Poll on attitudes to tax

[king_pellinor]

"Taxation" magazine is doing a survey to see if the public's attitude to tax avoidance/evasion/planning is what the Government thinks it is.  Can I ask people to have a quick go at it, to inform the debate a bit?  It's all anonymous.

http://bit.ly/TaxHowFar

Comments

[adaese.livejournal.com]

Thanks for that, Pellinor. I'd been mentally bracketing them as "schemes set up by Parliament to encourage Worthy Actions, such as saving for retirement or giving to charity" = okay, and "schemes dreamed up as a way of getting around the rules" = not okay. To which I would add the rider that "if your scheme later leads to Parliament making tax law more complicated because they are trying to plug loopholes, you then have no right to complain that tax law is too complicated".

[kargicq.livejournal.com]

I'm with you, Adaese. I don't think it's as complicated as Philmophlegm implies. Ticking the gift aid box isn't morally dodgy because Parliament passed that legislation precisely so we could do that. Ditto ISAs and pensions. Setting up complicated "companies" in Jersey which only exist in order to buy your house and thus avoid stamp duty (or however these things work), OTOH, is dodgy, if Parliament intended people in your position to pay stamp duty. I agree there are some grey areas, but in general it doesn't seem that arcane a distinction to draw. - Neuromancer

[king-pellinor.livejournal.com]

Why do you italicise "companies"? They're perfectly legal entities, and surely having a company which only exists in order to invest in property isn't such an objectionable thing?

Incidentally, you can avoid stamp duty land tax perfectly well by using a UK company - though the new rules will change things a bit - there's no need to go to Jersey.

The problem with Parliament's intention is where to look for it, if you're allowed to look outside the legislation. With stamp duty land tax, the problem is that the legislation taxes a change in immediate ownership of property, whereas people are complaining that actually the idea was to tax changes in ultimate ownership.

That of course leads to a whole load of other problems, not least what happens when ICI shares change hands on the stock market - presumably the idea wasn't to tax those changes in ultimate ownership.

So what did Parliament intend? Immediate ownership, or ultimate? The legislation is clear that SDLT taxes changes in immediate ownership, and taxing ultimate ownership is horribly complicated and unfair - so it's arguably odd to say that Parliament meant to do the latter.

[kargicq.livejournal.com]

I italicised "companies" to indicate "entities set up purely to reduce the tax liabilities of their owners". To me a "proper" company is something which exists to achieve some purpose and/or make profit other than simply by reducing an existing tax liability.
I can't follow the arguments about ultimate and immediate ownership: sorry! You know I'm well outside my area of expertise here. All I perceive is: Ordinary people like me have to pay £££ in stamp duty whenever we move house. Rich people with cunning accountants can do something clever involving setting up a "company" which means they avoid paying this tax. I resent this :-). If I have got it totally wrong and in fact everyone pays stamp duty just like me, well that is great news and I will be happy to be assured of this fact. -N.

[king-pellinor.livejournal.com]

It's not all that complicated. All you do is set up a company to buy the house you want, and the company then rents it to you. When you decide to move, then instead of selling the house you sell the company that owns it. Stamp Duty on the shares is due at 0.5% of the value of the company, instead of Stamp Duty Land Tax at 4% (or more, now). If you lent the company the money to buy the house, then the company is worth very little so the 0.5% is on a very low amount - it becomes pretty much negligible.

It's like having your own little property-investment business, just that you are your company's tenant.

It doesn't happen that often in the UK because you lose out heavily on the Capital Gains Tax side (normally selling your house is exempt, but selling shares wouldn't be), but you may be in a position where CGT wouldn't kick in, for one reason or another - if it's a Jersey company and you're not UK-resident, for example. Or if you have several houses you're going to get CGT on most of them anyway, so you might as well save the SDLT.

You don't need to be rich or cunning, you just need to be in the right circumstances for certain things to apply - like not living in the UK, for example. There's a school of thought that says that non-UK people selling shares in non-UK companies shouldn't be liable to UK tax. Of course there's another that says that if UK land is changing hands then it doesn't matter where those hands are.

It's one of those areas where it's very hard to draw a sensible line. If you look through the company to say the shareholder is really selling property not shares, then firstly you're undermining company law generally, and secondly what happens if we have say ten shareholders in a company with a dozen houses being rented out to random tenants - should they pay SDLT if one sells his shares? What if it's a listed company that has a small property portfolio as well as it's main business - should we charge SDLT every time the shares get traded? It's a tricky one.

[kargicq.livejournal.com]

(Previously when I mentioned Jersey you said "Incidentally, you can avoid stamp duty land tax perfectly well by using a UK company - though the new rules will change things a bit - there's no need to go to Jersey" but now it sounds as if you do need to go to Jersey if you want to avoid the CGT.)

I accept that there are some grey areas and hard cases, as in everything, but mostly it just Doesn't Sound That Tricky to me. I buy my house, sell it, pay ££££ in SDLT. Rich person resident in Monaco buys house next door via company in Jersey, sells it, pays £000. That doesn't sound fair to me nor (I pretty much guarantee you) to 99% of the UK population.

Neuromancer

[king-pellinor.livejournal.com]

As I say, you don't necessarily want to avoid CGT. It's what makes this sort of thing so complicated - everyone's in a different situation.

When it comes to fairness, people can be a bit odd. How about person in UK buys holiday home in France, sells it, suddenly finds they've got a French tax liability or two? I know of quite a few people who think that's unfair - they're British, why are the French coming after them?

Or how about a person who has to move every few years because of his job and gets an SDLT charge every time on top of his moving bills, while his friend in the company's head office gets to stay in the same town for 20 years and pays nothing. To many people, paying SDLT at all is unfair.