# Purchasing a bike through the company for VAT purposes - creative accounting?



## nickAKA (18 Feb 2020)

Post-April I'll no longer be eligible for any C2W schemes at work as I'll be classed as a partner but on the plus side I'll have more say on the financial side, so I was contemplating buying my next bike through the books & claiming the VAT back. Has anyone ever done this or does anybody understand "the rules" on how to do it without bending any tax rules and potentally upsetting HMRC?
Current thinking - I've recently set up a cycling club and the company is one of the sponsors, which means sponsored kit paid for with "advertising fees"; If we were to buy a bike "for the club" it could be purchased by the club, funded through sponsorship fees, OR could it simply be purchased by the company for the club and claimed as a company asset?

I'm not looking to defraud the tax man, I'm just looking for a way to buy via the company and hopefully save some money as I would on C2W...


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## I like Skol (18 Feb 2020)

You're avin a larf!

If the company buys the bike then it is the property of the company. You say you want to buy yourself a new bike.....


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## vickster (18 Feb 2020)

Just buy a reduced bike on an interest free credit card. The honest way


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## Mattk50 (18 Feb 2020)

Get the company to buy it for you and treat it as a Benefit in kind


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## flake99please (18 Feb 2020)

Could the company register on the c2w scheme?


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## nickAKA (18 Feb 2020)

flake99please said:


> Could the company register on the c2w scheme?


I'll no longer be on PAYE so no mechanism to 'save' the tax as I understand it?


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## nickAKA (18 Feb 2020)

Mattk50 said:


> Get the company to buy it for you and treat it as a Benefit in kind



Ah, that's the way - classed as a tax free benefit in kind according to to the CAB... cheers!


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## screenman (18 Feb 2020)

CAB? Are they qualified tax accountants. Any VAT inspector would see right through it, so a big no from me. Been in business long enough to remember being able to claim for almost anything, times have changed and they needed to.


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## Inspector Monkfish (18 Feb 2020)

Nothing in the c2w scheme says you actually have to pay the money back, it's just most companies obviously want their money back and don't want to just buy bikes for peole. From section 2.6 of  the Governments advice document 


> Another alternative is the workplace pool cycle model. This is a tried and tested
> option for supporting staff in their commuting and for inter-site and business trip
> travel which is not currently being well served by public transport. At its simplest, you
> can purchase a suitable fleet of cycles for active travel and make them available to
> ...


So the company can buy a bike and make it available to you with no requirement for you to pay for it. Although my accountant warned that depending on the value of the bike it could be considered a benefit (I was advised anything over 5k)


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## I like Skol (18 Feb 2020)

This 'creative accounting' you talk off. Isn't it the kind of thing we all lambast Amaz0n and offshore companies of that ilk for being guilty of and paying unfairly shrunken tax duties on their huge UK ear ed profits?
Strange how it is deemed obscene, immoral and unfair when they do it, but it's alright when you do the same.....


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## BoldonLad (18 Feb 2020)

I like Skol said:


> This 'creative accounting' you talk off. Isn't it the kind of thing we all lambast Amaz0n and offshore companies of that ilk for being guilty of and paying unfairly shrunken tax duties on their huge UK ear ed profits?
> Strange how it is deemed obscene, immoral and unfair when they do it, but it's alright when you do the same.....



't is the way of the world..... rules are for other people


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## Supersuperleeds (18 Feb 2020)

If the business is buying for legitimate business use then they will be able to claim the VAT back. If it isn't for business use then they cannot claim the vat back.

Chances of getting caught, next to none.


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## bikingdad90 (18 Feb 2020)

What type of partnership is it? Incorporated Company and every partner is a company director or unincorporated? 

Under the unincorporated route If you purchase a bike through the partnership and use it for any partners personal use then the asset is deemed to have been sold by the business as effectively stock taken for personal use and all partners end up paying more tax and NIC as the partnership profits are higher. 

Also when it comes to disposal if the other partners gift the asset to you then it creates a capital gain for them as everyone owns a share of the bike.

A partnership is transparent and owns nothing, every partner is effectively self employed and accounts for their own tax affairs and each own a share of each asset.

