"Taxman unleashes its 'snooper computer'" so that's what the investigatory powers bill was for

Strat_a_tat_tat

m_c said:

Chalky said:

Are you being serious?

You perfectly described the clear separation between your own business and your own employment.  Yet you cannot see it is the same for the contractor with the limited company?

I know it is, but in my case, I'm not using a limited company for the sole purpose of storing money to avoid tax, which is what most contractors are doing.

I think one of the main reasons contractors do this is to pay themselves dividends (instead of just salaries) - as there's no NI liability for dividends.

Chalky

m_c said:

Chalky said:

Are you being serious?

You perfectly described the clear separation between your own business and your own employment.  Yet you cannot see it is the same for the contractor with the limited company?

I know it is, but in my case, I'm not using a limited company for the sole purpose of storing money to avoid tax, which is what most contractors are doing.

Er, but you said "Being employed and self-employed, my goal each year is to not pay tax on the self-employed bit, but I can currently afford to reinvest any profits back into the business, so if I finally do make the jump to ditching the day job, I have a well equipped business."

So instead of storing money you are storing equipment, aka capability.  The old 'it must be a physical asset to be a real business' mindset. So last century

m_c

Strat_a_tat_tat said:

 

I think one of the main reasons contractors do this is to pay themselves dividends (instead of just salaries) - as there's no NI liability for dividends.

That's only a side benefit.

Take an example, a contractor gets paid 100'000 for a year. They will bill via a limited company, and due to having to pay VAT, they have to bill 120'000. They then have to pay VAT on that, but you can do that via the flat rate scheme (although this has changed recently, so somebody please correct me), so they don't actually pay the 20'000 they would if using the normal VAT scheme, they only pay 14.5%. So straight away they have a 5.5% bonus/vat saving.

Now of that 105'500, say they pay themselves a basic salary of say 20'000, using the first online calc google threw up, they'd pay 1'880 income tax and 1'433 NI. On the remaining 85'500 in the limited company, they then pay 19% corporation tax (12'245), so they end up with 69'255 left in the company essentially free from any further tax, and ultimately 89'942 left under their control.

So for that 100'000, you would only pay £15'558 in tax/NI, and that's before you consider that any travel (I.e a commute to a fixed office)/business expenses would also be treated as a tax allowance.

Now if you were to be paid that same 100'000 as an employee, you would pay £29'403 in tax, and 5'271 in NI, and of the remaining 65326, you would be hit for interest tax, and also have to pay for your commute cost.

There you have a 24'616 saving by being a contractor using a limited company compared to an employee. However as you mentioned, contractors will often avoid income tax by paying themselves the minimum wage, then using dividend payments when they need additional money, thus they save even more in tax.

I don't earn anything near that, plus I don't have a limited company at the moment (probably something I'll need to look at later in the year for liability reasons). What I'm earning as self-employed, I'm simply using to buy equipment so that if I do decide to quit the day job, I have the equipment I think I'll need for the work I'd like to do/offer.

The problem facing the government, is how do you legally distinguish between somebody running a business and reinvesting money into that business, from somebody simply using the business to store money to minimise their tax bill?

m_c

Chalky said:

m_c said:

Chalky said:

Are you being serious?

You perfectly described the clear separation between your own business and your own employment.  Yet you cannot see it is the same for the contractor with the limited company?

I know it is, but in my case, I'm not using a limited company for the sole purpose of storing money to avoid tax, which is what most contractors are doing.

Er, but you said "Being employed and self-employed, my goal each year is to not pay tax on the self-employed bit, but I can currently afford to reinvest any profits back into the business, so if I finally do make the jump to ditching the day job, I have a well equipped business."

So instead of storing money you are storing equipment, aka capability.  The old 'it must be a physical asset to be a real business' mindset. So last century

Chalky said:
So instead of storing money you are storing equipment, aka capability.  The old 'it must be a physical asset to be a real business' mindset. So last century

See my last post, however it's a very grey area. I'm not working for a single company under the pretence of being a contractor, just to avoid being an employee

Strat_a_tat_tat

@m_c... not totally accurate. You don't have to be a ltd company to register for VAT or to use the flat rate scheme.

m_c

Strat_a_tat_tat said:

@m_c... not totally accurate. You don't have to be a ltd company to register for VAT or to use the flat rate scheme.

