Re: The staggering hypocrisy of the Prime Minister : Thu Jun 21, 2012 4:22 pm
Ferocious Aardvark wrote:
The trouble with that is that everything done is perfectly legal. There is no law against setting up a service company. Tax laws on company income, profits etc are equally clear cut, as are the provisions regarding offshore taxation, non-doms tax position etc.
What I think HMRC don't do properly (and maybe this is the more specific legislation they need, I'm no expert) is catch what I'd call "associated operations". In the case of Jimmy Carr, how that would work is to look at the reality of the situation, which is that in truth, people are paying lots of money to watch Jimmy Carr, and Jimmy Carr is receiving that money as an income. If that much is clear (as in his case it seems to be) then all you need is HMRC to have the power to choose to tax him as if he was being paid it personally in cash, and choose not to tax it as it would if all the associated operations by which the cash arrives at the same place but via a circuitous route, were the correct taxable vehicle. These would instead be deemed associated operations and while not illegal, not effective for tax purposes.
However, I'd like to think that any such cases would start with the biggest fiddlers.
What I think HMRC don't do properly (and maybe this is the more specific legislation they need, I'm no expert) is catch what I'd call "associated operations". In the case of Jimmy Carr, how that would work is to look at the reality of the situation, which is that in truth, people are paying lots of money to watch Jimmy Carr, and Jimmy Carr is receiving that money as an income. If that much is clear (as in his case it seems to be) then all you need is HMRC to have the power to choose to tax him as if he was being paid it personally in cash, and choose not to tax it as it would if all the associated operations by which the cash arrives at the same place but via a circuitous route, were the correct taxable vehicle. These would instead be deemed associated operations and while not illegal, not effective for tax purposes.
However, I'd like to think that any such cases would start with the biggest fiddlers.
Well that is what I would do for anyone who sets up a company simply to avoid tax as opposed to trade. It's been common practice for years for self employed contractors to do as Carr has done. They are clearly being paid as individuals for their services and are just using the company to avoid tax.
I still think some sort of legislation about what is tax free as opposed to what isn't tax free would be far easier to police. ISA's and pension contributions tax free - fine. Pay yourself a pittance of a salary from your company and take income a different way thus paying less tax - tax it as income.