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| Or a cat in the West Indies |
I have been writing recently
about tax avoidance schemes and the Sirens
who lure unsuspecting business owners and higher paid employees
towards their rocky outcrops.
Please don't misunderstand me. I am
certainly not against people managing their affairs to pay less tax,
and it can be done without worry. It is just that there are so many
offers from tax avoidance specialists which claim to reduce tax on
business profits to very little in the hands of the business owners
extracting it as income. The appeal is both to the greedy and to
those who resent paying so much of their hard-earned cash in tax when
they are making such a contribution to the economy by employing
people. I have some sympathy with the second category.
When I was in the tax avoidance
“industry” I saw both categories. I guess that in these
moralistic times post-banking crisis it is hard to sympathise with
the greedy but maybe it always was. I had a certain distaste for some
of the clients I saw way back; those who wanted the yacht in
Gibraltar and the house in Barbados mostly paid for by the Treasury.
Those others who were less selfish but wanted more control over their
money were easier do deal with. Yet both groups had to be apprised of
the risks.
The world has changed. The climate has
changed. Legal tax avoidance is second only to illegal tax evasion on
HMRC's hit list. It is a hard thing to do
with a scheme these days.
I am all for helping people save money
by paying less tax. It is a significant part of my business.
Sometimes though I get frustrated both by the clients' unreasonable
expectations and the double standards on behalf of Government, by
which I mean the machinery of the Civil Service and the environment
which came about under the previous administration where there was
(is) one rule for some working with Government organisations and
another for others who don't.
We have seen a recent row about the
head of the Student Loans quango
working through his service company. We in the tax profession all
know that the arrangement has nothing to do with saving him tax, but
it is related to the Government avoiding its responsibilities
as an employer re periods of notice, pension contributions and the
like. And that is what happens throughout the Civil Service and the
NHS where the “employer”, i.e. Government, prefers to pay
contractors generally through an agency rather than having them as
employees.
So all these contractors can save a
load of tax either working through their company or using an
“umbrella scheme” which for some reason HMRC often looks on benevolently.
I had a prospect come to me recently
who wanted to have a service company to save him tax. He worked for
one company, has done for eight years, and expects to do for a few
more. I had to tell him that with the degree of control the firm and
his agency had over him, he was a quasi employee and would be liable
to the IR35 legislation which effectively would tax him as an
employee. It wasn't on in his particular case. However, if he had
been working ultimately for a Government or local Authority
department my advice would probably have been different.
So we have overaggressive tax avoidance
schemes which may not work. We have sensible tax mitigation which is
the sort of work I do. In between, we have incredible hypocrisy in
the Civil Service in how they engage many of their workers, and
ignorance amongst Government Ministers who do not understand the
culture of hypocrisy which has grown up over employment
responsibilities and tax. That can't be right, can it?
