thanks

dbowleracca | | Permalink

Assuming someone does "avoid" tax, and pays only 1% instead of 50% (which is where the problem starts) - what do you think happens to that 49%??

Unless it is saved in a bank account, or spent overseas, it will find its way back into the UK economy.

For example, the individual concerned may decide to buy a new house. If this is from a developer, they will make a profit upon which tax is due. And then they will pay staff who will pay tax. And their suppliers, who also pay tax on their profits. And so it goes on. The money eventually finds its way into the treasury but just in a different way.

I would personally like to see the UK take a look at the way Hong Kong was developed - low taxes and no tax for the lowest earners. What happened? Everyone invested the savings in getting their business to grow, hiring more employees etc, which in turn generated greater tax receipts and so on.

If the government didn't waste so much money on the public sector and benefits for those that don't deserve them, then we could all pay a lower proportion of tax and if tax rates were say 25% and everyone had to pay tax at these rates, nobody would bother avoiding it. When you are losing half your income in taxes (and that's before you include VAT ad other duties!) then you are going to be inclined to try and reduce this!

ShirleyM's picture

@dbowleracca    2 thanks

ShirleyM | | Permalink

Sounds good in theory ... but what happens if everyone jumps on the same bandwagon? Why should anyone pay tax, and what if these builders, developers, etc. also use aggressive avoidance schemes?

Should the remainder of the taxpayers (whose numbers are getting fewer and fewer) pick up the tab?

Your argument that people would not use tax avoidance if tax rates were lowered is flawed. It hasn't worked in the past, so why should it work now? Why do people reduce their tax liability to 1% and not reduce it to a more reasonable 20 or 25%? I think you will know the answer.

The 1% being spouted probably DOES include their VAT, NI, etc. anyway. Vodaphone set a good example of this sort of spin!

What happened to Greece with 49% tax avoided ...    3 thanks

JC | | Permalink

@dbowleracca

Probably misunderstood where you are coming from, however, we seem to have your scenario currently being played out with Greece

Granted that they have retirement at 50 on the grounds of dangerous jobs (i.e. hairdressing etc.) and their public services are a drain on the system (cheaper to provide a taxi for every member of the public on the underground rather than run the service)

Nevertheless, clearly the avoided tax money has not found its way into the Greek Treasury - so something seems to have gone wrong along the way

I guess the point is that individuals in this category are potentially highly 'mobile' anyway and could choose to reside in any country in the world, but ultimately they choose the UK. Nothing is stopping them living elsewhere and with this in mind the choice of UK comes at a price; afraid that's the deal!

After all you don't go to a restaurant, eat the meal and then offer 1% of the price - do you?

HMRC are not very good at their job.

philfromleeds | | Permalink

 

If the HMRC can not stop unfair tax avoidance I feel heads should roll. I am sure it is not beyond their capabilities to disallow un-natural transactions and lets pass a law to make valid RETROSPECTIVE LEGISLATION with regard to tax affairs. 

What annoys me is that over 50 per cent of self-employed type businesses are on the fiddle. These individuals will just say that they find it hard to keep records so the accountant has to correct their record keeping. Now they will say If Jimmy Carr and his likes get away with it so why should I pay too much tax. No doubt they will try to make it sound funny.

jaybee661's picture

... exactly...    3 thanks

jaybee661 | | Permalink

Robkoster wrote:

It is ironic that David Cameron has spoken out against this when  it was his own family are neck deep in the tax dodging mud.

Just found this online on the Daily Record website:

'DAVID Cameron was last night branded a hypocrite for condemning comic Jimmy Carr's tax avoidance as morally wrong while his inner circle are involved in similar dodges.

Super-rich Tory backers Lord Ashcroft and David Rowland avoided paying tax in Britain but the Prime Minister still handed them prestigious jobs.

His father-in-law Viscount Astor holds property in an offshore company, George Osborne has a family trust and Andrew Mitchell invested in a tax haven.

They deny tax avoidance but Labour's John Mann said: "Are these people morally wrong too?"

I know cutting and pasting from articles only shows part of the overview, but what i have selected are stone cold facts. It is going to be interesting to see how this develops.

