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  1. #1
    RacingJim is offline Public Member
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    Default What is your attitude to tax?

    I'm currently doing my accounts and looking again at my tax.

    I'm just wondering what is your approach to tax? Are you a person who tries every which way you can to avoid tax or do you just accept it as part of life, take your money out of your company as wages and pay your tax bill happily. Do you hate tax or are you chilled on the matter?

    I've been looking at ways to reduce my tax bill, but being an affiliate it's actually pretty hard. We are a low input, high output type of business, it's not like I am going to turn round and suddenly decide to re-invest all my profits in the business when I can get the same results pretty cheaply. It's not like we get any cash in hand, all our money is online and trackable.

    I can see only a few ways to avoid tax for affiliates:

    1. Have a limited company, keep your cash in the business bank and only take out tax-efficient salary + Dividends. Build up cash in the business bank and at some point either sell your business or close up shop, taking out the cash at bank using entrepeneur's relief. The current UK government are even making this less appealing with the dividend tax changes.

    and/or

    2. Invest in some dodgy offshore scheme. Worry each day about HMRC coming for you.

    and/or

    3. Move to a tax haven e.g. Jersey/Guernsey, Isle of Man, Malta etc.

    The only one I can see actually working if you actually want to see your money anytime soon and not fear being caught out in some way, is moving to a tax haven.

    I'd be interested in anyone's tax tips or tales of woe.

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  3. #2
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    I moved to an offshore tax haven.... best decision I ever made.

    It's not just the not paying income tax that is beneficial, it's not having to pay an accountant, and not having to worry about structuring expenses to be beneficial for taxes, and not having to worry about filing.
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  5. #3
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    There are only a few true tax havens that exist.. none of which are in Europe, I used to live in a Country where you were only taxed on income earned inside the country so not a tax haven as such but was tax free. Since I am back in Europe I set up a corporation, I don't know anyone that likes paying taxes but as a corporation it is a lot more beneficial than working self employed.

    The draw back being a lot of set up costs and ongoing monthly fees and even though I have a pretty good accountant I still have the bureaucracy of declaring VAT every 3 months and Taxes once per year. still in the end it's all worth it.

  6. #4
    baldidiot is online now Private Member
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    I don't think anyone really likes tax, but it is a necessary evil if you want things like schools and roads and hospitals etc... Having said that the tax changes to dividends have annoyed me massively.

    We're a UK company and pay corporation tax as well as personal tax here in Blighty, but we do aim to make withdrawing money as efficient as possible. Personally I'd be up for a higher tax free allowance and then a flat rate for everyone (ie; no bands). Would make things so much simpler and also remove the incentive to retain profits.

    There are other things you can do as well btw to reduce your tax bill - investment in EIS or SEIS companies or in VCT's comes with significant tax benefits (30% for EIS/VCT and 50% for SEIS off the top of my head). Plus capital gains are tax free with EIS/SEIS and dividends are tax free with VCT's and you get further relief on any losses: http://www.sheen-stickland.co.uk/vct-eis-seis-compared

    You have to hold the assets for a minimum of 3 years (or 5 for SEIS) and there's no guarantee you can get your money out immediately at the 3 year mark, but something to look at if you have excess cash you want to get at. There is risk involved so obv spread yourself around or use a diversified fund.

    [not tax advice, speak to an accountant]
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    baldidiot is online now Private Member
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    Ps Seedrs is cool for EIS/SEIS investments if you fancy yourself as a 'Dragon' rather than relying on a fund: https://www.seedrs.com/invest
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  9. #6
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    Quote Originally Posted by RacingJim View Post
    1. Have a limited company, keep your cash in the business bank and only take out tax-efficient salary + Dividends. Build up cash in the business bank and at some point either sell your business or close up shop, taking out the cash at bank using entrepeneur's relief. The current UK government are even making this less appealing with the dividend tax changes.
    Pretty much how we run things, just ran through the dividend tax changes with the accountant a couple of weeks back which seems like another way for the government to take another pound of flesh.

