I have posted this on the Greedy Pigs thread but more appropiate on here I think.
Kevin Peachey(Personal finance reporter, BBC News)
Year after year, some wealthy individuals have used legitimate reliefs to pay little or no tax, according to the Treasury.
Chancellor George Osborne has claimed that he was "shocked" by the extent to which these high-income individuals have used the system.
Ronnie Ludwig of Saffery Champness Accountants and John Whiting of the Chartered Institute of Taxation, who also advises the government on tax simplification, explain Tax Avoidance.
Tax Reliefs.
Wealthy individuals have a lot of disposable income - money that is not needed to heat the house, feed the children, or pay the council tax bill.
This income can be invested in things that lead to a reduction in the amount of tax they have to pay. For example, this income can by pumped into an individual's pension scheme, up to a certain limit, or into schemes that are aimed at allowing businesses to thrive. Also known as Enterprise Investment Schemes, these are designed to encourage wealthy people to invest in new businesses that appear to have good ideas, but could be risky investments.
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 paid little or no tax previously. They might do very little work, but are still paid a salary. This means that the couple divides its income tax bill, rather than one of them - who might be the boss of the company - receiving all of the income and so paying a larger amount in tax. The benefit from this arrangement arises because most people get a tax-free allowance to set against the first chunk of their income.
Artificial losses.
This is something that governments have taken steps to try to stop.
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 owner to benefit from a lower tax bill than would otherwise be the case.
The chancellor wants to strengthen existing rules against this and similar schemes by introducing a General Anti-Avoidance Rule (GAAR).
This would act as blanket legislation to allow the taxman to differentiate between what counts as responsible tax planning and what is abusive tax avoidance.
Tax Relief.
Used correctly and not abused, I can see how this could benefit everyone. Being successful is vital for this country and success should be rewarded. However the problem today is that only the rich are being rewarded, even for failing, as well as succeeding and this is leading to an unbalanced country.
Creating more wealth sounds like a good idea and could work but not with today's trend of "I'm all right Jack" greed and selfishness.
Employing a husband or wife.
Again, this is sensible if used correctly but this one is probably the most abused of all. Not just by the rich bosses and MP's but by many of the self-employed as well. Hard to police but if lies are told then then this legal loophole becomes illegal.
When abused in this way, I see no difference whit benefit cheats. Both should be stamped out.
Artificial losses.
Well, all I need to say on this one is that even this Government wants to stop it. Or I should say they are making noise's to stop it, surely they could stop it if they wanted to?
Full report at: -
http://www.bbc.co.uk/news/business-17665780"My New Year's Resolution, is to try and emulate Marek's level of chilled out, thoughtfulness and humour towards other forumites and not lose my decorum"