If the partnership is an incorporated entity it’s a bit clearer as the bike belongs to the company and could get capital allowances but beware of the bike triggering withholding tax at 32% if it is deemed to be a directors loan outstanding 9months and a day after year end. Also HMRC see through the cleardown and drawdown if you do this at 9months and ignore the transaction treating it as if the loan is still outstanding.


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## bikingdad90 (18 Feb 2020)

Also assume you are taking tax advice and legal advice and have sight of the partnership agreement which details the legalities, responsibilities and profit split etc? A good tax advisor will inform you of the impact of overlap profits (double tax in first two/three years) and your class 2 and class 4 NIC staged payment dates to avoid a huge tax bill!

Oh and don’t forget to register with HMRC ASAP or else you may get fined.


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## oldwheels (18 Feb 2020)

I bought a Columbus Trailer on the business to carry parcels to the post office. The parking situation made a vehicle almost impossible and we had the maximum weight parcels so it was quite legit. I did provide the bike myself for towing. It was labelled slightly tongue in cheek as Works Vehicle No. 4.


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## nickyboy (18 Feb 2020)

You say you're not seeking to defraud the taxman but what you're proposing is exactly that.
If the bike is bought by the company and given to someone it cannot recover the VAT.
If the company donates it or whatever to a cycling club that would be ok if it could be shown that the bike was not for a particular person who happened to be a partner in the firm. Any half decent VAT or IR inspector would see right through this


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## Mrs M (18 Feb 2020)

You want a new bike, just pay for it!
Don’t be a tax dodger


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## PaulSB (18 Feb 2020)

You're going to be "classed" as a partner? Great example to set everyone else in the business.

My ex boss once told me how he engineered losses in the business to ensure his daughters received state support to attend uni. Fraud.

Deliberate tax avoidance of this type makes my blood boil. Pay your dues. If you can't afford it, don't buy it.

Unbelievable you're asking the question.


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## Gunk (18 Feb 2020)

All you’re saving is 20%, you could save that with a few phone calls.


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## CanucksTraveller (18 Feb 2020)

Inspector Monkfish said:


> So the company can buy a bike *and make it available to you *with no requirement for you to pay for it. Although my accountant warned that depending on the value of the bike it could be considered a benefit (I was advised anything over 5k)



That's true, although do you know if there are there any requirements around making it available to other employees? 

My last company but one bought a fair old fleet of Batavus dutch bikes for a large site which was a couple of miles across. One man asked if he could commute home on one, and that was apparently no problem. Once he stenciled his name on it and kept it at home full time however, and then locked it at work with his own lock on it, the HR people did have a word and said that company bikes needed to be available to all because of tax rules. I'm not sure how accurate that excuse is. They might just have been trying to stop him being such a necky dickhead with their kindly provided bikes.


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## Buck (18 Feb 2020)

The only way you can legitimately gain any ”benefit” is if you were to ride your bike on work business on a regular basis. The accountant will then be able to allocate a % of the cost of the bike as a legitimate expense in the same way as they would with your car. 

As far as VAT or tax creativity is concerned - avoid!


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## srw (18 Feb 2020)

nickyboy said:


> Any half decent VAT or IR inspector would see right through this


As would any half decent financial controller. And a partner in the firm should hope that the financial controller is rather more than halfway decent.


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## Phaeton (18 Feb 2020)

Gunk said:


> All you’re saving is 20%, you could save that with a few phone calls.


Yeah but he would then save 20% off the already reduced 20% price


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## bikingdad90 (18 Feb 2020)

Following on from lots of just saving 20%, in reality you would actually save nothing. Under basic VAT principles, You can’t claim the VAT back as you are not making an onward taxable supply in the course of furthering the business so the VAT recovery is 100% blocked, reduced proportional to the amount of business use that is not home to work. Your self supply is an exempt supply.


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## Inspector Monkfish (18 Feb 2020)

CanucksTraveller said:


> That's true, although do you know if there are there any requirements around making it available to other employees?



I'm not an expert on the subject but reading what the government advice says....


