Tax avoidance, has really changed my opinion of someone

[noemail]

For clarity, I am a moderately high earner, paying higher rate tax. I do take advantage of legal tax savings by paying into ISAs and a pension, but generally recognise that tax is necessary if we want things to work and am happy to pay my share. I don't, for example, vote according to where I think I'll pay less tax.

Friends of mine have 6 children, all went to the very ordinary local comp, most have decent but ordinary jobs.

One son does "something" in the city. His dad talks about him and his success and wealth all the time. It sometimes makes me cringe for the other DC, but his pride is understandable. He also gives rather too many details of exactly how much the son is worth for my liking, but I was raised never to discuss money.

Anyway, so is due a big bonus (low millions) which will be paid next tax year. Dad was telling me about a clever scheme involving living off shore for 9 months so that he doesn't have to pay any tax on it. Dad is thrilled at the idea. This is a man I used to have a lot of respect for - we have similar career paths ourselves.

I felt really disappointed. I understand it's a lot more money than the few thousands I am "happy" to pay in tax, but he's a young man enjoying immense good fortune (albeit worked for) and he's going to avoid putting anything back.

This is obviously his choice, but I am disappointed that my friend, his dad is so thrilled about it, especially (but maybe not relevant) as they are a family which has been very costly to the taxpayer over the years, lots of children, education, medical care, two of the adult children currently claiming benefits etc. He and his wife are first to complain that DF is having to pay care fees, but where do they think the money should come from? It's changed things and I couldn't speak at the time. I was hardly going to tell him I think his pride and joy is a terrible person, but equally, I couldn't be pleased about it.

I think I'd be confident to challenge him. I'd say, don't you think that's morally a bit off? We hear about all these rich tax dodgers don't we...' and start a debate about it. He should know that you don't approve of such things. You could hopefully have a healthy discussion. But then hopefully after that he'll know this chat does not impress you and won't speak of it again.
I'd say the idea that a young man working in the city from a less than affluent background who is getting a bonus in its millions wouldn't want to dodge his taxes is a bit naive tbh. Not that it's right. It's totally grim. But I wouldn't stop talking to your friend over it.

It would mine too, OP. I have extended family members who know every trick and loophole in the book and have lived off benefits for years. I have zero respect for them and don't really maintain any contact with them.

I'd have to day something. It makes me so cross that those who do this are usually the ones who can easily afford to pay tax and still be OK.

he's going to avoid putting anything back.

Does he not pay tax on his normal earnings and therefore probably is paying quite a lot back?

In general, I would just avoid the topic, sometimes things like money, religion, politics are best avoided if you otherwise like the person. If it's legal, then until these sorts of loopholes are closed, there's no point worrying about it and falling out.

However, as he's boasting and talking about it all the time., I'd probably just avoid him as he sounds like a bore.

If it's allowed under HMRC rules then it's ok. It's irritating but unless something changes nothing will. If we all had the money I daresay many of us would take advantage of tax loopholes. Note that some clever schemes have backfired on the users. People in the entertainment and sports areas have got caught out in schemes that flouted financial regulations. If I worked abroad for 6 months or mre I think I could be classed as offshore. Let's not forget Mrs Sunak who was non dom until she was forced into paying tax on her UK income.

Doesn’t that mean he actually has to live off shore? If he does have to and he does move and it’s in the rules then it’s no different to an ISA in my book. If he doesn’t actually move and he’s genuinely fiddling something then that’s not ok.

Yes, he plans to live in Dubai for 9 months. (no idea if 9 months is long enough, but presumably he's done his research).

He's going to be a tax exile, yes, it's very much allowed, I'm not suggesting it's illegal,

It's not tax evasion and it's perfectly allowable.

Would you do it if you were in his shoes? I'd consider it personally.

I overpay into my pension. I use my ISAs. The government allows me to because it wants me to save for my retirement and not rely on state funding if I lose my job or something.

The government would have carefully left this loophole open to sweeten the deal for overseas companies to register their businesses in the UK.

Otherwise the talent and therefore the big companies will not prop up the city.

I have relatives who do this and they do miss their family. I'd do it for a million quid though, so would most people if it came down to it.

