Socialism ?

[Ethan]

Paying a portion of your own salary via your spouse to avoid tax, if they are not doing any work, is definitely tax evasion and illegal.

It definitely isn't. Tell me the name of the law that you think applies.

 

[Jamesbrown]

On the topic of tax.
I was a contractor for a number of years. Came off self employed as was tedious so was recommended a payroll company to be “employed“ by.

Not sure how it worked but but I got a payslip for minimum wage. Taxed on minimum wage and then the rest was a separate transaction into my bank tax free.

Never questioned it as let’s be honest who doesn’t want to pay less tax. But managed a remortgage with the payslips despite difficultly working out what and how.

Delving deeper they had an arm of the company based in Malta so maybe they classed me as overseas. Who knows, but I certainly enjoyed my ignorance to tax.

 

[Ethan]

On the topic of tax.
I was a contractor for a number of years. Came off self employed as was tedious so was recommended a payroll company to be “employed“ by.

Not sure how it worked but but I got a payslip for minimum wage. Taxed on minimum wage and then the rest was a separate transaction into my bank tax free.

Never questioned it as let’s be honest who doesn’t want to pay less tax. But managed a remortgage with the payslips despite difficultly working out what and how.

Delving deeper they had an arm of the company based in Malta so maybe they classed me as overseas. Who knows, but I certainly enjoyed my ignorance to tax.

Basic income paid as salary up to a tax efficient amount, rest as dividend with expenses deducted first, at a lower tax rate. The way most people with limited companies operate.

 

[Jamesbrown]

Basic income paid as salary up to a tax efficient amount, rest as dividend with expenses deducted first, at a lower tax rate. The way most people with limited companies operate.

It wasn’t through my Ltd company as it was an Umbrella company. Usually subject to employers NI as well as my employee NI.

 

[GreiginFife]

It wasn’t through my Ltd company as it was an Umbrella company. Usually subject to employers NI as well as my employee NI.

That's not an umbrella set up in the "normal" sense and might actually be on the borderline.
Umbrella PAYE would deduct tax and NI plus any pension and, if you so choose, holiday pay. Usually to the tune of about 57% if above upper threshold.

What you describe is a limited co masquerading (possibly dangerously) as an umbrella. There are a few around and many larger FS employers and agencies won't allow umbrella contractors to use them. There is an FCA approved list now and I doubt ones like that will be on it.

I was a Ltd co contractor for 10 years until this year where my current assignment is inside IR35 and as a result I have to use an FCA approved umbrella provider. My monthly income is collated and split into income, commission and pension. All is taxed accordingly and c.57-59% is deducted at source (inc. Margin).

Its utter garbage working this way as none of it takes account of I take a weeks holiday or I am sick for a week. Ltd Co allowed money to be kept aside for such things.

 

[Foxholer]

On the topic of tax.
I was a contractor for a number of years. Came off self employed as was tedious so was recommended a payroll company to be “employed“ by.

Not sure how it worked but but I got a payslip for minimum wage. Taxed on minimum wage and then the rest was a separate transaction into my bank tax free.

Never questioned it as let’s be honest who doesn’t want to pay less tax. But managed a remortgage with the payslips despite difficultly working out what and how.

Delving deeper they had an arm of the company based in Malta so maybe they classed me as overseas. Who knows, but I certainly enjoyed my ignorance to tax.

Yep! That's the way many/most IT contractors (including me) work/worked - paying an accountant to sort out the optimisation. FWIW, I don't believe 'the rest' was actually 'tax free', but significantly less than via PAYE on the full amount - and a totally legitimate way for contractors to work. The Malta connection might have had 'added benefits'. Many/most Umbrella Coys (and how I worked) were UK ones.

 

[Grant85]

It definitely isn't. Tell me the name of the law that you think applies.

tell me the name of the law that makes it legal?

It takes literally seconds to google this kind of thing.

Tax Agility - see this UK tax advisers website.

'First of all, it must be explained that HMRC deems your family ties to be entirely irrelevant when it comes to who is placed on your payroll. You can definitely employ your spouse or any family members and put them on your payroll.

What HMRC is very much interested in is what your company gets out of the arrangement. In other words, the person who is being paid a wage appropriate to the job should actually be doing the job. There must be no special treatment paid to the family member through an inflated salary, reduced working hours, or anything that falls outside the ‘equal pay for equal value’ idea.'

