Tax exile ruling - implications for McCabe?

[Highbury_Blade]

Several of my contractor colleagues are currently shitting themselves over the results of the montpellier case.

I don't particularly like my current arrangements much, but as a contractor you do feel pushed into some of these dodgy arrangements due to the ridiculous way NI is applied to contractors working solely for themselves.

 

[Nick Jansky]

Several of my contractor colleagues are currently shitting themselves over the results of the montpellier case.

I don't particularly like my current arrangements much, but as a contractor you do feel pushed into some of these dodgy arrangements due to the ridiculous way NI is applied to contractors working solely for themselves.

Yes, there is an absolute onslaught against avoidance at the moment. Do you operate under a Managed Service Company style arrangement, Highbury? Some of those have become incredibly esoteric! Especially some of the offshore ones.

If anybody is a sub contractor in the construction industry, wait & see what they have planned for you! The proposal is that ALL labour only subbies will be treated as employed, no matter how long the contract is!!! The only exceptions will be if you personally provide plant and equipment, AND other workers. This flies in the face of all court precedents relating to self employed status (much more draconian than IR35) and will add 13.8% (when NIC increases next year) to a huge chunk of the construction industry's labour costs overnight, at a time when that industry is very depressed.

 

[Highbury_Blade]

I'm currently operating as a sole trader through a company called inland solutions. I can't reall be arsed with contracting at the moment, and have been offered a permanent job with my employer, so will probably take it.

 

[Highbury_Blade]

Should add I'll probably go back to contacting in the future as IT contacting can be very lucrative especially in city of London, but not until I've finished uni (and get a lot better at java programming)

 

[SwissBlade]

A lot of people are bricking it here as well...Do we need to panic if we're trying to stick to the rules as we see them?

The problem is, none of us know where we stand. The guidelines I read recently suggested that if you're in oil and gas exploration or development outside the uk then you're tax exempt (forget the wording). But we're working on a a gas pipeline construction so in a way we're neither or we could argue development...

I know guys that've sold their cars, changed the ownership name of the house, mobile phone to their wives etc etc to fall in line. But depending on who you talk to, this is either "following the rules" or "tax avoidance"

I'm also unsure as to where I stand as I'm paying the toblerone tax here in Switzerland.

All the stuff i've read is that its up to us to prove that we're non resident.

Nick Jansky, I might need your advice as I might not be straight forward

 

[JJ Sefton]

"The tax which each individual is bound to pay ought to be certain, and not arbitrary. The time of payment, the manner of payment, the quantity to be paid, ought all to be clear and plain to the contributor, and to every other person"

Adam Smith, 1776

 

[Deleted member 2102]

"The tax which each individual is bound to pay ought to be certain, and not arbitrary. The time of payment, the manner of payment, the quantity to be paid, ought all to be clear and plain to the contributor, and to every other person"

Adam Smith, 1776

Apart from when you have a debt/GDP ratio pushing up to 100% and the state spends over 50% of GDP then you fight for every penny. Its the same reason as to why HMRC are actually trying to claim back tax from football clubs. As for BB's pension blackhole all I would say is if you are a state employee under the age of 35 I wouldnt be banking on getting your pension in it current generous form. Unfortunately you will have to sacrifice that to pay for the baby boomers' retirement as they will not be making any sacrifices of their own.

 

[ghandi]

Should we levy a Police tax on Spanish backpackers who get their mobiles stolen on Oxford Street?

No just shoot them on the Underground claiming with their backpacks they just looked like that other Latin looking terrorist from Brasil.

 

[Nick Jansky]

Apart from when you have a debt/GDP ratio pushing up to 100% and the state spends over 50% of GDP then you fight for every penny. Its the same reason as to why HMRC are actually trying to claim back tax from football clubs. As for BB's pension blackhole all I would say is if you are a state employee under the age of 35 I wouldnt be banking on getting your pension in it current generous form. Unfortunately you will have to sacrifice that to pay for the baby boomers' retirement as they will not be making any sacrifices of their own.

