mythbusting - ISAs are tax avoidance

[gun ainm]

decent blog on why ISAs are NOT tax avoidance (despite many investment types drawing the comparison by way of mitigating the Paradise Papers scandal)

http://www.taxresearch.org.uk/Blog/2...tax-avoidance/

excerpt:

In the case of ISAs, the economic substance is that money is placed in the UK in an account which is legally designated as tax free because the government wants to boost savings. The whole arrangement is above board. A national insurance number has to be given to open the account to make sure the scheme is not abused. Tax compliance is built in.

There is not a hint of comparison that can be made between this and setting up a series of aircraft leasing companies to buy a plane that it is then claimed is leased back to the owner with VAT reclaimed on the say to save millions on the purchase cost. That is an artificial structure set up in a place where the plane will hardly ever go with the sole intention of subverting the intention of tax law. The transaction is recorded in the wrong place and the economic form does not match what is reported. That is tax avoidance.

If someone is doing precisely what the law intends and allows for and seeks to encourage then they are not tax avoiding.

When they are doing something that the law never intended to happen and get a tax advantage from it then they are tax avoiding.

[Dub]

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decent blog on why ISAs are NOT tax avoidance (despite many investment types drawing the comparison by way of mitigating the Paradise Papers scandal)

http://www.taxresearch.org.uk/Blog/2...tax-avoidance/

excerpt:

In the case of ISAs, the economic substance is that money is placed in the UK in an account which is legally designated as tax free because the government wants to boost savings. The whole arrangement is above board. A national insurance number has to be given to open the account to make sure the scheme is not abused. Tax compliance is built in.

There is not a hint of comparison that can be made between this and setting up a series of aircraft leasing companies to buy a plane that it is then claimed is leased back to the owner with VAT reclaimed on the say to save millions on the purchase cost. That is an artificial structure set up in a place where the plane will hardly ever go with the sole intention of subverting the intention of tax law. The transaction is recorded in the wrong place and the economic form does not match what is reported. That is tax avoidance.

If someone is doing precisely what the law intends and allows for and seeks to encourage then they are not tax avoiding.

When they are doing something that the law never intended to happen and get a tax advantage from it then they are tax avoiding.

It would seem as though some people are trying to muddy the waters.

[Wannabehibee]

Who was saying ISAs were tax avoidance? Never heard so much 💩 in my life! 😂

[HenryLB]

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When they are doing something that the law never intended to happen and get a tax advantage from it then they are tax avoiding.

How does one decide what the law 'intended'? Furthermore how is that a basis for censuring people?

[gun ainm]

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How does one decide what the law 'intended'? Furthermore how is that a basis for censuring people?

another slightly obtuse question - you see no difference in the two examples H? are you arguing that HoC deliberately left gaps in VAT requirements to allow the super rich to save millions on the purchase of their private jet while ensuring that it is properly applied to basics like sanitary products? its possible I suppose even if it has a whiff of the conspiracy - I tend to believe it was an unintended loophole that was never considered. but yes you are right I have no evidence either way.

my censuring is done from my own moral perspective rather than a legal one - that may share that moral perspective is reassuring.

[HenryLB]

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another slightly obtuse question - you see no difference in the two examples H? are you arguing that HoC deliberately left gaps in VAT requirements to allow the super rich to save millions on the purchase of their private jet while ensuring that it is properly applied to basics like sanitary products? its possible I suppose even if it has a whiff of the conspiracy - I tend to believe it was an unintended loophole that was never considered. but yes you are right I have no evidence either way.

my censuring is done from my own moral perspective rather than a legal one - that may share that moral perspective is reassuring.

How is it obtuse? Of course I realise there's a moral difference between the examples, but while you may feel comfortable to impose the law based on what you think it might mean, I don't. And if you don't want to impose the law then how are you going to fix the problem?

You - and the article - are IMO looking at this from an odd premise. Most people don't mention ISAs to say that all other tax avoidance is of a piece with them; they do so to point out that the actual operation of [I]avoiding[I] (I'm using the term precisely) tax is not in itself something that is necessarily wrong, or even unsanctioned by government. And that the blanket usage of the term pejoratively to describe every single effort to minimise a tax bill is an un-nuanced and unhelpful way of looking at the problem.