This is just something that has fallen into the idea of 'an easy loophole to save a bit of tax that no one will ever check or be able to prove a case against us.'

 

[Ethan]

tell me the name of the law that makes it legal?

Ah, I thought so. You don't know what you are talking about. Thanks for the confirmation.

 

[Grant85]

Ah, I thought so. You don't know what you are talking about. Thanks for the confirmation.

Who goes about quoting laws?

Everyone knows it's illegal to drive at 80 mph or murder someone, but who knows what law or act of parliament has made it illegal?

I know very well what I'm talking about. The responses to my point about paying a spouse part of your salary have provided no evidence or actual information demonstrating it is legal.

 

[Foxholer]

...The responses to my point about paying a spouse part of your salary have provided no evidence or actual information demonstrating it is legal.

I provide a link in post 120 to the case that HMRC lost when trying to get a ruling that it was illegal! Therefore that ruling confirms that it was/is legal!

 

[Ethan]

Who goes about quoting laws?

Everyone knows it's illegal to drive at 80 mph or murder someone, but who knows what law or act of parliament has made it illegal?

I know very well what I'm talking about. The responses to my point about paying a spouse part of your salary have provided no evidence or actual information demonstrating it is legal.

Because laws prohibit stuff. That is how they work, and then that which is not rendered illegal is legal. There is no law that says explicitly that it is legal to drive on the motorway at 69mph, but it is not illegal, therefore it is legal.

The scenario where a person sets up a limited company and has a spouse as a director or shareholder is an extremely common one, recommended by accountants and law forms who assist people to set up such companies, and perfectly legal. The reason for doing so is to minimise tax. That too is legal and is not tax evasion, but tax avoidance, which is sensible.

 

[Kellfire]

Because laws prohibit stuff. That is how they work, and then that which is not rendered illegal is legal. There is no law that says explicitly that it is legal to drive on the motorway at 69mph, but it is not illegal, therefore it is legal.

The scenario where a person sets up a limited company and has a spouse as a director or shareholder is an extremely common one, recommended by accountants and law forms who assist people to set up such companies, and perfectly legal. The reason for doing so is to minimise tax. That too is legal and is not tax evasion, but tax avoidance, which is sensible.

I think we can agree that it should be illegal.

 

[Grant85]

I provide a link in post 120 to the case that HMRC lost when trying to get a ruling that it was illegal! Therefore that ruling confirms that it was/is legal!

Sorry, I missed that yesterday - have now read it.

Issues - it's now 13 years old. Not saying it's not relevant, just that there's been a lot of time passed, a lot of governments passing laws and very possible that a perceived loophole has been closed. but lets assume it still stands.

The article also seems to focus on the fact it's dividends that are being paid. Which is crucial, because while salary has to be earned, dividends are considered a passive income (similar to rental income).

Also - the article doesn't mention at all what the Jones' argument was. i.e.

* was it that dividends are different from salary, so it doesn't matter if one of the shareholders doesn't do any work?

* Or did they argue that both partners did a reasonable share of the work?

* Or did they argue that you can pay anyone whatever you want and not have to justify it?

I suspect it is one of the first 2 and not the 3rd option there.

My point about paying a spouse a £10,000 salary even if they do no work, rather than pay it to yourself and pay £4,000+ tax on it stands and it is illegal.

 

[Ethan]

I think we can agree that it should be illegal.

So long as they also make the wealthy putting their money in the Caymans or Malta and their houses in trust to avoid inheritance tax illegal too, sure.

 

[Kellfire]

So long as they also make the wealthy putting their money in the Caymans or Malta and their houses in trust to avoid inheritance tax illegal too, sure.

Yep, I’d agree with both of those.

 

[Foxholer]

Sorry, I missed that yesterday - have now read it.

Issues - it's now 13 years old. Not saying it's not relevant, just that there's been a lot of time passed, a lot of governments passing laws and very possible that a perceived loophole has been closed. but lets assume it still stands.

The article also seems to focus on the fact it's dividends that are being paid. Which is crucial, because while salary has to be earned, dividends are considered a passive income (similar to rental income).

Also - the article doesn't mention at all what the Jones' argument was. i.e.

* was it that dividends are different from salary, so it doesn't matter if one of the shareholders doesn't do any work?

* Or did they argue that both partners did a reasonable share of the work?

