The Rich According to the Guardian

[Judy1234]

www.guardian.co.uk/money/2008/aug/04/workandcareers.executivesalaries

I'm glad you posted that link Swedes. I remember having a heated (and in my case, slightly tipsy) debate on MN years ago, and trying to explain that domicile was an inheritance tax concept and not an income tax concept (though obv relevant to income tax as the whole non-doms issue demonstrates). Blessed if I could lay my hands on any handy or snappy definition.

Dittany - Ahhh. Cheer up. It made me chuckle but cheap I know. I hope you have a nice weekend.

btw the press publish all sorts of opinions of political figures. Just because they are published doesn't mean the publisher thinks they are sensible or that they agree with them. LOL at that idea.

Are we saying HMRC avoids tax .... yes, it's absolutely hilarious. They sold off their property portfolio to an off shore trust I believe. Someone look up the link if they have time. Because it's lawful and normal to pay the minimum tax you're legally obliged to pay.

Dittany. When you are in a hole stop digging. You don't appear to know or understand what you are talking about.

The link you gave at 14:59 to the HMRC website proves nothing. There is some emotive language about 'avoiding responsibility' but they are a bit quieter about the actual business of avoiding tax. Bizarrely, the Anti-Avoidance Group even admit that they find it 'impossible to provide a comprehensive definition of avoidance.' How on earth do they expect to police something if they can't even define it!?

With regard to your IRC v Willoughby quotation of "Tax avoidance is a course of action designed to conflict with or defeat the evident intention of Parliament". So what!? Parliament may have intended one plan but sloppy drafters of legislation created another scenario. Parliament haven't spotted the flaw and have enacted the legislation. Clever people notice the loophole and exploit it. You may not like it but it is not illegal.

I don't know what your Vince Cable quotation is supposed to prove, apart from the fact that he knows more about the situation than you do. He seems to have similar thoughts to you about non-doms but he understands that the problem lies with the legislators, not tax experts.

I suspect at heart on the two sides are differing views simply over whether it is right and fair that some people earn a lot more money than others, that some people are cleverer or work harder or luckier such that they earn more. It doesn't bother me at all that plenty of people have more money because I accept life is unfair and we largely make our own luck. Remember the old saying ... funny how the harder I work the luckier I get.

Certainly this Government has had it in for the rich (hunting ban etc etc) and that includes a requirements that accountants have to notify HMRC in advance of clever tax plans they come up with which I think is morally wrong but it's the law and the tax planners have to follow it.But unless you made a law that no one was allowed an income or a standard of living of more than X and anything over X is confiscated then you're not going to get parity of everyone and those with the green eyes jealously are better of seeking therapy or praying or just casting out from their minds the fact that some people earn more.

"I guess I am thinking small cos I cant actually imagine interest payments on savings that are large enough to attract tax anyway!"

riven do you know about form R85?

Glad that I went to the toy shop rather than follow this blow for blow.....I went for the more traditional toys; there is so much crap in Hamleys these days but much fun none the less. I cam back with Chinese checkers, some modern boomerangs and upgraded to Digital Scaletrix.

Xenia- I am not certain that I want to give away all of my ideas/secrets. Also, land prices are soaring so you should have a significant capital gain to realise in order to pay off the mortgage. But you will need to do some tax planning . Seriously, I have seen you give people genuine/good advice so we know that you care; so why do deliberately cause such outrage? Can only be what I said earlier.

Yes I think that's the core of the issue as well.

Coming back to taxation, I do feel that

(a) Income tax is unfair because some people have a marginal tax rate of 22% and others at 40%.

(b) Inheritance tax is grossly unfair. It actually taxes middle income families. Poor people don't pay it, rich people can plan to avoid it, it's the middle income families who suffer.

(c) The tax burden is unfairly biased against employees. At present, people who are employees have tax deducted at whatever rate under PAYE. Yet there are literally millions of self-employed people, a fair chunk of whom are fiddling their taxes.

I quite like the disclosure regime because I am not sure that companies should indulge in advanced and over-sophisticated avoidance.

Oh dear. Have read all of this. Agree with every single competant word written by Quattro. Cannot imagine the level of confusion going on in Dittany's brain. Can't quite understand what or when Dittany worked in the City, but with references to bonuses paid in commodities I would suspect she hasn't been near the place since... oooooh, 1992????

I'm assuming Quattro is a little weary of arguing with someone with little knowledge and vast quantities of misplaced conviction, so in order to assist her slightly I will do a quick mark up of the article by Vince Cable (who was an economist, albeit not an accountant, and therefore should know better)...

