AIBU to want to scream idiot at the next person

[helloclitty]

who uses the term "hard working person" in regard to tradesmen in the cash in hand tax avoidance debate.
I have heard many people saying leave the hard working people (tradesmen) alone they're just trying to make ends meet and target the rich.
Is the general consensus that people who earn high salaries are less hard working than people who earn less?

Obviously avoiding tax is wrong whoever you are. But tbh these days I find most tradespeople don't want cash, they always want a cheque (or have a machine - even the one-man-band mechanic) so that everything is traceable just because they know that the Revenue will come looking soon enough.

Example - I have a friend who's a plumber. He's getting on a bit & only does a couple of days a week and just odd jobs these days, nothing heavy, so his earnings are down to a lot less than you'd expect. He's had the tax inspectors round checking up to see what was going on (to be fair, they took one look at his knackered car, tatty 1 person flat and very lovely & well tended garden, had a cup of tea and left after a very cursory look at his books!)

If only the Revenue were as hot on chasing up the big scale tax avoiders, I'd be delighted :)

Cinnabar, the bloke who does my MILs garden for her is an example of this. He uses it as his "beer" money.. his "real" job is entirely unrelated to gardening but he has 4 kids, and bills like everyone else, and that extra 20 quid a week gives him a night out that he couldnt afford any other way.

Oh no, I didn't think you were confused Squeaky .

I just didn't get the impression that people on this thread were confused either, so I thought if you could point me to posts where people were confused then maybe I could unpick some of that confusion.

Takver - HMRC is doing loads to tackle the big scale tax avoiders. I'd be delighted to run through it, but only if people are interested. I don't want to hijack the thread any more than I've already hijacked it .

squeakytoy - he could of course very well be declaring it on his tax return. Just because he's paid cash doesn't mean he doesn't put down 52 x 20 quid in the 'other income' box . . .

Also of course lots of low paid people who claim tax credits are desperate to keep their hours up over the minimum cut-off so there's an immediate incentive there to declare everything.

Agree with Cinnabar, a culture change so that paying tax is viewed as the important social contribution that it is would be the thing that would really help. I've often wondered if there ought to be some social recognition for people who pay lots of tax - the equivalent of the Queen's Garden Party for anyone paying over a certain amount in a year for example, just to encourage a positive view of tax paying.

Hmm. I'd say he was right on the edge of being on dodgy ground TBH.

On the one hand, it's such a small amount that frankly I'd be embarrassed to stand up in court and say he was trading. Especially if he's got any expenses that he's not attempting to defray. On the other hand, it's regular cash and the lawn-mowing does seem to have profit as its motive.

On balance, I think he probably is evading tax. Strictly. To the tune of perhaps £200 per year. Assuming that he's an employee, I'd expect that HMRC would probably suggest to him that they would prefer for him not to file a tax return because it would cost them more in processing time.

What you're running, as well you know , is a slippery slope/thin end of the wedge argument. And I agree it's tricky. But isn't enough, in itself, to stop HMRC going after all cash-in-hand evaders.

To be fair, I think the Revenue does a good job, but I don't feel that the political will is always there - it always seems more politically convenient to attack those who need to claim benefits than those who evade tax through off shore arrangements etc.

Interesting your point about their computerised ways of finding things that don't fit - obviously how they picked up my friend the not-very-hard-working elderly hippy plumber!

I sometime wonder what would happen apart from me losing my job as a tax policy adviser if the government threw out all 28,000 pages of tax law and replaced it with one simple clause obliging everyone to pay the amount of tax that they felt was fair.

I'd like someone to define 'rich' and 'poor'. Everything is relative I'm afraid. Would it be assessed on assets? income? disposable income?

Tax avoidance is quite legal, anyone can do it if they are canny enough, read up and make the most of their tax breaks.

The only time I've ever known HMRC suggest they didn't want me to file a tax return (in fact they refused to let me file one!) was when they'd owed me money for the last 3 years.

They did let me write them a letter and ask for my 25 quid back though

We would all end up like Greece or worse I imagine.. !

Cinnabar, there's a wonderful scheme in Spain (well, I don't know if it still runs, but it used to) where as a hotel/guesthouse you could either opt to be taxed normally, ie declare all your income/expenditure etc.

Or, you could go for a flat rate tax where they looked at the number of bedrooms you had and the star rating, then gave you an amount they wanted per year, and you didn't have to keep any books at all. (If you did keep books and could prove in retrospect that you had in fact made much less money than expected that year, you could have a refund, but if you made more than expected you could keep it - but I think most people just didn't bother keeping any paper work.) I thought it was a great idea for small businesses with a very predictable income, saved work all round.

Car boot sales, and ebay are another haven for "dodgy" dealings and I saw an article in the paper the other day about a couple who got caught. What I couldnt see the point of though was jailing them for it. They had enough cash in the bank to pay the underpaid tax, so why cost the taxpayer even more by giving them a custodial sentence?

Suppose it depends what you think prison is for, Squeaky. To my mind, they should provide punishment, deterrent and rehabilitation. Perhaps the judge was aiming more to deter others? Or perhaps he had no choice and the sentencing guidelines demanded a prison stay.

Flat rate taxes are often suggested to me as a panacea for all our tax ills. I'm not a supporter, on balance. For a start, many people's income isn't predictable enough. Secondly, moving to a flat rate system would create too many people losing out (who would need to be compensated) to be economically viable. Thirdly, why should people earning high incomes not pay more as a percentage of their income than lower earners (to my mind it's about how much you take home out of each additional £ you earn). Remember poll tax? That was a flat rate tax.....