> ....you
> can purchase a suitable fleet of cycles for active travel and make them available to
> employees either on a one-to-one or a pool basis....


Suggests to me that a company could choose to assign a bike to an individual if they so wished


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## Pale Rider (18 Feb 2020)

CanucksTraveller said:


> That's true, although do you know if there are there any requirements around making it available to other employees?
> HR people did have a word and said that company bikes needed to be available to all because of tax rules. I'm not sure how accurate that excuse is. They might just have been trying to stop him being such a necky dickhead with their kindly provided bikes.



Quoting from the rules: "At its simplest, you can purchase a suitable fleet of cycles for active travel and make them available to employees either on a one-to-one or a pool basis."


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## fossyant (18 Feb 2020)

Your other partners might get a bit miffed you are doing a dodge. Next, cars ?


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## Phaeton (18 Feb 2020)

fossyant said:


> Your other partners might get a bit miffed you are doing a dodge. Next, cars ?


He's probably just trying to catch up


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## Milkfloat (18 Feb 2020)

If I were becoming a partner, the last thing I would do as my first action is to do something financially dodgy.


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## neil_merseyside (18 Feb 2020)

'Classed' as a partner? is that a real partner with all the liabilities, or is it a fancy job description like vice president of steel washers? and nothing more than a tax avoidance scheme scam.
Don't ever be a partner unless you share an equal benefit (and the liabilities obv.) if you fiddle a bike without issue just imagine what the more long standing have been fiddling - you and they will be jointly and severably liable (I think is the term) when any of the scam bubbles burst.


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## Gunk (18 Feb 2020)

Milkfloat said:


> If I were becoming a partner, the last thing I would do as my first action is to do something financially dodgy.



And announce it on an Internet forum


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## Sharky (18 Feb 2020)

What's this thing you are calling 'work'?
Vague memories of 10 hour bike rides, with an extended 8 hour lunch stop - was this 'work'?


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## HMS_Dave (18 Feb 2020)

What a bizarre thread...🤪


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## Gunk (18 Feb 2020)

The best “ I’ve had a massive promotion and I’m doing rather well for myself” thread so far this year


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## vickster (18 Feb 2020)

Gunk said:


> The best “ I’ve had a massive promotion and I’m doing rather well for myself” thread so far this year


But I still want to avoid tax....


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## Pale Rider (19 Feb 2020)

The remarks made by Lord Pullman, the Scottish Lord Justice General in 1929 in the case of Ayrshire Pullman Motor Services v Inland Revenue, are still deemed to be relevant.

Only a judge could use the phrase 'put the largest possible shovel in his stores', but I think the meaning is clear.

“No man in the country is under the smallest obligation, moral or other, so to arrange his legal relations to his business or property as to enable the Inland Revenue to put the largest possible shovel in his stores. 
"The Inland Revenue is not slow, and quite rightly, to take every advantage which is open to it under the taxing statutes for the purpose of depleting the taxpayer’s pocket. 
"And the taxpayer is in like manner entitled to be astute to prevent, so far as he honestly can, the depletion of his means by the Inland Revenue."


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## slowmotion (19 Feb 2020)

The tax rules for company vans used to be that a company could provide you with a vehicle if it's main purpose was for the business. All the fuel, insurance costs, servicing, VED etc could be paid for by the company and were not taxed as a benefit to the user if it was solely used for work. Commuting to work in it was allowed, but if you deviated from the direct route between home and work, the mileage was taxed as private use.
The use of a company bicycle might have similar restrictions but I'm not an accountant or a taxman.

BTW, I believe that HMRC have greater powers than the police when it comes to smashing down your front door at three in the morning.


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## winjim (19 Feb 2020)

Pale Rider said:


> The remarks made by Lord Pullman, the Scottish Lord Justice General in 1929 in the case of Ayrshire Pullman Motor Services v Inland Revenue, are still deemed to be relevant.
> 
> Only a judge could use the phrase 'put the largest possible shovel in his stores', but I think the meaning is clear.
> 
> ...


Don't hate the player, hate the game.