Non-doms must be made to pay up or pack up
By Vincent Cable
Published: February 13 2008 18:21 | Last updated: February 13 2008 18:21
For the second time in a month ? on capital gains tax and now on non-domiciled residents ? Alistair Darling, chancellor, has beaten an embarrassing retreat after a fierce offensive led by wealthy individuals in the City. One U-turn was unfortunate; two suggests serious incompetence. Both operations were badly botched. But the generous tax treatment of non-doms is still a scandal requiring action. [POLITICAL POINTSCORING, HASN'T SAID ANYTHING YET]

Ordinary taxpayers are angry that rich people can use loopholes and expensive lawyers to avoid paying tax at up to 40 per cent like the rest of us. [NOTE ORDINARY PEOPLE, IE NOT ANYONE WHO KNOWS ANYTHING ABOUT ANYTHING] For a millionaire, 40 per cent is not a penal rate. [IT IS THE SAME RATE FOR A MILLIONAIRE AS FOR ANYONE ELSE, THAT'S HOW PERCENTAGES WORK]

Super-rich oligarchs from Russia and India [EMOTIVE... WHAT ABOUT ORDINARILY RICH PEOPLE FROM THE UK OR FRANCE? WHOOPS, DOESN'T SOUND AS GOOD] have used the system to buy expensive property with a tax obligation limited to £2,000 or so of council tax. [MY COUNCIL TAX IS A LOT HIGHER THAN THAT, HOW ABOUT YOURS?] Many have their homes in offshore companies to avoid stamp duty on sales. [IF YOU BUY A COMPANY IN WHICH A PROPERTY IS SHELTERED YOU DON'T PAY STAMP DUTY, BUT YOU WILL PAY CGT ON ANY GAINS. IF YOU BUY AS AN INDIVIDUAL YOU WILL PAY SAY 5% STAMP BUT WILL NOT PAY 40% CGT ON GAINS IF IT IS YOUR PRINCIPAL RESIDENCE. SWINGS AND ROUNDABOUTS.]

For less exotic non-doms [WHAT DOES THIS MEAN? NONDOMS ARE NONDOMS, THERE AREN'T CATEGORIES OF EXOTICNESS], there are several well-established tax avoidance dodges [WHY DODGES? WHY NOT JUST TAX AVOIDANCE IE LEGAL METHODS OF REDUCING TAX LIABILITY?]. One is the use of dual contracts for work in the UK and overseas with the overseas portion not taxed unless remitted. [IF YOU WORK HALF IN LONDON AND HALF IN HONG KONG, YOU PAY HALF YOUR INCOME TAX IN HK AND HALF IN THE UK. WHY SHOULD YOU PAY IT ALL IN THE UK? THE HK GOVERNMENT WOULDN'T BE PLEASED]. UK capital gains can also be moved offshore into overseas trusts since non-doms are not subject to the same tax avoidance rules as domiciled residents. [YOU CAN'T MOVE UK CAPITAL GAINS OFFSHORE. IF THEY HAVE ACCRUED IN THE UK, IF THERE IS AN OBLIGATION TO PAY UK CAPITAL GAINS, YOU MUST PAY IT. IF CAPITAL GAINS ACCRUE OUT OF THE UK THEN THEY ARE NOT TAXED IN THE UK, BUT THEY WILL BE SUBJECT TO THE TAX LAWS OF WHEREVER THEY ACCRUE.] Inheritance tax is voluntary for non-doms. [WELL YOU HAVE TO PROVE THE WILL SOMEWHERE, BUT EVEN IF YOU ARE NON DOMICILED HMRC CAN DECIDE YOU ARE UK DOMICILED AT THE POINT OF DEATH AND CLAIM IHT ON YOUR WORLDWIDE ESTATE. IF IT DOESN'T, IT IS BECAUSE SOMEWHERE ELSE HAS GREATER CLAIM EG CANADA IF YOU ARE A CANADIAN NON DOM IN LONDON. AGAIN, WHAT IS THE CONCERN WITH THIS? DOES THE UK THINK IT HAS A GOD GIVEN RIGHT TO THE DEATH DUTIES OF ANYONE WHO LIVES IN THE UK FOR A SHORT PERIOD?]