 

 

... totally agree, all this 'morally repugnant' stuff spouted from the mouths of the MPs is laughable, and makes my blood boil - everyone knows they are the worst offenders - always have been, always will be... so maybe all these people complaining about how tax schemes are bad for the country should target the MPs first - not our clients, who we have a duty to serve - and should be offered perfectly legal methods of reducing their tax bill - anyone who doesn't offer them to clients is not serving them properly in my opinion - good luck to anyone who takes them up I say!

... and, on another point of it being bad for the country, just seen how much the Olympics will cost the taxpayer - £11billion - enough said...

Lazy perhaps..    2 thanks

Kirkers | | Permalink

They are not loopholes in the law, neither are they 'morally wrong' in my opinion. The goverment simply have not done a good enough job dictating what they deem as illegal tax avoidance. If it ain't on the list, it's legal!

Or perhaps they're just sore about having less of a Christmas bonus with all the tax they're losing to the K2 scheme and others like it. I say well done to Jimmy Carr and those (unfairly) being singled out (publically!) for a completely legal tax saving scheme. If I earnt as much as Jimmy did then I for one would be very happy knowing my tax was not lining the pockets of the MP's and paying for the biscuits at their meetings.

What David Cameron has also failed to mention is that his father has been using schemes similar to the K2 scheme and using offshore accounts etc to avoid paying tax. Should we ask David to pay back that tax from his inheritance? I do believe we'd get a big fat 'no!'. It's always different when the shoe is on the other foot.

One last point; politicians calling someone 'immoral'. Pot, kettle, black.

ShirleyM's picture

That is one way of looking at it, I suppose    2 thanks

ShirleyM | | Permalink

While I have scant respect for politicians, it would be impossible for anyone to foresee the imaginative ways that many people dream up to cheat the system.

Trusts are being used in ways that few people would have foreseen. The end result will probably be a tightening of the laws regarding trusts and this may mean that people who use trusts for their intended purpose will have to jump through hoops in future, with all the accompanying cost and inconvenience.

Isn't this what happens in the grand scheme of things? A few find a loophole, and everyone has to suffer extra legislation as a result?

 

dbowleracca's picture

I think that a balance is required    3 thanks

dbowleracca | | Permalink

In my example above, it does suppose that everyone is not avoiding tax but if they were, as long as the money makes its way into the UK economy then it's all going to end up okay - assuming of course that there isn't any avoidance of VAT along the way.

I feel that, if you earn £200k a year because you have worked hard and been successful, taking £100k of it off you in tax is just wrong. What is the incentive in being successful?? You could get a good lifestyle by just having 10 kids and claiming all available benefits!

I'm not advocating avoidance of tax, but I think the government need to:

1) stop wasting so much money employing worthless public sector workers and being too afraid to cut jobs in this area. I know from friends and family that there is a culture of "hiding" unnecessary employees in pointless management positions.
2) look after entrepreneurs and successful people and encourage people to earn more without the fear of higher taxes

whilst the K2 scheme and others have been widely reported, not much fuss is ever made of the billions of tax lost by people not declaring cash in hand work, deliberately manipulating turnover to be below the VAT threshold (by not putting all sales through) and other downright illegal strategies.

let's all pay 25% tax, with a decent personal tax free allowance to help the poor. Make all businesses VAT registered to avoid the fraud above and unfair competitive advantages gained from this. Let's stop being so soft with lazy people who want a free ride. And let's stop wasting all the money that everyone pays in tax on pointless public sector workers, wars, benefits etc.

rant over :)

ShirleyM's picture

Why is it OK?    2 thanks

ShirleyM | | Permalink

" .....as long as the money makes its way into the UK economy then it's all going to end up okay...." 

I still don't understand this logic. On the assumption that none of the recipients of dodged tax will, in turn, dodge their tax liabilities, how does the country benefit equally from dodged tax possibly being spent on builders for a private house (for example) instead of nurses and policemen who help many people (for example).

Nobody likes waste, but the general public are more able to pressure the government into reducing waste of taxpayers money. If an individual who dodges tax decides to dump the saved tax in the river, or hoard it under his bed, then there isn't much anyone can do about it.