The rules on Penson Contributions will change in April 2012. From then, every single person in employment will HAVE to make contributions to a pension scheme, as will their employer. At the moment all an employer has to do (if they have 5 or more employees) is to make a pension scheme available to employees, but neither employer or employees have to contribute to it.

Beighton is correct - this is an absolutely massive issue, and, like you, I fear for the retirement of those currently under 35.

Expect National Insurance to rocket in the coming years, way beyond the 1% increase we will all see next April. Because, of course, it is "not a tax", so they can trumpet (both of them) that they have "not increased tax".

 

[Nick Jansky]

All the stuff i've read is that its up to us to prove that we're non resident.

Nick Jansky, I might need your advice as I might not be straight forward

Always happy to help a fellow Blade!

Haven't had a chance to read the 31 page judgment yet, as ever there will be a lot of devil in the detail, but will get up to speed over the next few days & PM you.

 

[Trigger Blade]

Should add I'll probably go back to contacting in the future as IT contacting can be very lucrative especially in city of London, but not until I've finished uni (and get a lot better at java programming)

I've got one of those complicated digital percolators as well. I'm thinking of going back to the cafetiere with a plunger, far simpler

 

[Darren]

But it gets better, Darren! Take a look at this one!

http://news.bbc.co.uk/1/hi/business/8484955.stm

The whole issue of new tax legislation applying retrospectively is a huge can of worms.

To be fair, the report seems to suggest that whilst the taxpayer asserted that the claim for tax was based on retrospective legislation, the Revenue argued that the scheme was unlawful all along and the judge seems to have accepted that.

On the wider issue, I have zero sympathy for people who engage in convoluted schemes to avoid paying taxes.

 

[Deleted member 2102]

The rules on Penson Contributions will change in April 2012. From then, every single person in employment will HAVE to make contributions to a pension scheme, as will their employer. At the moment all an employer has to do (if they have 5 or more employees) is to make a pension scheme available to employees, but neither employer or employees have to contribute to it.

Beighton is correct - this is an absolutely massive issue, and, like you, I fear for the retirement of those currently under 35.

Expect National Insurance to rocket in the coming years, way beyond the 1% increase we will all see next April. Because, of course, it is "not a tax", so they can trumpet (both of them) that they have "not increased tax".

Is this correct after the recent tax changes higher rate tax payers will get only 20% relief on pension contributions but be taxed at 40% on the pension income. Basically its not worth saving in a pension for a higher rate tax payer. I agree with your general point about tax, 40p rate will be increased as will Nat Insurance, personal allowances will be phased out and VAT will be at least 20%. Darren I consider it my moral duty to reduce my tax bill to the smallest amount possible. And how does this relate to the Blades? Well people will have less cash to spend in the club shop.

 

[Highbury_Blade]

In some circumstances i would agree with you. A lot do it to avoid being hit for 20% NI (8% employees's & 12% employers NI), which for contractors that only employ themselves is manifestly unfair. I would be happy paying one or the other, but not both. If the governmet introduced legislation to cater for sole contractors then i wouldn't be forced into seeking a convoluted tax arrangement in order to take home a decent chunk of my pay.

 

[Sothall_Blade]

To be fair, the report seems to suggest that whilst the taxpayer asserted that the claim for tax was based on retrospective legislation, the Revenue argued that the scheme was unlawful all along and the judge seems to have accepted that.

On the wider issue, I have zero sympathy for people who engage in convoluted schemes to avoid paying taxes.

My thoughts exactly. Are we supposed to feel sorry for these people who've been paying tax at 3.5% for years?

 

[Nick Jansky]

In some circumstances i would agree with you. A lot do it to avoid being hit for 20% NI (8% employees's & 12% employers NI), which for contractors that only employ themselves is manifestly unfair. I would be happy paying one or the other, but not both. If the governmet introduced legislation to cater for sole contractors then i wouldn't be forced into seeking a convoluted tax arrangement in order to take home a decent chunk of my pay.

