Sunday, 4 November 2012

Tax Dodging UK

"We don't pay taxes. Only the little people pay taxes." .... said US billionairess Leona Helmsley in 1983. Although originally sentenced to 16 years, she later spent 18 months in prison (the wealthy even evade the 'justice' meted out to 'little people'), for dodging her taxes.

Lets not fool ourselves, the UK tax system favours the rich (and big Companies such as Starbucks and Amazon), just as much as the US model, but also the loop holes and lack of join up allow the lesser earners to run a 'cart and horse' through the idea of us all paying our fair dues. In fact, as I will illustrate below, only those on P.A.Y.E (Pay As You Earn), i.e. directly employed by someone else, actually cop for 'paying our fair dues'.

UK's Most Wanted Tax Dodgers

Here's an illustration of how bizarre and unjust the UK's tax regime has become:

An I.T. Contractor, using a one man limited company as his employment vehicle (he and his wife are co directors, and he is the 'employee'), earns around £72k pa and decides to try and get round the provisions of Inland Revenue regulation 35, about what is 'self employed' in I.T. So with the aid of his wife, a qualified accountant, he says that he is compliant with this regulation, and can claim to be fully self employed, even though he is actually directed in his work by the companies he works for, and is not self employed in the same sense as say, a *plumber.

So in fact his contract doesn't get a round this IR 35 rule, and he most likely wouldn't be excluded from high rates of tax, should he ever be investigated by HMRC, but never mind, he decides to make hay while the sun shines, and declares his income as below the tax threshold and the vast majority of his income as 'dividends' i.e. Subject to tax at only 20% instead of the higher or standard rates, saving himself anything between £15 and £25k pa in taxes.

Now, being a bright and creative soul, he then hits upon another wheeze, and to reinforce his claim to be 'below the poverty line' .... he claims for Family Tax Credits. So now this genius is not only doing the tax payer out of £15k to £25k of tax revenue, but is also claiming free school meals and a tax credit for one year under Gordon Browns ill thought out scheme .... although presumably he will have to declare the 'dividends' as income at the end of one year and lose his Family Tax Credits for the following year.

He is also looking to see if he can try to dodge the change in rules on Child Benefit, that say families with an earner getting £50k plus can't get it, by using the same financial devices as he has used to avoid taxes.

If anything illustrates exactly why the tax burden is so high for the many, while being so low for the fortunate few, then this does. I know its a true scenario because the contractor was actually so proud of all his clever schemes that he boasted of them to a group of mere employees .... only prudence prevents me from naming him on this page.

Now before we all turn on the IT contractor, consider this:

(A) This is all 'legal' (apart from the IR35 part, which its very dubious that they would qualify to comply with if investigated), and is not breaking any laws except the moral standards we might hope for (and with an accountant as a partner, you would expect few of those).
(B) In fact most of the 'entertainers' on TV etc, and even those 'presenter names' at the BBC - "stars" in fact, employ exactly the same 'tax management' schemes via limited companies.

So when you are watching or listening to some liberal presenter, or a left wing comedians diatribe about 'the rich Tories', and or a liberal radio presenter on a day time phone in, 'tut tutting' at some wealthy persons money being 'off shore' .... just remember that they are all using the same tax avoidance schemes as each other. Jimmy Carr was just the more extreme edge of a thin wedge. To reinforce this view about who gets done, the HMRC has just announced that it won't prosecute those people with secret Swiss HSBC bank accounts (passed over by the French government), who admit tax avoidance.

'Pinsent Masons' director Ray McCann told The Times: “It is those at the lower end of the social scale who go to prison. There is no immunity offer for benefit cheats. The Revenue made a policy decision … Where there was an HSBC account, they would automatically go to contractual disclosure facility. This means immunity from prosecution is guaranteed if you own up to tax evasion, whether it be a small amount or billions.

Unfortunately the Companies house check service doesn't allow for a check of directors, or we could put in names, and find what each of these high wealth hypocrites actually declares as earnings, because from the humble freelance IT programmer, to the winner of a Sony award for radio, they all think that, to quote US Billionairess Leona Helmsley again, "We don't pay taxes .... Only the little people pay taxes..."

* Neither are the BBC employees who claim similar status for much the same tax avoidance reasons, but that's another story.


  1. This comment has been removed by a blog administrator.

  2. This sort of fiddle is why Capitalism has such a poor delivery record.


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