@shirley....this also suggests that    3 thanks

justsotax | | Permalink

taking cash is ok because it goes back into society - difference is that at least with the small builder/electrician etc the odd cash job will probably be spent in the local bookiess/off licence/newsagents etc.  Wonder what happens to the £1,000's saved by our millionaire friends - i doubt any will benefit small local businesses, indeed i suspect it will go towards luxury overseas holiday homes etc. which don't quite have the same benefit.

 

 

K2 and tax avoidance    4 thanks

kelvin | | Permalink

Without having a single socialist bone in my body, it does not seem unreasonable that those earning significant sums of money should actually pay a realistic tax charge thereon - and certainly 40% to me is not unreasonable.

 

Looking at the broader tax avoidance issue, it seems completely inequitable that our present Chancellor of the Exchequer, along with a very large proportion of MP's, stands accused of property "flipping" to avoid CGT on one of his properties.

 

To get UK taxpayers "onside", MP's should not be seen to be able to claim a property is their "main residence" for tax purposes, whilst another is their "main home" for Parliamentary expenses claiming purposes.

 

Once MP's lose their extremely generous - and unfair - tax advantages, perhaps the bulk of taxpayers will not overly mind paying their fair share of taxes; however, one can quite understand those that point to MP's as examples of those that engage in questionable tax avoidance practices, and then follow their example.

 

Kelvin Butcher 

Flipping MPs....    1 thanks

justsotax | | Permalink

not wishing to side with MPs....but 'flipping' is not exclusive to them....anyone owning property may well be in a position to do this, indeed the revenue give examples of such situations and what they deemed reasonable (not you will find such an example for the K2 scheme). (the generous tax free allowances do however appear to be restricted to MP's and certainly query the 'we are all in this together' statement).

 

It would however be nice to see the MPs lead by example....but i can't see that happening. 

Very Funny

hiu612 | | Permalink

chris4454x wrote:

Comments by politicians about morality (in the context of tax or anything else for that matter) must be the ultimate hypocrisy. Is there any other body of people in this country who people have less trust or faith in than politicians? It is like being lectured on fire safety by an arsonist!

 

Like being lectured on fire safety by an arsonist - brilliant!

 

Did anyone read this article in the Daily Telegraph. It gave the flip side of the argument rather nicely, although it was hidden away on page 24 rather than being plastered across the cover with a picture of Gary Barlow, and the newly named "Keep That"

http://www.telegraph.co.uk/finance/9347159/Britains-tax-system-is-the-real-villain-of-the-Jimmy-Carr-case.html

 

Tax

ds | | Permalink

The Government wants to do too many things which generally do not have the support of the tax paying population but continue do so by adopting various aggressive methods of taxation, Gordon Brown was an expert in this if nothing else. Civil service and public sector empires have been created which are difficult to tear down even though they really can't be afforded anymore.

Cameron was wrong and a hypocrite to criticise and expose the private tax affairs of Jimmy Carr in the way he did and then stopped short of doing the same to Gary Barlow who supported the Conservatives in the 2010 election campaign. Carr lambasted Barclays for only paying 1% tax and it seems someone is getting their revenge on Carr via The Times newspaper for this exposure.

Why should anyone have to pay a percentage of his income to the Government for their "services"? The tax paid should have an upper limit and then the rest is yours to do as you will. As another commentator said here earlier the money that was untaxed hardly stays inactive for very long and will be used elsewhere in the economy which will improve growth there. It really comes down to the point who can spend your money wisely, you or the government? I'm with Mr Carr on this one and no doubt in future when referring to these off-shore schemes they may well become known as "doing a Jimmy Carr".

pawncob's picture

Morality?

pawncob | | Permalink

If we're going to discuss morality in the context of Governments, please explain the morality of taxing someone like Carr at an effective lifetime rate of 70% (excluding VAT and other indirect taxes on expenditure).

ROTFLMAO

whopkinscom | | Permalink

pturner.aims wrote:

... and that the loans, which for a typical IT contractor who has been using a tax avoidance scheme for several years, could easily exceed £1m ...

Haa haa haa haa haa hee hee hee hoo hoo - Oh stop it wha wha wha wha. Mr Carr has certainly got some competition in the comedy stakes. Ho ho ho ho. Oh my sides hurt! 

Will (A typical IT contractor who lives in the real world!)

Fees for these schemes ...    2 thanks

JC | | Permalink

Whose pockets do the fees end up in?