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## PaulSB (19 Feb 2020)

While I'm totally against this type of action I'll offer a word of caution. A very small deviation from the norm or fiddle if found by HMRC can lead to significant problems. Consider the following genuine occurrence.

Around 20 years ago the business I managed received a visit from HMRC. It was a random, routine inspection. During the inspection a single receipt for £50/60 for petrol was found amongst my expenses claims. I drove a diesel. The inspectors immediately asked why. This is the potential level of detail they may go in to.

At first we were flumoxed. The receipt was around 18 months old. HMRC assumed I was buying petrol for another vehicle and claiming it under expenses. Eventually I remembered the day I accidentally put petrol in my diesel car. We produced the invoice for motorway rescue and the one from my garage for draining the fuel tank and flushing the system. All was good.

However. HMRC decided to dig further in to my expenses claims. Nothing was there to be found and nothing was. I was asked to prove my business mileage exceeded 18,000 miles. I was driving +/- 30,000 pa. I forget what the exact rules were but this number was important for personal taxation.

I should have kept a log of personal and business mileage. It's such a pain in the arse I'd given up. The company didn't require it and was happy if I paid for the occassional tank of diesel myself.

HMRC required me to prove two years of business travel. Eventually we managed it but it took +/-12 months to get them off our back and cost Lord knows how much.

So by all means go ahead and fiddle your VAT. Keep in mind if HMRC come calling and find errors or fiddles they will dig and dig and dig. They can go back seven years and your records had better be perfect to withstand that.

Your other partners will probably be delighted.


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## Pale Rider (19 Feb 2020)

My accountant told me a tale of one of his customers who was questioned over a hotel bill.

The VAT man spotted it contained a morning newspaper, which should be zero rated.

What the VAT man never knew was the bill itself was to attend a wedding.

So in that case the VAT man won a little and lost a lot.


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## winjim (19 Feb 2020)

The VAT man is us and we are he. See my post on the wages thread and pay your farking taxes.


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## Pale Rider (19 Feb 2020)

I'm impressed, nay humbled, at the height of the moral ground occupied by some contributors to this thread.


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## vickster (19 Feb 2020)

Pale Rider said:


> I'm impressed, nay humbled, at the height of the moral ground occupied by some contributors to this thread.


Not sure why, even the use of 'creative accounting' thread title implies that the OP knows what he is suggesting is not exactly cricket. That term does not have positive connotations. 
Does say he's not looking to defraud however so...He could simply ask others involved in the business and his accountant what he is able to do. 
Other than just buy a new bike out of his own money (at a discounted price or negotiating a discount)  (presumably the move to the new position of partner is a promotion with more money).
He could turn perhaps down the promotion and stick with C2W


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## Pale Rider (19 Feb 2020)

vickster said:


> the OP knows what he is suggesting is not exactly cricket.



Agreed, one person's tax avoidance is another's prudent tax planning.


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## vickster (19 Feb 2020)

Pale Rider said:


> Agreed, one person's tax avoidance is another's prudent tax planning.


It's fine if it's done within the rules, an accountant can advise 
Maybe he'll need to engage one if moving from paye to self assessment once a partner?


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## Pale Rider (19 Feb 2020)

At one time, probably when administration was more localised, which accountancy firm prepared your accounts could make a difference.

Some had a good reputation with the tax office, so accounts from them were more likely to be accepted.

Other accountancy firms were known as stroke pullers, so accounts from them were more likely to be questioned.


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## Bazzer (19 Feb 2020)

You are not looking to defraud the taxman, but dress up certain comments in quotes. 
A couple things to consider:
If you are a genuine partner, the financial buck stops with you.
If HMRC come calling about your creativity, the money you engineered to fund your hobby, may well be dwarfed by the financial costs of defending your actions, even if you are successful.

Oh, and by the the way, HMRC do use social media in research.

Edited to switch the fourth sentence.


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## fossyant (19 Feb 2020)

As @PaulSB says, HMRC will insist on a download of your accounting and payroll, and their software is designed to look for irregularities. Absolute pain when they turn up, in terms of staff time digging about.

PS you'll get a better discount on a last year's model. I've not bothered with our bike to work scheme since it first came in (I got one many years ago with it).