    What gets my goat is that POCT is another tax that's indirectly been applied on the business, so (crudely) we're having a 15% tax at source, then corporation tax & the now the new dividend tax from April - and that's with the most 'tax efficient' option! Go over the upper earning limit then it gets really silly in terms of the net % that goes back to the treasury.

  10. #7
    justbookies is offline Private Member
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    Yep, as OP states, the real solution is to move to a tax haven with no direct taxation - there are a few (bahamas, caymans etc). But you can't mix and match ie: you cant reside in UK and have an offshore company - that is simply a scam and you are asking for trouble. You need to reside in the tax haven and have the business there (or business if a company at least in its own tax haven) ie: company in gibraltar and live in caymans (or both in same location, but I would keep them separate). Though once you are in a tax haven you don't really need the company. BTW, if you are from USA, none of it applies as US rules are they tax on your worldwide earnings irrespective of your permanent residence - so you'd need to change nationalities, not just residence.

    On the other point, I run everything through a UK company like others in this thread. But I don't see the particular tax advantage over being a sole trader - with a company you pay NI on salary both from company side and your side. Ok, there are dividends to avoid NI, but they are only after corporation tax has been paid (not set against) - so they are getting almost as much tax as salary (which is set against profits), aren't they? The only advantage is not paying NI. Factor in the costs of the company and where are the advantages? If you think that I am missing something with this then please let me know.

  11. #8
    RacingJim is offline Public Member
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    JustBookies - From my experience, the advantage of Limited company is that you can control the amount you pay yourself, so you can spread salary over a number of years to be more tax-efficient, saving some for potential future lean years or if you decide to close/sell the company you can receive entrepeneur's relief on the cash that you receive.

    Self-employed is simply pay-as-you-go, so if you earn 200,000 one year you will be taxed full whack on that amount. If you then had a 'lean' few years and earn 50,000 a year, then with a limited company you could have paid yourself more tax-efficiently, seeing more of the money yourself.

    It is also more tax-efficient to pay yourself through dividends through a company than to be self-employed, though they have just brought in some dividend tax changes which is sealing this right up so there are much less advantages on that score.

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  13. #9
    baldidiot is online now Private Member
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    Quote Originally Posted by justbookies View Post
    On the other point, I run everything through a UK company like others in this thread. But I don't see the particular tax advantage over being a sole trader - with a company you pay NI on salary both from company side and your side. Ok, there are dividends to avoid NI, but they are only after corporation tax has been paid (not set against) - so they are getting almost as much tax as salary (which is set against profits), aren't they? The only advantage is not paying NI. Factor in the costs of the company and where are the advantages? If you think that I am missing something with this then please let me know.
    Few advantages:

    1. You do generally pay less tax. The difference is going to reduce significantly with the new changes, but that's exactly why these changes were made - to reduce the benefit of incorporating for people like contractors. It's still a bit better though. Plus who knows how they'll change in the future.

    2. The ability to retain profits. As far as I'm aware sole traders can't do this can they? Profit retention, especially in an industry where there can be so many ups and downs can help stabilise your income and reduce your tax burden (eg: if you make 200k one year and 0 the next as a sole trader you pay tax on 200k in year on and then nothing in year 2. As a ltd company you could have two years at 100k, which is much more tax efficient).

    3. The aff accounts belong to the company - meaning that if you die, who ever inherits the company will continue to receive the income from the affiliate accounts. For personal contracts (ie: sole trader) they're quite often made void on death/wont be transferred to your estate (there's been a couple of threads about this recently). Also means you can sell the company if you want to retire, regardless of the programs stance on selling accounts (the owner of the account - the company - isn't changing, just the owners of that company).
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  15. #10
    benl12 is offline Private Member
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    I'd set up in Malta. If you do it right, you can get your tax effective tax rate down to 5%. You need 2 companies to do it, 1 pays tax at 35% then the other one gets a rebate of 30% so 5% tax effectively. I found someone to do it all but realised I'd still need to pay tax on it when I brought back in to the country so not much point unless I wanted to live in Malta for a while. If I was single I would but my OH wouldn't want to.

