I’m a tax adviser to millionaires and billionaires. AMA.

[LetsTalkTax]

I advise rich people on their tax affairs. With all the posts today of people outraged by Vinted being taxable, I thought it might be a good time to do an AMA and dispel some of the myths posted about the tax that rich people don’t pay.

Absolutely not stupid and naive, just reflective of how the press sensationalises tax and how little education we get on it!

This is why I started the thread as there was so much misinformation on the Vinted threads.

First of all, this is not a change in tax rules or policy. For years the £1,000 trading limit has been there - mostly for the benefit of those selling on Vinted and the like (before there was no lower limit or allowance).

The limit applies if you are trading only. Trading isn’t clearly defined anywhere, but if you are buying things with the intention to sell for a profit, making many many transactions over time, or improving the things before you sell (think embroidering clothes then selling) then you are probably trading. If you are selling things you’ve used personally and no longer need, you’re probably not.

If you’re not trading these rules don’t apply to you. HMRC might find you in Vinted and ask some questions, and once you explain what you are doing with anecdotal evidence they are unlikely to pursue further.

Even if you are trading, you only pay tax on the profits you make. Most stuff you will obviously not be selling at a profit and so again, no tax.

The same rules apply to car boots.

In the digital artwork position, I think this should be taxed. You’re creating something for profit. It’s not a lot different to being employed and paid. Again, you only pay tax on the profits and I’d normally recommend that anyone puts 20% of their total income aside for the tax bill. Again, you could not earn £1,000 without having to pay tax - it’s only when it’s more than this you pay tax. But again, that’s only obvious if you know!

However a lot of the rich just take loans against their wealth so they get cash but don’t have a taxable event and pay interest instead.

How do they pay back the loan? Or pay the interest?

They get interest only loans, or sell down some investments for part repayments. Banking arrangements for the ultra wealthy are different to what's available on the high street!

Maybe a wealth tax, but COVID would have been a great reason to introduce one and so I think the moment might have passed. A lot of HWNI would move out of the UK to avoid it though, so it might be counter intuitive.

And I don't think much about the Scottish system. It's mostly the same with different (more complicated) rates.

Hi OP, thank you for the interesting thread.

Would you agree that there is a widespread public perception that when it comes to tax, there is one law for the rich and a very different law for ordinary working people? And why do you think this perception exists?

Then you need to start considering the business rates. Retailers with stores pay much higher tax than warehouses. A small village pub near me is paying over £20k annually before they switch the light on to sell a pint or a sandwich. No allowance for the staff they employ.

Or the charges to remove their garbage.

It's complicated, but basically it has a sense of where your true home is (the exam teaching is your domicile is where you intend to be buried). It's really hard to lose domicile, and so if she has any intention to return to India at any point in the future then she will be Indian domiciled.

However once she's lived here for 17 years, she will be deemed UK domicile and the beneficial rules will cease to apply to her. She will lose the deemed domicile if she leaves for at least 3 years.

So on the basis she's living here temporarily for her husband's career and she intends to return to India, and has not been here for 17 years, she's not UK domiciled. Once she's been here 17 years she loses the tax benefits anyway even though she's still strictly non-dom.

The 17 year period could be shorter, which is probably what Labour will do.

I agree that's the perception, but it's not the truth. There are just more options available to the wealthy because they have more complicated assets. If you're spending all your wages on your mortgage, an investment vehicle is no use to you even though it's hugely valuable to the HNWI.

I think the media fuels the perception, and a lack of understanding of why the rich pay the taxes they pay.

Were any of your clients caught out by the retrospective way HMRC applied the loan charge scheme, Despite being legal. Did you get them out of it if so or did HMRC take it the whole lot sought.

There are pretty decent, fair, robust transfer pricing rules. I wouldn't really change this. It's not British IP and so I have some sympathy with there being huge costs associated with using this IP.

Whether it's right that it's based in Luxembourg (for example) is different, but it definitely doesn't belong in the UK.

You can't just decide to move profits out of the UK without good commercial reason, even if you're Amazon.

No - very few of my clients are employees and so didn't need to avoid employment income. I'm largely supportive of HMRC's approach to the loan charge (it's how similar schemes for the rich have been approached). The blame should lie with those who forced individuals to be paid by the scheme. But not paying income tax was obviously too good to be true.

I've helped unwind countless other schemes though, and generally HMRC gets their tax.

I think they take more risks (ignoring inherited wealth). I work with clients that I will never be as rich as because I would never take the risks they did. I might work as hard as them though. Luck also plays a part.

I am 99% confident they don't turn a blind eye. My company probably deals with clients like this (not me or my team), and my colleagues/company would certainly not be doing anything at all that required a blind eye. Big corporations often want to comply, but in a way that best serves them.

Of course they do - it's like me saying "Jeff Bezos mays a lot more than than me" 🤷🏼‍♀️

What is your opinion on inheritance tax? Do you think it should be abolished in the UK.

I think the media fuels the perception, and a lack of understanding of why the rich pay

So it’s all the media’s fault and nothing to do with the rich & corporates effectively bribing corrupt politicians with massive tax-deductible donations to pass laws which protect their own interests while clobbering ordinary workers with ever higher taxes?

So it’s all the media’s fault

Yes. I think this was perfectly well demonstrated in 2020/1.

Is there any prevalent shared behaviour your clients possess? In other words can you spot a multimillionaire from a group of people you meet at the party?

How is Jan 31 going? I used to do tax for HNWI employees and used to have people sending their stuff through on Jan 25, we would bust a gut to get the sums sorted and then they ask why they had a tax bill and couldn't we do something about it 🤦🏼‍♀️.
Also what are you hours like? I would like to return one day maybe. But the insane Jan 31 puts me off.

Your view seems to assume the law isn't written by millionaires who stand to gain from "loopholes" they add for their own benefit

Several of them are clients 😉

Hi, Can I ask a question regarding child care please, I'm really struggling getting my head around this.

My husband is going to earn roughly 105k this calendar year after bonuses. To get the 15 hours free childcare for our 2 year old who turns 3 in April. Are you saying that he needs to pay just over £5k into a personal pension? For this to work is his salary being calculated on calendar or financial year for benefit purposes? I assume calendar with you mentioning December. Also will he have to self assess to notify hmrc?

It's so difficult as we pay £450pm in nursery fees and it sounds like we could really benefit by diverting those to a PP and getting the free hours

Thanks in advance, Rachael

You are “maximising the reliefs that are made purposefully available to them by government.” So the people who move client money into off shore tax havens are in a different department.

And of course, “there are no loopholes” because technically it’s all legal.

Just silly word games. Everybody knows what’s going on. The ultra wealthy haven’t moved $2 trillion to the British Virgin Islands because they want the money to enjoy the nice beaches.

Thanks OP. So if, say, your wealthy clients ended up paying the top rate of tax, do you think it would really affect their wealth noticeably?

Other posters have referred to higher amounts of tax income from high earners. Of course they pay in more, but surely % contributions is what really gives a true comparison. It seems that proportionately many on PAYE are paying higher % in tax than those who can afford to find the ways and means.

Very interesting AMA thanks for all your answers.

Are there ways us ordinary non- rich people can improve our tax liability?eg, I have worked all my life and am a good saver, but really pissed off that I have to pay tax on interest when that money was already taxed.