After all the client gets to keep 80% of his gross income, HMRC gets 1% and where does the balance go?

The assumption must be that 19% (1/5th) goes to the financial advisor/accountant who dreamt up and/or administers the scheme (advisors)

Interesting that all the bad press has been targeting the client and very little is attributed to the innovators of these schemes - some members of the profession

Finally, supposing the scheme is overturned by HMRC - the client is on the line but will the advisor return their fee?

K2 scheme    1 thanks

johnporter | | Permalink

Maybe we should all be allowed to join this scheme. Then the Government would have to worry about Pensions for Doctors etc. as they would all have to sacked as no monies to pay them.

It was a bit hypocritical about the papers screaming about Charity giving which is basically another way for the Rich not to pay Tax. Maybe we shoudl contribute all our monies over the thershold to Charity that will also solve th pension crises 

A case of deliberately misunderstanding to gain a point...

mackthefork | | Permalink

I would not suggest that HMRC would receive this explanation well, or the courts for that matter, that does not change the fact that obtaining a cashflow benefit however done is a commercial reason for action.  There is a problem with the definition if anything, to argue against this is to say, black is white.

Your last paragraph I 100% agree.  The law is the problem here if there is one, to make public a private individuals tax affairs is not in the public interest and they can only get away with it because the crowd is in their favour this time (thumbs down for me!).  I wonder how they got the info (lol acceptable face of phone hacking).

Regards

MtF

@dbowleracca    1 thanks

Kirkers | | Permalink

Could not agree more! I for one do not earn close to 200k, ha, I am but a mere trainee. I agree that if you work hard and earn a very respectable living then why should you have half your earnings taxed? 25% for all seems fair. It gives people the incentive to achieve success, like you said. And benefit bashers will hopefully lose their free ride. My husband works 40 hours every week and brings home £1200 a month. I know people getting the equivalent of 15k a year in benefits, plus rent and council tax paid for them. Is our tax really doing any good if it's boosting people such as that?

fpurves's picture

All the focus is on personal tax..! - There is a bigger picture

fpurves | | Permalink

You do have to love the press and their slant on thing!

As I note no one is commenting that Mr Carr ( and many other affluent business people):

1) have houses in the UK which they paid millions for

 [ SDLT on £8m house @ 7% = £560,000]

2) Do run companies and will pay ER's NI

[say 10 employees average salary £30,000  @ 13.8%= £41,400]

3) run expensive cars, furnish said properties plus live a luxurious life style

[ lets say £1m per annum expenses @ 20% VAT = £200,000]

So Poor HMRC- Mr Carr has contributed £801,400 to your coffers in the last year ..... and you are STILL not happy!

Keep this up and all the wealthy individuals in the UK will ( as in previous decades) move out... and where will we be then!

( an unless my arithmetic skills have failed me 1% of something and always will be greater than 50% of ZERO)

 

 

Revenue approval?    1 thanks

The Black Knight | | Permalink

Many of these schemes state they have counsels opinion ( for accountants) and are approved by HMRC ( for the client). Surely a misrepresentation to a contract?

Do HMRC approve these schemes by not taking action I wonder? Perhaps because they fear they do not fail the Ramsay principle?

Substance over form? How can salary ever be paid with the intention it was a loan just by saying it is repayable (but it never happens)

 

 

 

 

 

LOL....@fpurves....you seem    2 thanks

justsotax | | Permalink

to be under the impression that Mr Carr would pay these other items....lets think SDLT...there is a scheme for that so probably not paying that.....Emp'ers NIC....hmmm perhaps an EBT with some sort of loan facility...sorted....properties...well if we make them FHL then the losses will hopefully mop up any more earnings.....hmm petrol duty - ah well there is always a price to pay.....

 

Yep 1% of something is greater than 50% of nothing.....I would like to pay 1% please....now i wonder what would happen if the other 20 million taxpayers decided to do the same......i get the feeling the 999 call wouldn't be answered, bins left uncollected, streets not cleaned etc etc etc.....you get what you pay for in this life......

One things for sure    2 thanks

The Black Knight | | Permalink

Those that work and pay tax are caught in a poverty trap and will perhaps never amount to anything for all their hard work.

Who's the stupid one?

We could really do with a full system crash.

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