    Other things you can do is take conferences as holidays. I see my trips to London, Amsterdam and Berlin as company holidays. There's bound to be a conference someone where you'd like to go. When I first started I went to a couple of conferences in Vegas.

    Paying into a pension is another idea depending on your age and thoughts about the system. You can get 100% tax relief on it. You can also get something called a SIPP, buy an office with it and rent it back to your company. Or can just invest in stocks and shares. You can get at your money when you are 55.

    You can pay family too if they have unused allowances. I don't do this but my accountant a while ago suggest employing my mother as an administrator. Can also give shares to partner who can get some dividends at the lower rate.

    They are closing that entrepreneurs tax relief loophole down. You used to be able to close the company down one day and open up another one the next and still claim the relief. Now you have to wait 2 years else the revenue can say the money was really dividends and charge you the dividends rate. Getting dividends is still better than salary though, http://www.bdo.co.uk/__data/assets/p...-July-2015.PDF Saves about 3% tax for higher rate an 14% for lower rate.

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  17. #11
    RacingJim is offline Public Member
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    Quote Originally Posted by benl12 View Post
    I'd set up in Malta. If you do it right, you can get your tax effective tax rate down to 5%. You need 2 companies to do it, 1 pays tax at 35% then the other one gets a rebate of 30% so 5% tax effectively. I found someone to do it all but realised I'd still need to pay tax on it when I brought back in to the country so not much point unless I wanted to live in Malta for a while. If I was single I would but my OH wouldn't want to.
    The thing I worry about with Malta is the immigration thing now. It seems like they are a bit close for comfort to all the problems and have had problems with it already?

  18. #12
    benl12 is offline Private Member
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    I don't think so. Its Greece and Turkey that are getting all the immigrants. Less likely to get refugee status in Italy so it better to go round to Syria and try get in via Turkey.

    Other thing is, you might only have to live there 90 days or something. I met a Swede that lived in Malta but then just moved to London. Said it was no problem with the tax. Guess it might be different being British but its worth talking to an accountant about it. PM me if you want the accountant's email I was talking to.

  19. #13
    justbookies is offline Private Member
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    Quote Originally Posted by benl12 View Post
    I met a Swede that lived in Malta but then just moved to London. Said it was no problem with the tax. Guess it might be different being British but its worth talking to an accountant about it. PM me if you want the accountant's email I was talking to.
    That swede was staying out of sweden. If he is in UK for too long he comes under UK tax regime. If you are UK citizen then you need to stay out of UK for all but 90 days. The rules depend on your situation & time away etc, but here is hmrc guidance on uk residence status: https://www.gov.uk/tax-foreign-income/residence

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  21. #14
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    Well, Balkan-countries will close their borders and Greece is not the destination most migrants are dreaming of, so I guess sooner or later they'll try to enter Italy. Eastern Europe will be closed. From northern Italy it also isn't far to Germany, destination of many and the country that is inviting this migrants to Europe. So I understand the worry of RacingJim.

    I do understand we all have to pay taxes. I also do want roads, hospitals, schools, police, an army, border control, etc so I need to pay taxes. But I also do think governments have an obligation to charge as less taxes as possible and to charge them as fair as possible. The first thing means that governmans needs to keep their expenses as low as possible. The smaller the government is, the better it is! The government usually isn't the solution, but is the problem. The second thing, charging fair, means I am a supporter of a flat tax, the most fair system. Everybody pays the same amount of cents on every euro/dollar/pound he/she has earned.

    In the first post option 4 is missing and option 4 is be creative.

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  23. #15
    RacingJim is offline Public Member
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    I'ma big advocate of flat rate or a simple two tier tax system e.g. like the Isle of Man. They have 10% basic rate, then 20% higher rate, but with a ceiling of 110,000(ish) maximum tax for any individual. I think that is fair. Surely 20% with a maximum of 110,000 is more than enough for one individual to pay as a one-man company - surely that is contributing enough to breathing oxygen, building 'stuff', health care and charitably helping those lesser off.