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## vickster (19 Feb 2020)

fossyant said:


> As @PaulSB says, HMRC will insist on a download of your accounting and payroll, and their software is designed to look for irregularities. Absolute pain when they turn up, in terms of staff time digging about.
> 
> PS you'll get a better discount on a last year's model. I've not bothered with our bike to work scheme since it first came in (I got one many years ago with it).


Precisely and interest-free finance enables one to pay it off over 1-2 years


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## Dogtrousers (19 Feb 2020)

As you've already participated in C2W presumably you already have a bicycle and thus have no need for another.


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## BoldonLad (19 Feb 2020)

Pale Rider said:


> I'm impressed, nay humbled, at the height of the moral ground occupied by some contributors to this thread.


Me too. I have had to stop reading it, I am getting altitude sickness.


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## Phaeton (19 Feb 2020)

it would be interesting to know how many would turn down a £1200 bike if offered for £1000 & to pay it back at £50 a month for 20 months.


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## Dogtrousers (19 Feb 2020)

Phaeton said:


> it would be interesting to know how many would turn down a £1200 bike if offered for £1000 & to pay it back at £50 a month for 20 months.


That is actually quite a refusable offer. A £200 saving on a bike that I don't particularly want and wouldn't buy otherwise.

I think I'd turn it down.

(20% of 1200 is actually 240, not 200. Still not interested) Edit: I'm an eejit.


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## Phaeton (19 Feb 2020)

Dogtrousers said:


> That is actually quite a refusable offer. A £200 saving on a bike that I don't particularly want and wouldn't buy otherwise.
> 
> I think I'd turn it down.
> 
> (20% of 1200 is actually 240, not 200. Still not interested)


Who said anything about 20%?


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## Dogtrousers (19 Feb 2020)

Phaeton said:


> Who said anything about 20%?


I thought this was all about avoiding VAT at 20%. Sorry if I misunderstood. (And of course you're quite correct. £1000 bike + 20% VAT = £1200)

Anyway ... whatever the percentage, I'd still turn down the offer. A grand for another bike? I don't care whether it's a bargain or what the payment terms are. I'm not in the market.


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## vickster (19 Feb 2020)

Phaeton said:


> it would be interesting to know how many would turn down a £1200 bike if offered for £1000 & to pay it back at £50 a month for 20 months.


Legally?


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## fossyant (19 Feb 2020)

Or even better, find a mate who is selling a hardly used bike for a very good price - did that last year for a bike for Mrs F. Other than the bike being dirty (it was an MTB), a couple of hours fettling, it was like brand new.


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## DRM (19 Feb 2020)

fossyant said:


> As @PaulSB says, HMRC will insist on a download of your accounting and payroll, and their software is designed to look for irregularities. Absolute pain when they turn up, in terms of staff time digging about.
> 
> PS you'll get a better discount on a last year's model. I've not bothered with our bike to work scheme since it first came in (I got one many years ago with it).


Exactly this, my latest bike was current year, only just, for a couple of weeks, list price was just shy of £1300, they wanted rid, got it for £800, it’s just not worth the hassle of all this creative accountancy really is it.


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## fossyant (19 Feb 2020)

DRM said:


> Exactly this, my latest bike was current year, only just, for a couple of weeks, list price was just shy of £1300, they wanted rid, got it for £800, it’s just not worth the hassle of all this creative accountancy really is it.



Last shop bought bike was £1600 list (last year's model). Bit of a haggle £1000


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## nickyboy (19 Feb 2020)

Pale Rider said:


> Agreed, one person's tax avoidance is another's prudent tax planning.


Except in this case it isn't tax avoidance. It's tax evasion. It's illegal

I've no problem with anyone organising their affairs to minimise the tax they pay whilst remaining within the law. But people who do what the OP are suggesting are stealing from you and me. If someone evades tax it just means that someone else has to pay more tax to make up the shortfall

The idea that evading tax is fair game cos it's just means the IR is out of pocket is bollox


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## tom73 (19 Feb 2020)

As some have said if the VAT man comes calling you know about it. If they want to dig around they will , if they want to go into the darkest cupboard they will. Hector the tax inspector they are not. I’ve yet to meet anyone who welcomes the knock on the door Or the boot though it. 
The gain if any is just not worth the trouble and as a partner it’s your trouble and other partners will be over joyed when they get it too.


