Notes from a very small island

I am not having a go at it, because the questions are all unrealistic and seem rather leading. Apart from the fact that I am not and never will be a higher rate taxpayer, there's a lot of "if you're sure you would never be found out" and a general background atmosphere of "everyone else is doing these dodges you've never even heard of, you're a mug if you don't".

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I should explain that my objection to "if you're sure you would never be found out" is that this is not a realistic hypothesis, at least for a worrywart. I would never be sure. Maybe it's just paranoia keeping me honest, but the awareness of people way richer than me happily arranging their affairs because they can afford the accountants really does make me feel stupid for not wanting to take the risk of being caught, or the time to work out what I could get away with if I had the bottle. This may be the legacy of growing up in Italy!

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It won't let me back in to review the questions, now that I've done it.

Are things like "20% off for cash", or "someone gives you a £50 tip" all that unrealistic?

I agree about the "never being found out" side of things, but then that's because I have professional distate for that approach and knowledge of how it probably won't be the case. But I think many people are more optimistically black and white in their thinking about this sort of thing.

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I wouldn't call myself a worrywart, but I agree, you never would be sure, and therefore all those questions have to be 'No' for me.

I also wanted to quibble with the questions - In particular the 'would you run a small business as a company' - surely the answer to that is not just about tax! And I do wonder about the small business where the owner's spouse is 100% trustworthy, but does no work at all in the business. Doesn't sound like any of the small businesses that I work with, and I wondered how exactly 'work' is being defined...

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Well, I've never been in a position to purchase something where a cash discount would even be offered, and given the antigravity afflicting house prices in the southeast and the difficulty for both of us of finding lasting employment elsewhere, the prospects of ever having any involvement with paying builders or similar seem remote. The few times I've been offered tips for doing my job I've declined, or insisted on payment in chocolate to share with colleagues if the tipper was insistent, as per council regulations. I admit I accepted the half-kilo of cheese from Italy, though, with gratitude and greed, but it would have been hard to declare as income and in that job there was no rule on gratuities.

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Done.

Do you want to accept comments on this, or would you rather avoid that so as not to bias people taking the survey?

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Can't you role-play the part of a slightly richer person...?

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I don't mind, it's not my survey :-)

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Strictly, chocolate and cheese may well be taxable.

Hard to declare, as you say, and determining the market value of a lump of second-hand cheese is tricky, but still taxable.

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But presumably there is still a distinction between income and gift giving, and a grey area? I would have gladly given a tithe of cheese to HMRC, since it went mouldy faster than I could eat it. But they'd have had to accept payment in kind.

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Not with any conviction!

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Never done the whole "Let's play this campaign as a bunch of evil PCs!" thing...?

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Not really, no. If you get given something in return for doing your job, that's job-related income and so it's taxable. HMRC will sometimes accept a tithe (several tithes, really) of shares or loan notes, but I've not heard of them taking the cheese :-)

In practice it normally slides, but theory's a different matter.

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The cheese was definitely more of a gift - a student I'd been especially helpful to brought it on her next visit to London. I am sure there are people who abuse this as they seem to abuse everything else, but I can't help feeling that too much breathing down the neck of the gift economy impoverishes us morally.

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Er, no... I'm not a very good role-player, really, for the same reasons I am an appalling salesperson.

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adaese.livejournal.com

When I worked in the book trade, publishers would routinely give us lunches and marketing tie-ins (I went about five years without having to buy a single T-shirt). These were all declared to the company, and I never thought to ask how payroll handled the tax thereon - I just trusted them to deal with it.

When I worked at the university, some of the companies we had dealings with gave us Christmas presents. These all went into a departmental stash, and were divided up between everyone just before we broke up for Christmas. I would quite happily have given the entire bottle of Lithuanian "brandy" to HMRC, if they would have accepted it - I think it all went into cooking in the end.

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Well ok then, I'll admit to being an evil tax avoider.

I have an ISA.
I have an occupational pension scheme.
One of my employers pays me dividends out of post-tax profits rather than salary out of pre-tax profits.
My other employer lets me have more holiday (which isn't taxed or NIed) instead of more salary (which is).
I include professional subscriptions on my tax return.
I tick the Gift Aid box.

