Tag Archive | "tax planning"

Gary Barlow begs forgiveness for tax avoidance debacle

Take That frontman Gary Barlow has gone on record about the whole investing £26 million in a tax planning scheme that has been suspected of being tax avoidance.

Barlow said in a recent statement that he’s absolutely broken up about offending anyone if the news the Icebreak scheme he and his bandmates were involved in the scheme. He also went on to say that’s he’s sacked his old accountants and will be employing a whole new team to straighten this whole mess out – and even offered to shell out more cash to the Government to square things up.

I actually have to hand it to Barlow for being so forthright and open in his addressing this whole scandal. I mean I’m not about to come forward and say that he and his bandmates went into this blind and had no idea this scheme wasn’t actually tax avoidance, but I am most definitely willing to give him the benefit of the doubt. If his accountants did indeed tell him that this whole Icebreak scheme was a legitimate business opportunity – and he had no real reason to disbelieve them – it’s hard for me to really fault him.

Then again, Barlow’s not exactly fresh off the boat. This bloke was awarded the OBE after all, and it would be nice to assume that people of that calibre will be on the up and up, but just because you’re an OBE doesn’t mean that you’re a world-class economist or business magnate. I suppose I should be more forgiving and Christian and turn the other cheek, but then again how much goodwill is Barlow getting because he’s a world-famous musician? Would John and Mary Fishwife from Leeds get the same forgiveness if they were caught out using a tax avoidance scheme?

I suppose Barlow is trading on his “good name” and his celebrity quite a bit here. Then again a normal run-of-the-mill non-celebrity that invested in Icebreak wouldn’t exactly face global scrutiny, now would they? I mean there were more than 1,000 Icebreak investors but how come Barlow and the other Take That members get all the press? It’s because they’re famous, obviously. Whatever; I can’t be arsed to care any more. Let him pay off his debts and let’s move on with all our lives, shall we?

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Tax advisers slapped with £1 million tax avoidance fines?

As if anyone didn’t think Her Majesty’s Revenue & Customs wasn’t playing for keeps, now there’s a chance that tax advisers could be fined as much as £1 million.

Tax avoidance and tax evasion is the current crusade that the Government has launched, and HMRC has become its sharp-bladed sword. The Treasury is honing its weapon, and the newest whetstone to meet the steel takes the form of a new raft of proposals that will provide the taxman with a bit more bite. The most unequivocally controversial and high-profile of these new proposals is  the plan to fine tax planners if they refuse to comply to the letter of new regulations – and the fine is a massive one.

There’s all sorts of new regulations to keep aware of when it comes to tax planning promoters and tax advisers. Their clients, whether they be massive multinationals or simple contract workers, need to now be issued a promoter reference number, and there are other documentation rules that will need to be followed as well. Ostensibly all of this is to provide a clear paper trail to catch tax planners red-handed in promoting tax avoidance schemes that are robbing HMRC of revenue it can use in mis-managing all sorts of Government functions. After all, if there’s anything the Treasury knows how to do it’s waste taxpayer money, right?

I suppose that’s a bit unfair of me to say, but for what it’s worth do you truly think that taxpayer money is truly managed properly by the Government? Of course not. Still, if HMRC can siphon off a few million here and there from borderline criminal tax planning firms that specialise in the kinds of schemes that make it easier for people to not pay their fair share, I’d be happy to turn a blind eye and a deaf ear to the ‘suffering’ of these poor, bedraggled tax planners. Maybe if they would have been on the up and up in the first place they wouldn’t be targeted by the taxman now. Then again I suppose hindsight is crystal clear for just about everyone isn’t it?

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Consultation launched to root out contractor tax cheats

A new consultation has been launched with an eye towards rooting out tax cheats by making anyone using tax avoidance schemes pay their taxes up front.

The new proposals are specifically looking to target contractor tax cheats in particular. The Treasury still has a massive vendetta against tax avoidance schemes – a crusade that seemed to blossom overnight after the revelation that Jimmy Carr was using the K2 scheme to his massive advantage – and while few of these schemes have been classified as outright illegal, the view of the Government is that using any sort of tax avoidance scheme is highly suspect, especially when used by a well-paid contractor to avoid paying higher tax rates.