    I don't blame people for clearing off to tax havens, we've got a failing NHS, crap public transport, overcrowded roads, quickly diminishing services, immigration of vast amounts of people from poorer countries using the benefits system and putting NHS and services under even more pressure. It's getting out of control, I don't like the way things are looking for the next 10-20 years in the UK and many parts of Europe. Call me a doom-mongerer but my medium-term (1-5 years) goal is to get out.
    Last edited by RacingJim; 8 March 2016 at 2:49 pm.

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  25. #16
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    3.000 BC taxes were paid in Egypt.
    So there was time enough to come to terms with it.

    Leopold

  26. #17
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    You could have found some better examples than :

    Schools - I pay 1200 a month for private.

    Hospitals : Private insurance for family costs €950 per month.

    Roads - Road tax - fuel tax - Tolls !

    But then again its fair enough when you live in a tax haven like Spain for much of the year -- since top rate personal tax is only 52% on world wide earnings --- irrelevent of when your business is international and varied!!

    Thank god i live in Switzerland for a good portion of the year

    Malta would be an alternative in europe if you wanted to live there. Many people seem to like the place, i hate it! Romania, Bulgaria, Czech Republic have relatively low company tax!

    Alternatively move to Scandinavia for a year - then go back home. After that everything will feel low cost!

  27. #18
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    While it's hard to say that I'm "happy" to pay tax - I do willingly contribute my tax dollars to (hopefully) make my current country of New Zealand a better place for people to live.

    No "trusts", no dodging schemes, no "double Irish" or "Dutch Sandwich" schemes (WTF?!), and no money squirreled away. I'm no GOOGLE or APPLE that uses corporate tricks to actively hide profits away from countries.

    But I do try to legally minimise tax by paying an average directors salary, and paying most of the profits out in pre-tax paid dividends (using imputation credits).

    Personally too, I take advantage of local tax laws to invest in structured investments called PIEs (Portfolio Investment Entity) which are designed for long term savings and only pay tax at the corporate rate of 28%.

    So while DO I see the confliction in my attitudes, my feeling is that we are doing well, and that it's part of our civic duty to part with taxes that we can afford.
    Last edited by TheGooner; 8 March 2016 at 4:28 pm.

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  29. #19
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    Geez this thread is dripping with first world problems.

    I'm happy to pay tax so long as I get value for my money. The rate doesn't matter, the way it is spent does. There is always stuff that I disagree with but if no-one pays their tax, your country will end up like Greece. I figure that if you are trying to set yourself up in a tax haven yet staying and living in your first world country then you lose all right to complain about services provided because you're gaming the system and making other people pay for the lifestyle you enjoy. On the other hand if you are prepared to move to an island somewhere and live there and they only want to tax you a minuscule amount then good for you.

    Quote Originally Posted by RacingJim View Post
    I don't blame people for clearing off to tax havens, we've got a failing NHS, crap public transport, overcrowded roads, quickly diminishing services
    Perhaps some of these problems are contributed to by people who earn good money leaving and setting themselves up in tax havens.

    The anti-immigration thing I'm reading in this thread is pretty poor. Putting aside the fact that it was western governments who created the whole problem and should be obligated to fix it, perhaps if people paid more tax governments would have more money to spend on foreign aid and make life more bearable for the horrible poor people that you don't want coming to share the lifestyle that you enjoy, which was mainly due to you winning in the lottery of birth.

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  31. #20
    justbookies is offline Private Member
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    Quote Originally Posted by Muppet View Post
    Perhaps some of these problems are contributed to by people who earn good money leaving and setting themselves up in tax havens.
    They wouldn't do it if the tax system wasn't so oppressive - or at least was more efficient. Certainly the value for money in the UK is abysmal, with every aspect of the services provided by the tax you pay being poor as RacingJim suggests. When you have tv programs showing people migrating to England purely to claim benefits and then sending those benefits back home to other countries, it is little wonder the UK will likely vote brexit. That's one market the bookies have wrong. It's not fashionable to admit to vote leave, just as as nobody admitted that they would vote Tory.

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