I'm intrigued that now it's somehow morally reprehensible to not pay tax that you aren't actually obliged to. I note however, that it is perfectly acceptable (encouraged even) to obtain state benefits that you don't need. If tax avoidance like the measures I mentioned above is now appalling, then so should (in my own case) free medicines when I could afford to pay for them. (I don't even have to pay prescription charges.)

Other forms of tax avoidance seem to be acceptable. Cycling instead of driving for example. This avoids road fund licence, fuel duty and VAT - three whole taxes! So shouldn't cyclists come in for lots of tax avoidance criticism? People like me with high-performance, super-unleaded-guzzling sports cars should be praised by the anti-avoidance crowd. We're really doing our bit, unlike those immoral cyclists or walkers.

How about not flying? Or not watching television? Or not buying stuff? All activities which actively avoid tax far more efficiently and effectively than any Jersey-based trust.

I don't get it.

Unless the difference between acceptable tax planning and morally repugnant and aggressive tax avoidance is simply "Stuff that I do: acceptable tax planning; stuff that people that I'm jealous of or just don't like do: morally repugnant and agressive tax avoidance."

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Surely that's not about income or wealth, so much as position in the economy? I suspect there are a lot of people who earn very little indeed, who pay cash for things in order to make the best of small and casually earned incomes. (Actually, I *know* there are...)

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It's an irregular verb:

I take acceptable steps to mitigate my liability
You use legal planning of questionable morality
He's a filthy cheat

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Oh, I agree.

The problem is where you draw the line, and I think HMRC are as guilty of abusing the rules in one direction as some taxpayers are in the other. Especially as they get to do the line-drawing...

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I don't think that's what the survey is asking about though is it? Or, most of the questions aren't. Most of the questions (2,3,4,7,9, 10) seem to be about not paying tax that is supposed to be paid but you haven't actually had a demand for, and hoping you won't get found out.

Not getting found out is not 'avoidance' surely, or am I missing something?

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And who use that system of cash payments to get around having to pay VAT...?

HMRC has a name for people like that. (Of course it's not a problem if neither party is big enough to be VAT-registered, which in that scenario is possible.)

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Some of the questions seem to be asking about illegal tax evasion that you think you can get away with (perhaps because it would be hard for HMRC to spot or because "everyone does it") while others seem to be asking about legal tax avoidance that some people would think was somehow morally wrong. So I suspect the survey is actually trying to determine if people think that the first is ok while the second is bad or vice versa or both are fine or both are bad or if people are just inconsistent hypocrites.

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The classic definitions are:

Evasion is not paying tax which is legally due, either by not reporting it properly (if at all) or by just not paying it.
Avoidance is doing something such that the tax attaching to the transactions is less than it might otherwise have been

Over the last few years the debate has shifted slightly, so HMRC and Government now talk about "acceptable" and "unacceptable" tax avoidance, and don't refer to "evasion" very much. The difference seems to be that unacceptable avoidance is avoiding tax which Parliament intended you to pay; acceptable avoidance isn't really something that HMRC talk about, but presumably it means taking advantage of specific reliefs that are available.

Acceptable avoidance seemed to be synonymous with "planning", but now that seems to have acquired connotations of dodginess too, so people have started to talk about "mitigation".

So now we have:

Evasion: Illegal. Not paying tax which is clearly due.
Avoidance: Legal but immoral. Not paying tax which HMRC/Government/UK Uncut think you ought to have paid, even though they can't make it stick in the courts.
Planning: Legal and a bit dodgy. Paying an expert for advice on how to arrange things so as to pay less tax than you might otherwise have done.
Mitigation: Legal and fine. Using reliefs and schemes explicitly set out by Parliament.

The distinctions are a bit blurred. Vodafone is being castigated for not paying tax which people think is due, for example, when they're actually just claiming capital allowances which are quite clearly intended by Parliament.

The problems seems to stem from two factors: people not understanding tax law as it is writ, and people not understanding Parliament's intentions.

To which we can add a third: people not understanding that the UK is part of a wider world, and that other countries have the right to tax people too. The ridiculous thing about Barclays paying 1% tax came from that.

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