I’m sure many people will see this as an important step in stamping out tax avoidance completely, and for the most part I can sympathise with them. However, one man’s tax avoidance scheme can easily be another’s tax planning initiative, and the lines can tend to be blurred from time to time – often to the detriment of honest taxpayers who thought they were playing by the rules. Look at the massive amount of energy spent by Her Majesty’s Revenue & Customs in pursuing tax avoidance by way of disguised employment, for example – HMRC’s IR35 investigations have rocketed upwards, leaving many freelancers and contract workers worried that they’ll be raked over the coals needlessly.

And yes, I do mean needlessly; plenty of contract workers may be investigated only to find no evidence of disguised employment. However, the financial toll it can take on a freelancer can be heavy, especially if they have to mount a defence to such an investigation without IR35 insurance cover. Some believe that this is just the Treasury’s way of maing sure everyone’s paying their fair share, but attempting to squeeze every last penny it can from honest Brits seems to me like it’s a case of throwing the baby out with the bathwater. There needs to be better distinctions put in place and more discretion used when it comes to investigations – and also more transparency when it comes down to whether a tax planning scheme is in danger of being classified as the so-called ‘aggressive’ tax avoidance that could get a contractor in more than a small spot of bother!

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IoD to Chancellor: stop calling tax planning ‘tax avoidance’

The Institute of Directors has had it with Chancellor George Osborne and his short-sighted view of British tax reform, calling for an end to political rubbish.

The Government needs to stop painting tax issues with such a broad brush, says the IoD, singling out the Chancellor to stop lumping tax planning efforts in with the kinds of instances of tax avoidance that can get you in serious trouble. Doing so is doing nothing but making it harder for the UK to emerge from the still moribund global economy as an economic leader once more, the IoD added.

The culprit behind the whole thing, or at least as far as the organisation of business leaders is concerned? Overly politicised speech designed to act as polemical diatribes to whip the country into a frenzy. You can’t tout yourself as business-friendly as a Government whilst at the same time shifting its citizens’ hearts and minds towards the erroneous belief that using tax planning to ensure a company pays no more than they must should be treated the same as tax avoidance or outright tax evasion.

Now for what it’s worth I agree with the IoD, but at the same time there’s a lot of tax avoidance masquerading as tax planning right now – or there’s massive tax avoidance that’s simply ignored by the Government because it stems not from a small business or a contractor accountant but instead a massive multinational that has the Government by the bollocks. I mean you don’t think that the kind of massive tax avoidance that companies like Starbucks, Amazon and Google engage in here should just be glossed over, do you?

Ministers would say ‘yes’ to that question out of fear that a multinational threatened with the novel notion of being held responsible for all of its tax liability and not just a tiny percentage of it would simply take its ball and go home, leaving the British economy in the lurch – and many hundreds of thousands of British workers as well to boot. So instead we’ve got the situation we’re in now; the Government tries to look tough to everyone even as it bows and scrapes to massive multinationals. Honestly it makes me sick.

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Has 50p tax rate led to lower income tax receipts?

The government had hoped to raise additional revenue when it introduced the higher rate 50p tax rate, but it now transpires that the move is having the opposite effect.

In January this year, income tax receipts only increased by 2.4% year-on-year, compared to a 9.3% increase in the take from corporation tax. Recent data from HMRC indicates that the wealthy are turning to contractor accountants to help them with tax planning. Revenue from people submitting self-assessment tax returns totalled about £10 billion in January, down £500 from the corresponding month last year.

Francesca Lagerberg, Grant Thornton’s head of tax policy, explained that history shows that higher tax rates frequently fail to rake in as much as expected because they trigger a change in behaviour. Business owners, for example, may have speeded up their dividend payments before the tax rate changed and it may be some time before they pay another large dividend.

The Treasury now says it will publish figures showing the 50% tax take within three months, but this is later than originally expected.

Richard Mannion from Smith and Williamson said HMRC should already know how many people paid tax at the 50% rate simply by looking at the tax returns and it should be easy to produce the requisite figures.

The 50p tax rate is only meant to be a temporary measure and it will probably be removed before the end of the current parliamentary term in 2015. According to Stephen Herring from BDO, the top rate is deterring foreign companies from setting up in the UK. The UK is making good progress reducing the rate of corporation tax but that good work is being counteracted by an uncompetitive high rate of income tax.

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Companies are completely confused by government regulations

The continual changes to employment and tax regulations are leaving companies confused, stifling the country’s competitiveness and hindering job creation.