* Or did they argue that you can pay anyone whatever you want and not have to justify it?

I suspect it is one of the first 2 and not the 3rd option there.

My point about paying a spouse a £10,000 salary even if they do no work, rather than pay it to yourself and pay £4,000+ tax on it stands and it is illegal.

As far as I know, it still stands as relevant - in spite of the (then) Minister making a statement otherwise the following day!
Oh... And See Post 110 too!

 

[Swinglowandslow]

I think you need to read what I actually post as opposed to what you want it to be.
A Socialist State is one where the means of Production, distribution and financial control are state owned. You say those countries are Communist but none of then define themselves as such, they call themselves Social Republics.
Regarding National Socialists, again, they started as workers party and no matter how many times you deny it that was a socialist movement in its infancy, it had a policy where production, distribution and finance was state controlled, far right is the complete opposite to this, it wants the market to be free of state intervention. I dont support anything they did but they were anything but a haven for free enterprise.

Socialism is an economic concept, and SR's
description of socialism , in his second sentence, is essentially correct, and he , obviously, disagrees with that as he supports free enterprise, or "laissez faire" economics.

But overall he isn't correct.

He then seems to "leap" to allege a political view of socialism insisting that it inevitably is dictatorial, oppressive, breeds scrounging etc , seemingly because there is so much government input in its function.
Also, he concludes that because the name is in the Nazi official title, that the Nazis are an example of what socialism is, or can be. That is clearly a wrong conclusion.

The Nazis were far right fascists, their avowed enemies were socialists.
As others have said, the name socialist was no indication of their political mantra. Same as North Korea uses democratic in its description of its State.

Furthermore, Nazi Germany did not pursue socialist economic policies, they used privately owned and run companies- Krupps for Arms, even the army uniforms were made by private companies.
A typical fascist state ,where an elite of political, business and military run a country in an open or hidden dictatorship to mainly benefit them and their supporters, can exist in a country using any economic system.
Nazi Germany and Franco Spain and Czarist Russia using non socialist economics,
the Soviet Union using socialist economics.
Even the USA was accused by some ( see Oliver Stone's JFK- Jim Garrison's courthouse speech) of fascism.

Socialism can be the economic system of any Country, as in the late 40s in this Country , and I believe it has a strong influence in Scandinavia.. It certainly can thrive in a democratic country.
If implemented by politicians who are not knaves then it is a fair and good system.
However, if corrupted , or weak empathy allowing manipulative abuse is tolerated, then it fails.
S R puts forward free enterprise as a better system because it rewards effort and socialism doesn't, he says.
It's true , effort is rewarded in his system, and that is a good thing, but there is no such thing as a modern country run on "laissez faire " economics. There is always Government control of many aspects . Rules on planning, how many of certain types of enterprises allowed in one area (e.g off-licences) , rules on what businesses can and cannot do. We even have supporters of free enterprise, to whom nationalisation is anathema, demanding that the Government assist private businesses like Railways, aircraft industries, and Banks when they get into financial problems!
How is that "laissez faire"?
Well run countries use the best of both systems.
They have the fairest and most deserving prosperity, they do not decry wealth,and they strive for the least poverty.
To be fair, they have to have an empathy to socialism, surely. You cannot have "Devil take the hindmost".

 

[Foxholer]

I think we can agree that it should be illegal.

H'mm! Not sure I'd agree! It depends on what 'it' is!
I'd agree that 'everyone should pay their fair share of tax'. But the definition of 'fair share' can vary considerably!
A Kiwi entrepreneur (Bob Jones/Sir Robt Jones - a very 'interesting character'!) once described IRS (HMRC here), beautifully, as 'legalised bandits'!

 

[Foxholer]

Here's an interesting, and pretty accurate imo, article about Socialism - which identifies 8 'different/distinct' types of Socialism!
https://www.thebalance.com/socialism-types-pros-cons-examples-3305592#:~:text=Under socialism, workers are no longer exploited because,needs for the good of the whole society.

 

[harpo_72]

No extreme is any good..
What we seem to have an issue with is “social empathy” I earn more, therefore I deserve more, is very human and the total weakness of the system. As is the laziness that depends on others hard work. We need to change as a society but we are all too concerned with our material objects ..

Incidentally the Thatcher quote at the beginning was written by a spin doctor who could have re-written it as “once you have sold off your assets you have no money ... “