It’s illegal according to this:

https://www.gov.uk/government/publications/issue-briefing-how-we-tackle-offshore-evasion/how-we-tackle-offshore-evasion

I’d dob him in with no hesitation.

I'm not convinced about this approach working (non-doms rules require longer absence I believe), but this is irrelevant.

This case is a classic example of overtaxing - people shout about need for more funding for public services and that we need to pay more taxes. Everyone is failing to say how much more they are personally prepared to pay. Few k or even tens of k would be fine, but when he needs to pay hundreds of thousands it feels too much so he takes drastic measures.

There will be many more examples like this now with Labour increasing taxes.

Op, when you have some quiet time, sit down and try to visualise that amount and say honestly - wouldn't you try to save it for yourself?

I never said it was evasion, or illegal.

I can absolutely guarantee 100% I wouldn't leave the country that had raised me and given me the opportunity to make the money, in order to avoid paying tax on it.

This is perfectly allowable. I had a friend who NEVER paid tax due to this as he worked offshore. it doesn’t bother me. It’s just a rule. ..it is what is.

So you're happy to use legal tax avoidance schemes yourself, but you are not happy others use different legal tax avoidance schemes?

@noemail

I'm not sure that you would.

This isn't applicable here
He's not planning to hide income/assets but to give up UK tax residency

If he moves to Italy he's only need to pay 200k EUR annual flat tax rate on all his worldwide income - makes perfect sense

Yeah, challenge it. Shame is the only way this disgusting American imported culture is going to be watered down.

(Higher rate tax payer and happy about it)

Tax avoidance is legal.

Whether or not it is morally right to take advantage of such schemes, they are there to be used, and people will use them.

If it's allowed then what's the problem? We plan to do exactly the same to avoid high capital gains taxes. We already pay a ton in taxes, I see no reason why we shouldn't avail of all the loopholes possible for the rest.

I'm another saying that provided this is legal, then I don't see an issue. They're not doing anything criminal, and honestly, if I was given a bonus of say, £1.5M then it would cross my mind to consider a myriad of ways to prevent 45% of it going straight to HMRC. I mean, come on, that's £675K in tax, which even for rich folks is a significant sum of money and would be genuinely quite hard to kiss goodbye to (even for the most moralistic among us).

We take advantage of the few tax breaks offered to us - I max out ISAs, salary sacrifice to pension, save most of our money in DH's name as he's a basic rate taxpayer as therefore has a higher savings allowance. This is just another (albeit extreme) example of using the system to manage wealth in a tax efficient way.

Thanks for pointing that out @nearlylovemyusername I should have checked before posting.

So now I don’t see any difference to this compared to buying £50K in Premium Bonds and putting £20K in an ISA. Anything to (legally) avoid pay tax is fine by me.

How boring.

Probably made up as an excuse to talk about it. Does he earn this every year? Can’t imagine many city jobs as an employee where you could live as a tax exile.

I know of people who live as tax exiles but they usually have companies that pay them without them needing to be there, or huge amounts of capital they can park elsewhere and no need to work as an employee, or retirees!

I don’t think tax planning is necessarily a bad thing… I think everyone is at it, to some degree, within what the law will tolerate eg people paying themselves dividends.

As @Catapultaway said So you're happy to use legal tax avoidance schemes yourself, but you are not happy others use different legal tax avoidance schemes?

@noemail I once felt the same as you, that I would never want to leave this country, but I am so disappointed in and ashamed of the way the country is now that if I could, I'd be off in a shot. Perhaps he feels the same and it's his now or never opportunity to leave.

An heiress friend of mine from university did this when she inherited. Moved abroad for a year so she didn’t have to pay tax. I thought it was appalling. Doubly so because she makes quite a thing of being a ‘patriot’ (for the country we come from) and is banging on about it and it makes me think, ‘yeah but you shirked the basic duty to your country, which was to pay tax’. I don’t see her any more.

Inheritance tax is on the estate so the location of the inheritor isn’t relevant

i seem to be hearing of more and more people moving to Dubai and a lot of our new grads talk about it as their long term plan!