In the case you describe above it probably is an unintended loophole, and I suspect it's hard to close given the supranational nature of it. But what do you suggest the government do, beyond refining the law? Rely on everyone being as moral as you when it comes to writing cheques for millions of pounds in VAT when they don't legally have to?

My point - and the point of mentioning ISAs - is that there are many shades of avoidance. Some amount almost to evasion; some are actually intended to produce positive but non-revenue creating outcomes by the government. If one is going to try to solve this problem then that point is going to have to be grasped, because otherwise we rely on suddenly everyone having a moral epiphany - and it's odd how many people actually have the reverse one when they make some money. I can think of quite a few examples.

[gun ainm]

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How is it obtuse? Of course I realise there's a moral difference between the examples, but while you may feel comfortable to impose the law based on what you think it might mean, I don't. And if you don't want to impose the law then how are you going to fix the problem?

You - and the article - are IMO looking at this from an odd premise. Most people don't mention ISAs to say that all other tax avoidance is of a piece with them; they do so to point out that the actual operation of [I]avoiding[I] (I'm using the term precisely) tax is not in itself something that is necessarily wrong, or even unsanctioned by government. And that the blanket usage of the term pejoratively to describe every single effort to minimise a tax bill is an un-nuanced and unhelpful way of looking at the problem.

In the case you describe above it probably is an unintended loophole, and I suspect it's hard to close given the supranational nature of it. But what do you suggest the government do, beyond refining the law? Rely on everyone being as moral as you when it comes to writing cheques for millions of pounds in VAT when they don't legally have to?

My point - and the point of mentioning ISAs - is that there are many shades of avoidance. Some amount almost to evasion; some are actually intended to produce positive but non-revenue creating outcomes by the government. If one is going to try to solve this problem then that point is going to have to be grasped, because otherwise we rely on suddenly everyone having a moral epiphany - and it's odd how many people actually have the reverse one when they make some money. I can think of quite a few examples.

i'm not imposing the law i am calling folk ****s on an internet forum for avoiding paying tax by exploiting a mechanism that wasnt designed or implemented by the government/treasury.

the example above would be easy to close if theUK didnt subsidise tax havens to such an extent that they can operate as such...me and you subsidise this (along with 60 million odd others)

[EA2007]

I'd be tax avoiding as well if the loopholes were open and allowed me to.
Maximise wealth by whatever legal means necessary.
Non story for me.

[Purple & Green]

I always thought the distinction was between avoidance and evasion. I avoid tax by taking childcare vouchers.

[gun ainm]

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I always thought the distinction was between avoidance and evasion. I avoid tax by taking childcare vouchers.

the distinction made is that incentivised savings like ISAs or Childcare vouchers is not avoidance and not the equivalent to using offshore arrangements to avoid VAT on something that would have been liable to VAT in the UK (where the person is domiciled)...but then thats spelled out in the OP

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I'd be tax avoiding as well if the loopholes were open and allowed me to.
Maximise wealth by whatever legal means necessary.
Non story for me.

its a strange one - respect for the law on the one hand but utter contempt for society - your view is common but to me represents much that is wrong with the country/world. quite judgey i know as i dont know your circumstances and you might be saving to buy your poor freezing granny a new hip - but feck me i am sick of these selfish, indulgent pricks like Lewis Hamilton and her Madge while people are literally dying due to lack of services in one of the richest countries in the world. shameful.

[EA2007]

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i dont know your circumstances and you might be saving to buy your poor freezing granny a new hip

$#@! that, I have a lot more travelling to be done. My travel is in economy class rather than private jet like that prick Hamilton right enough.
The NHS should be taking care of granny though as that's what we pay our Taxes and N.I for right

All this is about shaming people into paying more tax though isn't it rather than suggesting they are breaking laws or evading tax??
Most will claim ignorance and blame their advisers anyway and wait for the fuss to die down whilst still cashing in.

[HenryLB]

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i'm not imposing the law i am calling folk ****s on an internet forum for avoiding paying tax by exploiting a mechanism that wasnt designed or implemented by the government/treasury.

So this is just a howl at the moon? Fair enough. But I think there's a philosophical point here - you seem to think that there is a sort of 'natural law' of taxation that the government then varies. That's not the case. The government creates every tax in existence and it's up to them to ensure they can be imposed and collected effectively. There are bound to be loopholes purely down to complexity but what is to stop the authorities closing them when possible? Why should private citizens do their job for them based on an arbitrary and contestable notion of what might be 'fair'?