I know that, but using it to highlight how you can use it to your advantage. One of those unintended benefits it's brought to people who it was never really meant for.

Chalky

m_c said:

Strat_a_tat_tat said:

@m_c... not totally accurate. You don't have to be a ltd company to register for VAT or to use the flat rate scheme.

I know that, but using it to highlight how you can use it to your advantage. One of those unintended benefits it's brought to people who it was never really meant for.

Flat rate is on gross not net, and I think you've picked an edge case scenario. An employee earning 100k can reasonably expect to be earning that next year, gets sick pay, holiday pay, and is unlikely to get sacked if incapacitated by an accident or lengthier illness. The contractor has none of these benefits and can be let go with the stroke of the Finance department's pen. So the risk profile is very different.

If you decide to go into your business fulltime I suggest you raise your risk awareness.  I'm assuming you know some lucky long term contractors and that is colouring your view!

viz

Emp_Fab said:

Unorthodox said:

Yeah, if you've got nothing to hide you've got nothing to fear...

Not sure I gave you permission to use that. 

digitalscream

Winny_Pooh said:

Typical right wing monarchial style attitude. Squeeze more out of the middle and poor and leave those at the top alone. 

Not at all. This is exactly the endgame envisaged by the last Labour government - the only reason it didn't get implemented during Blair's time at the time is that the technology to do so simply didn't exist.

For the record, this is precisely why I'm working on getting OpenVPN going from my router. It won't do much in the face of everything the government can access, but I'm at least going to resist as much as I can.

littlegreenman

digitalscream said:

Winny_Pooh said:

Typical right wing monarchial style attitude. Squeeze more out of the middle and poor and leave those at the top alone. 

Not at all. This is exactly the endgame envisaged by the last Labour government - the only reason it didn't get implemented during Blair's time at the time is that the technology to do so simply didn't exist.

For the record, this is precisely why I'm working on getting OpenVPN going from my router. It won't do much in the face of everything the government can access, but I'm at least going to resist as much as I can.

So, how's that work Lee? I'm aware of what VPN's are but not so sure how to use them/ set them up, etc...

digitalscream

littlegreenman said:

digitalscream said:

Winny_Pooh said:

Typical right wing monarchial style attitude. Squeeze more out of the middle and poor and leave those at the top alone. 

Not at all. This is exactly the endgame envisaged by the last Labour government - the only reason it didn't get implemented during Blair's time at the time is that the technology to do so simply didn't exist.

For the record, this is precisely why I'm working on getting OpenVPN going from my router. It won't do much in the face of everything the government can access, but I'm at least going to resist as much as I can.

So, how's that work Lee? I'm aware of what VPN's are but not so sure how to use them/ set them up, etc...

Well, you could use a commercial VPN service, or you could do what I'm doing - get a virtual server (such as the one that this place is hosted on, but the entry-level version) then set up an OpenVPN server. It's a bit technical, though, so if you're not particularly au fait with Linux command line stuff then it's probably not the best idea; a commercial service might be easier.

I'm currently looking for a router which can act as an OpenVPN client. The idea is that rather than connecting to the VPN from each machine, all traffic from the router travels over the VPN and is encrypted accordingly.

RaymondLin

Is there any point? If they could track down who hacked the democrat's emails, I'm sure they can trace your activities online if they want to. (I'm sure you've seen CitizenFour)

ToneControl

bbill335 said:

What the FUCK? Anything that they might get from spying on small time individuals minus the cost of enforcing and collecting (theoretically) scores of tiny amounts is pissing in the ocean compared to the big guys that dodge tax with impunity. 

so people who  work and pay no tax should not be  pursued to contribute?
I know  many who  do cash in hand jobs and pay little or no tax - is that OK?

ToneControl

Unorthodox said:

http://www.telegraph.co.uk/tax/return/taxman-unleashes-snooper-computer-information-does-have/

Three choice bits of info.

"HMRC’s powerful “Connect” system now draws on information from myriad government and corporate sources to create a profile of each taxpayer’s total income."