NI is currently 11% Employees (if not Contracted Out) and 12.8% Employers, a total of 23.8% on top of Income Tax.

From 6/4/11 both rates go up by 1% - 25.8%!!! Before Income Tax is taken into account.....

Then, when you spend your net pay, you pay VAT at 17.5%. And who doesn't think that will be going up?

Personal Allowances are very unlikely to be phased out, but for people earning over £100k per annum, they reduce by £1 for every £2 earned over & above £100k. Once your income reaches £112,050 you lose your Personal Allowance completely, giving an effective tax rate between that bracket of 60%.

These are the changes that we already know about, before the inevitable tax increases that will be "necessary" to tackle the deficit.

 

[ghandi]

Is this correct after the recent tax changes higher rate tax payers will get only 20% relief on pension contributions but be taxed at 40% on the pension income. Basically its not worth saving in a pension for a higher rate tax payer. I agree with your general point about tax, 40p rate will be increased as will Nat Insurance, personal allowances will be phased out and VAT will be at least 20%. Darren I consider it my moral duty to reduce my tax bill to the smallest amount possible. And how does this relate to the Blades? Well people will have less cash to spend in the club shop.

The tax relief which will be restricted to 20%; I believe, is only for high earners (those earning over 150K per year) not higher tax rate payers which is about 40k-150k per year.

 

[oldblade]

Yep, tax 'em till they squeal and go find somewhere else to live. Everybody will be better off then.

Well, if our bankers are anything to go by, we would all be better off if they did all go elsewhere and preferably find something else to do - something that they have a modicum of competence at doing.

 

[super_pig]

don't worry .. it will never happen.. it is politiking for the upcoming election. the powers that be.. the super rich, the people who own this joint will have a quiet word and it will be thrown out on appeal..
i heard everyone was now doing java at university:thumbdown:.. apparently c is too hard for them.. what is the world coming to?

 

[Highbury_Blade]

don't worry .. it will never happen.. it is politiking for the upcoming election. the powers that be.. the super rich, the people who own this joint will have a quiet word and it will be thrown out on appeal..
i heard everyone was now doing java at university:thumbdown:.. apparently c is too hard for them.. what is the world coming to?

Nothing to do with difficulty, and everything to do with the way the programming world is moving. C will be going the way of COBOL in the next few years, used only in embedded systems with small memory requirements.

Personally i think it's a shame that on my course everyone will graduate knowing absolutely bugger all about memory management. But then again who the fuck actually likes cleaning up after themselves? In todays' world where hardware is cheap and programmers are expensive, it's less about optimisation, and all about productivity.

Fuck, even in Java you sometimes have to write tedious amounts of code to get simple things done. Tomorrow's languages are going to be even higher level than they are now.

 

[TCsLoveChild]

I advise on this sort of stuff for a living. This ruling has had a huge impact in our office today, everybody downed tools to talk about it.

Bear in mind that it still has a long way to go - it will undoubtedly go to the Court of Appeal and quite probably beyond. It will take a few years before things become clearer (or rather, much less clear than they had always appeared to be before this ruling!). In the meantime, rich expats will be rapidly looking to put their houses in order, give up UK credit cards & mobile phones & all sorts of other shenanigans. Mr McCabe may be a much less frequent visitor to BDTBL in future.

Irrespective of the rights & wrongs of this, the insidious thing is that for years you have been able to follow HMRC guidance on tax residency and come up with an answer, but this ruling effectively says that HMRC's own guidance cannot be relied upon - hmmmmmm.....

One thing that I do admire the Yanks for (and there is precious little) is that if you are an American citizen you cannot opt out of the US tax system, no matter where in the world you live. You pay tax in the US on worldwide income, end of story, with none of this non resident bollocks that we put up with.

The first person I though of when I read about this was Lord Ashcroft - I sincerely hope it screws things up for him.

Thanks for that insight, as you say massive implications for many and especially McCabe (it almost sounded like they had done it just to catch KM).

Oh and thanks for adding "story" to "end of" something that disproportionally drives me crazy.

UTB