What, for example, are your opinions on Entrepreneur Relief and EIS and SEIS? Do you think people should just use them in a 'reasonable' or 'moral' manner, or that they should use them in the way the law allows them to? I just don't think the former is going to take off as a solution to this problem.

the example above would be easy to close if theUK didnt subsidise tax havens to such an extent that they can operate as such...me and you subsidise this (along with 60 million odd others)

Odd position for a Scottish nationalist to take. You're suggesting we should reduce the autonomy of places like the Isle of Man?

Had Scotland become independent after 2014 it's likely that iScotland would have reduced its corporation tax. Would you have supported what was essentially an invitation to businesses to avoid tax?

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the distinction made is that incentivised savings like ISAs or Childcare vouchers is not avoidance and not the equivalent to using offshore arrangements to avoid VAT on something that would have been liable to VAT in the UK (where the person is domiciled)...but then thats spelled out in the OP

Lewis Hamilton isn't domiciled in the UK.

[gun ainm]

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So this is just a howl at the moon? Fair enough. But I think there's a philosophical point here - you seem to think that there is a sort of 'natural law' of taxation that the government then varies. That's not the case. The government creates every tax in existence and it's up to them to ensure they can be imposed and collected effectively. There are bound to be loopholes purely down to complexity but what is to stop the authorities closing them when possible? Why should private citizens do their job for them based on an arbitrary and contestable notion of what might be 'fair'?

ha - I'm not suggesting a natural law of taxation - I am suggesting that the law is not the only reference point when making decisions =) I'm not arguing that the introduction of ethics is not contestable only that by using the law as the sole starting point on the tax question is unethical (literally - in so far as it doesn't allow for any consideration of ethics).

Odd position for a Scottish nationalist to take. You're suggesting we should reduce the autonomy of places like the Isle of Man?

laughable comparison henry - I have yet to see any indy supporter argue that we should become a crown dependency supported by tax payers in rUK to such a degree that we can choose to dispense with (some) taxes in Scotland. Subsidising the IoM's income to enable its status as a tax haven is not providing them with autonomy it is engineering dependence to the benefit of those who choose to use the 'special arrangements'. Any overlap between those people and those that lobby and donate to political parties is I am sure coincidental.

Had Scotland become independent after 2014 it's likely that iScotland would have reduced its corporation tax. Would you have supported what was essentially an invitation to businesses to avoid tax?

No

[HenryLB]

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ha - I'm not suggesting a natural law of taxation - I am suggesting that the law is not the only reference point when making decisions =) I'm not arguing that the introduction of ethics is not contestable only that by using the law as the sole starting point on the tax question is unethical (literally - in so far as it doesn't allow for any consideration of ethics).

In so far as I understand you, I guess we will have to agree to differ because I can't see how we can rely on an appeal others' ethical sensibilities to solve the problem. Demonstrably, because people and companies clearly often don't consider ethics when making tax decisions.

I guess what I mean is that I think you're right. Just not very usefully so in terms of getting to grips with the issue!

laughable comparison henry - I have yet to see any indy supporter argue that we should become a crown dependency supported by tax payers in rUK to such a degree that we can choose to dispense with (some) taxes in Scotland. Subsidising the IoM's income to enable its status as a tax haven is not providing them with autonomy it is engineering dependence to the benefit of those who choose to use the 'special arrangements'. Any overlap between those people and those that lobby and donate to political parties is I am sure coincidental.

No. But you are saying that the IoM should preferably not have power over its tax affairs.

Bear in mind that the 'subsidy' helps the IoM with its fiscal setup but is not the reason it has differential tax rates. Were the 'subsidy' to disappear they could still have the same corporation tax rates. They are possible because of its constitutional position, which as I say I find it odd that a nationalist would want to interfere with.

No

Fair enough. I guess that tax avoidance (and possibly a 'race to the bottom' in UK tax) will be a price worth paying. Or an unintended consequence, at least!

[gun ainm]

Christian aid press release today shows 89% of people think legal tax avoidance is morally wrong - suggest equivalency between BOTs and UK (with supported transition)

https://mediacentre.christianaid.org...christian-aid/