"HMRC said it had used information gathered from banks, peer-to-peer lenders such as Zopa and other financial institutions and then checked it against individuals’ tax returns."

“Connect broadly deals with information spontaneously available in government departments or as part of the digital footprint that people leave when they use the internet,”

These loan companies are handing over your data, Facebook hands over user data (1, 2), and Google hands over user data (1), and all on top of GCHQ capturing everything you ever do online and it's all being used to see if you're dodging tax. Nice.

Amazing that it took so long coming
Expect more of this

ToneControl

Winny_Pooh said:

Typical right wing monarchial style attitude. Squeeze more out of the middle and poor and leave those at the top alone. 

Where is the greater investigation into tax loopholes, overseas accounts, corporate tax evasion, family trusts & gifts etc? 

RIGHT wing?
Do you think the left would not do this?

It's not  about squeezing "more" out of the middle & poor, it's about catching those who lie

digitalscream

RaymondLin said:

Is there any point? If they could track down who hacked the democrat's emails, I'm sure they can trace your activities online if they want to. (I'm sure you've seen CitizenFour)

They can, but it would take a lot more effort - what it does do is remove your traffic from the automated data collection. They have enough computing power at their disposal to crack 256 bit RSA encryption if they want (that's a good compromise between security and performance), but it would take a significant effort to do so.

marantz1300

ToneControl said:

Winny_Pooh said:

Typical right wing monarchial style attitude. Squeeze more out of the middle and poor and leave those at the top alone. 

Where is the greater investigation into tax loopholes, overseas accounts, corporate tax evasion, family trusts & gifts etc? 

RIGHT wing?
Do you think the left would not do this?

It's not  about squeezing "more" out of the middle & poor, it's about catching those who lie

Except for the rich.

They will still have their loopholes. Philip Green stealing £500,000,000 and apparently its legal.

Sporky

ToneControl said:

Winny_Pooh said:

Typical right wing monarchial style attitude. Squeeze more out of the middle and poor and leave those at the top alone. 

Where is the greater investigation into tax loopholes, overseas accounts, corporate tax evasion, family trusts & gifts etc? 

RIGHT wing?
Do you think the left would not do this?

I don't know why so many people don't understand this; it's not right vs left, it's authoritarian vs liberal.

This is an authoritarian move. Nothing whatsoever to do with left or right wing.

digitalscream

Sporky said:

ToneControl said:

Winny_Pooh said:

Typical right wing monarchial style attitude. Squeeze more out of the middle and poor and leave those at the top alone. 

Where is the greater investigation into tax loopholes, overseas accounts, corporate tax evasion, family trusts & gifts etc? 

RIGHT wing?
Do you think the left would not do this?

I don't know why so many people don't understand this; it's not right vs left, it's authoritarian vs liberal.

This is an authoritarian move. Nothing whatsoever to do with left or right wing.

Precisely - since 9/11, almost every single Western country has had a massive lurch towards authoritarian rule, because the "threat" that terrorism presents also represents the perfect excuse for it.

Sure, we lead the world in surveillance of our own citizens, but everybody else is a) egging us on, and b) waiting for the next iteration of the technology so they can adopt it themselves.

bbill335

ToneControl said:

bbill335 said:

What the FUCK? Anything that they might get from spying on small time individuals minus the cost of enforcing and collecting (theoretically) scores of tiny amounts is pissing in the ocean compared to the big guys that dodge tax with impunity. 

so people who  work and pay no tax should not be  pursued to contribute?
I know  many who  do cash in hand jobs and pay little or no tax - is that OK?

Of course, everybody should render unto Caesar, but to enact a policy like this - claiming to target the small fry tax avoiders - before coming down on the crooks that run huge businesses owing millions in tax just serves to further demonise those at the poorer end of the spectrum. My real concern is that further scrutiny on the most vulnerable (people on disability benefit etc.) leads to desperate people having no money to live and the government happily does this kind of thing in the name of national bookkeeping while turning a blind eye to the human impact.

If they were really serious about retrieving unpaid taxes, they'd go for those making the big money. Who makes millions cash in hand? This a lip service policy that placates whoever is calling for this and that by making things worse for those most vulnerable while letting the worst offenders carry on as normal.