Tax avoidance UK
The most common tax avoidance schemes in UK have been around for a long time. Tax avoidance schemes are said to be "not morally right", however set by governments they are legally right.
HM Revenue and Customs has said it is taking "firm action to protect the Exchequer from unacceptable tax loss". Chancellor George Osborne is "shocked" by the extent to which individuals have used the tax avoidance system.
Money that is not needed to heat the house, feed the children, or pay the council tax bill can be invested into an individual's pension scheme. Up to a certain limit it leads to a reduction of the amount of tax individual has to pay. British Pensions UK.
Topsy-turvy UK tax avoidance schemes...
A way to avoid tax is Enterprise Investment Scheme. This tax avoidance scheme is designed to encourage people to put their money in new businesses that are too risky for banks or government itself to fund. People are offered tax relief on the chunk of their own income that they put in and also pay little or no tax on any return they get out if the business is successful.
Some people avoid tax by giving part of their income or shares to charity, rather than directly the state.
Another well-known ploy, available to anyone, is insurance, to insure their lives, and write this policy into a trust for their children, so the money passes after the plane crash straight to children without paying inheritance tax.
Abuse of the tax system for personal gain is never acceptable!
Employing a husband or wife
Many small businesses might survive only because the owner's husband or wife is prepared to do a lot of work behind the scenes for relatively little pay. However, some businessmen and women have employed their husbands or wives, who might do very little work, but are still paid a salary. This means that the couple gets two tax-free allowances set against the first chunk of their income and so the family pays a smaller amount in tax. This applies in full only to individuals with a taxable income of less than £100,000. Lucky low-earners!
Did you now, if only one of the couple took all the income, he or she is entitled to higher tax bracket. Consult HMRC how to claim a higher tax bracket.
People may also pay less tax by paying themselves a dividend from their business, rather than salary - activity that governments have also tried to crack down.
Again, this is a perfectly legitimate tax avoidance scheme in UK. Nevertheless, millions of public sector employees and industrial union members never do so, never.
Effectively, a business is creative with the books and makes unnecessary transactions to contrive artificial losses. These appear to be losses on paper, which can then be offset against income for tax purposes. Actually they do not result in a loss in cash terms, but do allow the business and its owners to benefit from a lower tax bill than would otherwise be the case. These have been seen in film, music and creative industries. ASCAP, BSA, Chan Nai-ming, FAST, IFPI, RIAA. Do not be evil, there are other ways for businesses how to avoid taxes.
Tax avoidance scheme K2
More than 1,000 people are thought to be using the Jersey-based K2 scheme. "I pay what I have to and not a penny more," they say.
Just out of curiosity, would YOU personally pay more tax than asked?
Under the K2 scheme, an individual resigns from their company and signs with offshore company. Offshore company then hires out employee to old UK employer. Offshore trust receives money and pays to employee small amount of that out as salary and the rest as a loan. As this is a loan that can technically be recalled, there is no income tax due. Simple. Organic.
The K2 scheme allows someone on an income of £280,000 to reduce their tax bill from £127,000 to just £3,500.
Just out of curiosity, would YOU personally pay more tax than neccessary?
Avoid tax avoidance
Laws are made by governments, people must obey. Right? George Osborne's hatches plans to tackle tax avoidance.
Tax avoidance schemes in UK, if morally not right and legally right, does it mean law is immoral?