61% of businesses are unclear as to what is classed as tax avoidance and what constitutes legitimate tax planning and 33% believe they are treat as guilty by HMRC until they can prove their innocence, according to BDO LLP.

A large proportion of UK companies think the current tax framework is to complex and the situation is made worse by HMRC’s aggressive stance. Companies feel they now need to spend more time on their tax affairs instead of focusing on growing their business. Dealing with the Revenue has become more of a burden in the last five years, according to 65% of business leaders and 88% think things would be much easier if the tax rules were simplified.

Employers also have to fight their way through a ridiculous amount of employment legislation. David Frost, the director general of the British Chamber of Commerce, said that there was a growing consensus that employment law is weighted in favour of employees. A lot of employee rights have been implemented as a result of EU legislation but European labour markets are very different to ours.

The UK government should be prioritising job creation as this will lead to future prosperity. Mr. Frost said the coalition must desist from implementing any new employment laws for the next three years and cancel the 1% increase in employer NICs in order to encourage companies to recruit more staff.

Over the next four years, BCC estimates show that new legislation and tax will cost UK employers £25.6 billion.

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What is the dark art of Tax Planning?

In August 1989 I started my training as an Accountant. Mrs. Thatcher was still the Prime Minister and everyone under the age of 21 wanted an XR3i or a 205 GTi.

I remember on the first day having a meeting with a senior Accountant (in my new grey suit) and he explained that, once I was experienced enough – I could begin my training on tax planning for clients. I nodded to confirm my approval and nearly said “Yes Sir”, but stopped short just before I raised my hand in salute. Obviously, I had no idea what he was referring to.

Over the next few years there would be several occasions when this arcane gift was again mentioned. I was half expecting some Masonic ritual needed to be performed or a secret handshake returned before I could wear the badge of honour and plan my clients entire future in the world of income tax.

Many years later, I realised there wasn’t going to be an initiation ceremony after all and I could roll my trouser leg back down again. It turned out, planning a clients tax – was not a thing you could actually teach. There wasn’t a secret book with a list of examples or a flow-chart to follow. It could only be performed when you are conversing with an individual – and they are all different. Without exception, all of you have a different personal circumstance and aspiration. For some people it is an expensive car or a big house. For others – it is sending their children to private school or five holidays a year.

Tax planning is a term given to the blanket of advice that helps your business to perform the following :-

1. Retain enough money for all of its debts and liabilities.

2. What are the laws you and your company must not fall foul of?

3. Pay the director and employees the salary they need.

4. Pay the shareholders the dividend the company can afford in conjunction with their personal requirements.

5. Have a look at the costs and expenses the company will need to pay for its daily running.

6. When will the taxes be paid and who has to pay them?

7. Where are the savings you can make?

If you are not or have not considered the above – you haven’t really started a framework for you or your company yet.

One day I may even get the chance to teach Accountancy to smartly dressed juniors at one of the many Accountancy colleges around the UK. If I do, I fully intend to walk up to whiteboard and write “Speak to People”. And then walk off.

About the author: Matthew Durrant

Matthew has been an accountant in practice since 1989 and has established a strong reputation in the contractor marketplace. He acts as accountant for a diverse blend of clients from sole traders to medium-size limited companies. An acknowledged IR35 specialist, Matthew’s services are much sought across the UK.

Matthew Durrant. Partner, Forbes Young Accountants

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ICAEW calls for level tax advice playing field

In October last year, Prudential the insurance giant, lost their High court battle to have accountants’ advice made confidential in the same way that advice given by lawyers is.

The case has now gone to the Court of Appeal and last Wednesday the ICAEW spoke out in favour of the Prudential.

Charles Flint QC, speaking on behalf of the ICAEW, told the court that both online accountants and lawyers are performing an identical role in an identical context and therefore you can’t distinguish between them. He added that the institute is interested in getting the best outcome for the public.

The Law Society on the other hand wants the Legal Professional Privilege (LPP) to remain solely for lawyers.

Accountancy bodies have for some time been calling for a level playing field saying that tax advice should be treated in the same manner regardless of whether it is a lawyer or an accountant who gives the advice.

The Prudential originally took the case to court because they think HMRC should only be entitled to see professional advice once a litigation process has been formally instigated. But HMRC is keen to boost up the government’s coffers and combat aggressive tax planning and part of its strategy could be to ramp up its demands that accountants disclose the advice they have given to clients.

It is thought that the case could take as long as three years to resolve and could end up going to the EU for a final ruling.

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