Gordon Brown, prime minister, promised to take action when in opposition. Then, after five years as chancellor, he argued in 2002 that current rules ?do not reflect the reality of today?s more integrated world?. He argued that ?it is generally accepted as fair that those with a long-term connection to a country owe a special oblig-ation to support the social structures of the state?. [THEY DO SUPPORT THE SOCIAL STRUCTURES OF THE STATE. THEY PAY INCOME TAX ON ALL INCOME ACCRUING IN THE UK. THEY PAY VAT ON EVERYTHING THEY BUY. THEY PAY CGT ON ALL OF THEIR UK CAPITAL GAINS. THEY PAY COUNCIL TAX.] He was right. Mr Brown then dithered for five years, under pressure from Labour?s big donors.

The numbers (112,000 in 2004-05) have grown as long-standing residents realised that a tenuous overseas connection ? an overseas parent ? can save many thousands in tax. [A SINGLE OVERSEAS PARENT DOESN'T DO IT I'M AFRAID. IF YOU ARE BORN IN THE UK AND LIVE IN THE UK IT IS VERY DIFFICULT TO CLAIM NON DOM WHEREVER YOUR PARENTS WERE BORN] The government reluctantly acknowledged that it was losing £1bn-£1.5bn in tax revenue to non-doms.[THIS IS THE TAX REVENUE THAT THEY WOULD GET IF THEY COULD TAX THE WHOLE WORLDWIDE INCOME OF NONDOMS. OF COURSE MOST OF THEM WOULDN'T LIVE HERE IF THE UK TRIED THAT ONE. ALSO A LOT OF THAT TAX IS BEING PAID IN OTHER JURISDICTIONS WHO HAVE A PROPER CLAIM ON IT SO IT WOULD BE TAX CREDITED HERE]

By autumn last year there was mounting pressure for action even in the financial community. My Treasury team commissioned and published a YouGov poll showing that 70 per cent of the public wanted non-dom tax status cut back. The Conservatives saw their chance and put forward an annual poll tax of £25,000 to raise the £3.5bn they needed for a pre-election pledge to abolish inheritance tax. The government, in pre-election mode, essentially copied the Conservative policy, with a £30,000 fee for non-doms of seven years residency or more.[YADDA YADDA]

The poll taxes proposed by Mr Darling and George Osborne, Tory shadow chancellor, will not work. The fee is prohibitive for large numbers of non-doms with modest income or gains. Even for a banker on temporary secondment to the UK the charge is the equivalent of £50,000 a year extra in UK taxed income, which many employers will balk at paying. But, for Roman Abramovich and Lakshmi Mittal, the charge is the cost of a small party. [IE WHAT IS THE POINT. THIS BIT, I AGREE WITH!]

The City has mounted a counter-offensive. They have a point about some details added by the Treasury; for example, on whether liability for capital gains should apply to gains accruing before non-dom status. [HOW WOULD THIS WORK? TELL THE JURISDICTIONS WHO HAVE CLAIMED THE CGT THAT ACTUALLY THE UK WANTS THE MONEY?] There are genuine problems for Americans falling foul of the double tax agreement. [THE YANKS ARE THE ONLY COUNTRY TO TAX EXTRA TERRITORIALLY. IT WOULD CAUSE NO END OF PROBLEMS]

But the apocalyptic predictions of mass exodus will not wash. Where will the tax refugees flee to? The established tax havens like Monaco or the Bahamas are not major international financial centres. Nor is Ireland, which offers non-dom status. Some cantons in Switzerland have long offered a favourable tax regime and will have already attracted those more interested in skiing than share dealing. Big centres competing with London ? New York and Frankfurt, for example ? recognise no such animal as a non-domiciled res-ident and any non-dom taking refuge in the US or Germany would pay full tax on their global income and gains.[THIS IS A RIDICULOUS POINT. THE BIG MONEY WOULD BASE THEMSELVES IN MORE FAVOURABLE JURISDICTIONS, OF COURSE THEY WOULD. AND THE POINT ABOUT THE US OR GERMANY BEING LESS FAVOURABLE... YUP, THAT IS WHY LONDON IS THE FINANCIAL CAPITAL OF THE WORLD. WELL, THAT AND SARBANNES OXLEY. ANOTHER BIT OF DUFF LEGISLATION THAT THEY DIDN'T THINK THROUGH THE IMPLICATIONS OF. WHY ELSE IS IT? THE FOOD? THE WEATHER? THE FABULOUSLY WELL EDUCATED LOCAL POPULATION???]

