This page is quite old hence its rather spartan appearance.
Why not check out our Latest Stories page for our newest articles or search our site for anything.
COMMENT
It's sometimes said that "there's one law for the rich and another for the poor". However, it's normally the case that only a single law applies; what differs is the application of that law. Take, for example, tax law, which was the basis of two news articles that I've seen in past 24 hours. The first tax commentary which caught my eye came in the form of a press release from Independent Financial Advice Promotion (IFAP). It interviewed two thousand adults about tax planning before reaching the following conclusions: 1. Over four out of five people (82%) will pay more tax than they need to this year. 2. In total, Britons will pay £7.6 billion this year in unnecessary tax (£1.8 billion more than in 2005). The main ways that we are missing out on tax breaks include: failing to claim tax credits; non-taxpayers failing to reclaim tax on savings interest; making simple Inheritance tax (IHT) planning steps (such as writing life insurance policies in trust); and being fined £100 for missing the 31 January deadline for submitting self-assessment tax returns. These are all easily avoidable and preventable problems, yet, although 31 million adults resent rising tax burdens, three quarters of us do nothing to reduce our tax burden. Hence, IFAP attributes the problem to "ignorance and apathy" -- two drawbacks which cause many people to overlook potential financial gains. The second tax piece was last night's Money Programme on BBC2, entitled, "No Tax, Please, We're Rich", which looked at how the super-rich take steps to minimise their tax liabilities. Here are a few examples of how, thanks to legal tax avoidance, the mega-wealthy can pay low or no taxes: Being domiciled in a tax haven Billionaire retailer Philip Green's stake in his retail group is owned by his wife Tina, who has been officially domiciled in Monaco, which has no personal income tax, since 1998. Hence, when the group paid the Greens a dividend of around £1.2 billion last year, Mrs Green's overseas status saved them being landed with a £285 million tax bill. Payments in kind (PIKs) Since the Square Mile started to boom in the Yuppie boom years of the late Eighties, top tax accountants have looked for ways to legally avoid tax on City traders' huge salaries and bonuses. By paying staff in "payments in kind", they could legally avoid paying National Insurance contributions on these sums. On a million-pound bonus, employee NICs would be £100,000 and employer NICs would be even more -- savings well worth jumping through hoops for! Hence, the early schemes involved traders being paid in gold, for which they received a receipt which could immediately be sold on for cash. When the Inland Revenue closed this loophole in the early Nineties, other easily traded commodities were used as PIKs, such as wine, diamonds, antiques, carpets, hay and even animal skins. By 1993, PIK schemes were the usual practice in the City, but the Revenue has now clamped down on them all. Offshore employee benefit trusts (EBTs) During his high-profile divorce case, it was revealed that, among others, Arsenal star Ray Parlour's wage was paid into a Jersey-based employee benefit trust. The EBT would then grant Parlour a series of low-interest loans, on which no tax is payable. Being paid in this way saved Parlour around £500,000 over three years. Phones4U billionaire John Caldwell -- one of the fifty richest men in the UK -- also had £20 million paid into a Jersey-based EBT over three years, of which £11 million was returned to him in the form of tax-free, low-interest loans. This tax avoidance helped him to legally avoid paying millions in income tax. When the beneficiary of the trust dies, more tax-avoidance techniques enable their estate to avoid paying IHT, too. Wow! Partnership subsidies Top tax professionals also use tax loopholes to enrich themselves. In another high-profile divorce case, it was revealed in the House of Lords that Kenneth McFarlane, a tax partner at top accountancy firm Deloitte, had bought his family home in leafy Barnes via the partnership in order to receive tax relief of 40% on his home loan. Of course, there is no tax relief on residential mortgages since MIRAS was scrapped; the tax relief McFarlane received was designed to help the partnership to grow, not provide housing support for millionaire partners! Loss-creation schemes In 2003 came the latest tax-avoidance scheme: loss-creation schemes which artificially created a loss which could then be sold to a wealthy person to offset their tax liability. In some cases, people earning £500,000+ a year were using these artificial schemes to wipe out their entire tax liability! HM Revenue & Customs estimate that these schemes have cost it £2½ billion in lost income tax. Of course, HMRC fights back: it banned PIK schemes, beat EBTs in court, and is battling against loss-creation schemes. HMRC now has a specialist anti-avoidance team, plus a general anti-avoidance law introduced in 2004 forces firms to reveal new tax-avoidance schemes to HMRC before they are used. Failure to do so could lead to criminal charges, but the battle between "invention and prevention" goes on. If all else fails, tycoons and entrepreneurs have threatened to up sticks and move abroad in order to force the issue. HM Revenue & Customers reckons that, in two decades of organised tax avoidance, it has lost around £10 billion a year to various legitimate schemes, or 3p on the basic rate of income tax. Hence, by dodging their fair share of the nation's tax bill, the mega-rich put up taxes for the rest of us. Boo! If you'd like to join the ranks of the tax dodgers, check out these four articles, which reveal mainstream ways to bring down your tax bill without employing financial trickery: Finally, I'll leave you with a quote from Paul Baxendale-Walker, the tax lawyer who invented EBTs: "Tax is a cancer". I'm not sure that I agree with his sentiment, but paying more tax than I owe would certainly make me sick! More: Earn tax-free interest with a cash mini-ISA | Avoid interest on your debts with a 0% credit card!