Cinnabar - I'd be interested to hear your thoughts on employers of domestic staff eg nannies. I have to admit to feeling quite aggrieved at being treated like any other employer out there. I pay the necessary tax, NI and will also eventually fall under auto enrolment for pensions.

However, I am not - like other employers - making a profit from my "employer's activities", I cannot defray any other expenses, so I am simply paying more into the system from my own net pay.

Is this a tax policy that is due for an overhaul?!

I feel the same way! I'm going out for dinner with DH (first time since DS3 was born ) so will reply tomorrow if that's OK.

Bon appetit!

Thank you! We had a lovely time.

So, nannies. We have a lovely nanny ourselves, so I ought to declare a certain self-interest here.

A contract between a nanny and her family bears all the hallmarks of employment (rather than self-employment by the nanny). She is entitled to paid holiday, sick leave, maternity leave, etc. She is not permitted to substitute alternative childcare. She does not provide her own work equipment. She works on your premises. She is your employee.

It is a requirement for all employers to operate PAYE. I don't think that's a policy that's up for debate, and neither should it be. PAYE is actually a pretty efficient mechanism that collects the right amount of tax with a sensible level of adminstration.

What I do think needs revisiting is the fact that nannies are paid from their employer's net income.

When a business employs someone, the employee's salary is tax deductible as a legitimate expense of the business. There is symmetry of treatment. That symmerty is broken in the nanny/family contract and I don't think there's any logical reason for that to be the case.

Personally, I would make all childcare costs tax deductible. I think that would be the fairest solution and would encourage employment. I do fully accept that there would be grey areas where rich people would try to argue that their (non-deductible) housekeeper or cleaner was really a (tax deductible) nanny but it should be possible to identify if someone spends less than, say, half of their time on childcare duties.

Glad you had a good time :) I think you're right about nannies.

Sorry for a diversion, but as you're on the thread, Cinnabar, a question for you if you'll forgive it.

I've read your contributions to quite a few threads, and you obviously know the system well - and if I understand correctly are generally saying that the Revenue are pretty hot on collecting tax, that there aren't that many unreasonable loopholes etc?

Given this, I guess my query is, what could the UK do to - reasonably - raise more tax if there was a wish to increase post tax/benefit income equality.

I know that pre-tax income inequality has increased a lot in recent years, but I believe it isn't dramatically out of line with some other European countries? Similarly I think I'm right in saying that our top levels of tax aren't drastically out of line with the European norm, and they kick in at a roughly similar level of income?

Yet our govt. spending as a %ge of GDP (historically - obv. the bank bailouts have had a big impact in the short term) has consistently been on the low side relative to our EU neighbours, and we've run a deficit rather than a surplus. So what are we doing wrong?

(As a small business owner, ideally could you not suggest taxing us lots more )

I am ok with the paye system - just the non deductible feature of the cost of my employee. So, any chance of any government making childcare tax deductible ( over and above the risible childcare voucher system) ?

Don't worry, I don't hold you personally responsible Cinnabar

Hi Takver and HEG

Yes, I do think that, on the whole, HMRC to a pretty good job collecting taxes. Particularly given the limited resources they have.

You asked what the UK could do to raise more tax as a mechanism to increase net income equality, which I think has within it the implicit assumption that we need to tax the rich more to pay for more benefits.

Personally, I think the first step to increasing equality has nothing to do with taxation; we need to do something to decrease the wage disparity between how much the average work gets paid compared to the highest paid worker (usually director) of a company.

In the UK, the ratio is around 15 across all companies (that is, the highest paid worker gets paid 15 times more than the average for a worker in his company). It used to be lower - a ratio of 10 was more common 20 odd years ago, but even then was much higher than the average for the developing world of around 5. Only the US consistently maintains a higher ratio - theirs is around 20.

Various experts on boardroom pay have suggested that executive remuneration should be capped at a multiple (usually 5) of the average salary for the company, and I support this. It would stop bosses being awarded 10% payrises plus share options, whilst employees get pay freezes. And I don't for one moment believe the self-serving guff from execs that limiting exec pay would create a brain drain;if they're so great they can sod off to the US and see how long it takes them to find a directorship there.

Turning to your specific question on raising taxes. I know this is controversial, but I wouldnt do very much at the moment. I think the squeeze on spending caused by any tax rises would do more harm than can be justified by the revenue raised.

The problem is that the country's debts are SO large that all tax raising measures are really just tinkering around the edges. Our only hope is to stimulate economic growth, which has two benefits. First it allows the debt to be repaid more quickly. And secondly, it shrinks the size of the debt relative to GDP.

I hate the current benefit cuts, which I think go too far and are preventing economic growth. But as a nation we have to accept we were living beyond our means and some cuts are necessary to maintain the UK's credit rating.

Long term, I would maintain VAT at 20% (still below the European avergage) whilst making sure that vital expenditure (rent/mortgage, food, childrens' clothes, utiliies) are exempt from VAT. The poorest parts of our population pay out a much greater percentage of their income on vital expentiture than the rest of us, and so it's critical that they don't pay VAT as well.

I might raise NIC for companies by a further 1%. That would raise another £15bn per annum. But I would worry that it would be at the expense of private pension provision.

I might keep taxing banks' payrolls for bonuses. That's another £5bn.

I don't think we'll see tax deductions for childcare in a month of SUndays.

All the tradesmen me and everyone I know round here have been anything but hard working, and incompetent to boot!

Theres a couple of new housing estates round here where the houses are £550,000 plus. Can't help noticing that in many of the driveways, various trades vans are parked - drainage consultants, plumbers, joiners - maybe those new builds need instant work from those hard working tradesmen. Or maybe they make so much cash in hand they can afford to buy at these sort of prices?

Geegee you sound like a prize knob.