In my view, the government should drop the Darling-Osborne poll tax on non-doms. It should, instead, restrict non-dom status to those who are not yet fully settled here ? a seven-year cut-off seems reasonable. [AHH BUT THIS WOULDN'T SATISFY DITTANY, OH NO] Short-term expatriates would not be affected. Others could plan their future with certainty. But a Labour government cannot run away from the issue altogether without losing all credibility and self respect. If it wants 60m Britons to take it seriously on tax avoidance and fairness in the tax system it must make non-doms pay up or pack up." [AND WATCH THE CONSEQUENCES FOR THE CITY. IN A GLOBAL RECESSION. YES, THAT'S A GOOD PLAN]

what pph said

you lazy old vampire, you

I AM NOT JEALOUS.

I DON'T NEED THERAPY.

OR TO CAST OUT FROM MY MIND THAT SOME PEOPLE EARN MORE THAN ME. GOOD FOR THEM.

I DON'T EVER WANT TO BE YOU.

I AM HAPPY.

Thank you.

My little daughter has learnt to play more with the boys than the girls at school. Some of this debate has reminded me of why that is so.

She spends her break time teaching the little boys karate.

??
no comprendo toughdaddy

The girls at school fall out over sillier things and there are less forgiving... I better stop there otherwise I could be slammed.

Dittany- you are probably right. Those little boys doing karate will probably stab each other in a few years time....you guys need to lighten up though.

Thanks PPH.

It's a bit of a wearisome circuit we're doing Dittany. I try to explain the difference between being sensible, engaging in avoidance and evasion/fraud. You link to an irrelevant article and triumphantly claim that it proves your point.

One last time before I open some wine:

What one City type has said is about dual employment contracts (not dual income) to reflect work undertaken in different jurisdictions. They're actually quite hard to work properly because of the social security position. They are commonly used for a number of reasons, not necessarily connected with avoiding tax. For instance if you have half your salary paid to you in New York and the other half in London, there is very little tax rate arbitrage opportunity.

But I am aware that some(very few) people have used dual employment contracts abusively. My sincere belief is that article was a "distractor" ie whinge and sound off about one minor issue in the hope that the Government (which is easily distracted at the best of times) will focus on that instead of the major issue.

I think we were all saying that all of it is tax avoidance, ie legitimate structures to minimise tax liability. much like claiming cgt relief on sale of your principal residence You don't HAVE to claim it, but if you want to avoid paying any CGT at all as opposed to 40% of the gain (if you are a high rate payer), then you claim it. Oddly, most people do.

And of course Odey wouldn't use the structure of dual contracts, they only have one office in London so would have no legitimate need to. They don't have any overseas employees. The only way they could do it is abusively as Quattro says, so he's right - in Odey's case it WOULD be evasion. Not so in all cases.

I'm very pleased about getting within a year of your departure date from the City though...

I must admit that I picked up a new word today, whilst googling.

Tax evasion is illegal and only done by BAD people.
Tax avoidance is legal but dubious. It is done by 'Them', fat cats and other people that you disapprove of.
Tax mitigation is legal and, in fact, merely sensible tax planning. It is done by noble, moral people like you and me.

Dittany - "because Quattro, Swedes, smc etc were all claiming that what is quite clearly tax avoidance, isn't." You really must stop misquoting people.

Yes, purits and in reality there is just avoidance and evasion, lawful and unlawful. Every time you contribute to a pension you are engaged in avoidance and depriving the poor and NHS of food but you're doing a lawful activity.

The fact someone is rich and lawfully minimises their tax and poor and does the same is neither here nor there. If they don't do it they are in effect burning five pound notes and they are idiots.

As someone said above every time you sell your house and choose to take advantage of tax relief on the gain you are tax avoiding. Perhaps those who think that is wrong will next time pay capital gains tax on all gains when they move house.

(TD, land prices soaring - in the UK but I think not necessarily where the island is which is not too far from the equator and I doubt it would pay off the post divorce mortgage which is over £1.2m; but we live in hope. In the old days you got tax relief on payments to a spouse but not any more; and you used to get tax relief on mortgage interest without any upper cap. All gone. You could covenant to your children too and get tax relief on the contributions in the old days)

To pick up on a teeny weeny point of Xenia's - the hunting ban had nothing to do with whether this Government had it in the for rich (some might say they have it in for the poor, but that's another story).

What a lazy and ridiculous statement: it's certainly not only the rich who hunt or who are involved in the hunting 'industry' (for want of a better word).

And this is not a point about the rights and wrongs of hunting, just a general point about who is involved. And it ain't just the toffs, love.