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## Grant Fondo (19 Feb 2020)

nickAKA said:


> Post-April I'll no longer be eligible for any C2W schemes at work as I'll be classed as a partner but on the plus side I'll have more say on the financial side, so I was contemplating buying my next bike through the books & claiming the VAT back. Has anyone ever done this or does anybody understand "the rules" on how to do it without bending any tax rules and potentally upsetting HMRC?
> Current thinking - I've recently set up a cycling club and the company is one of the sponsors, which means sponsored kit paid for with "advertising fees"; If we were to buy a bike "for the club" it could be purchased by the club, funded through sponsorship fees, OR could it simply be purchased by the company for the club and claimed as a company asset?
> 
> I'm not looking to defraud the tax man, I'm just looking for a way to buy via the company and hopefully save some money as I would on C2W...


I did it last summer, HMRC surely look kindly on substituting a car for a zero carbon form of transport.?
So, if you are on VAT flat rate it has to be +£2k bike to get VAT back. Then of course it is a business expense so -19% corporation tax. Not sure about P11D situation?


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## PaulSB (19 Feb 2020)

I'm interested to note the OP hasn't responded since the initial post.


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## Grant Fondo (19 Feb 2020)

PaulSB said:


> I'm interested to note the OP hasn't responded since the initial post.


Bad signal in the Cayman Islands i understand


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## Pale Rider (19 Feb 2020)

nickyboy said:


> Except in this case it isn't tax avoidance. It's tax evasion. It's illegal
> 
> I've no problem with anyone organising their affairs to minimise the tax they pay whilst remaining within the law. But people who do what the OP are suggesting are stealing from you and me. If someone evades tax it just means that someone else has to pay more tax to make up the shortfall
> 
> The idea that evading tax is fair game cos it's just means the IR is out of pocket is bollox



In his OP @nickAKA says he is looking to buy the bike 'without bending the rules' and he is 'not looking to defraud the taxman'.

Sounds reasonable to me, and certainly not stealing.


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## bikingdad90 (19 Feb 2020)

HMRC don’t look kindly on limited companies controlled, owned and effectively operated by one man, they don’t trust them to get it right so it’s One of the reasons why the IR35 disguised employment comes into force in the private sector on 5th April 20, HMRC will make a killing just like they did in 2017 when it was brought in for public sector as they found in a lot of cases the “worker” was an deemed employee of the engaging company regardless of the contracting parties and the contractual arrangements.

A one man band will need to substantiate the financial risk, substituting rights and control of work to be able to fall outside IR35 to avoid PAYE like an employee and be able to go through their limited company and pay a dividend to the instead. 

HMRC know larger organisations tend to be risk averse and dictate terms with smaller companies; begs the question what’s the point of operating through a limited company when you are a sitting duck. 

The VAT will be disallowed by HMRC unless he can prove with evidence that the purchase was used to further the business which provided a taxable supply to a customer. In addition to the blocked VAT, the penalties for a deliberate error which was found by HMRC becomes a prompted disclosure in the event of an inquiry, meaning they penalty is more severe then an unprompted disclosure that can’t be fixed on the next VAT return due to been over the thresholds for errors.

What I am basically saying is HMRC will have a field day, hammering for indirect taxes (VAT), employment taxes and possibly even corporates taxes if it’s an incorporated partnership!


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## Grant Fondo (19 Feb 2020)

bikingdad90 said:


> HMRC don’t look kindly on limited companies controlled, owned and effectively operated by one man, they don’t trust them to get it right so it’s One of the reasons why the IR35 disguised employment comes into force in the private sector on 5th April 20, HMRC will make a killing just like they did in 2017 when it was brought in for public sector as they found in a lot of cases the “worker” was an deemed employee of the engaging company regardless of the contracting parties and the contractual arrangements.
> 
> A one man band will need to substantiate the financial risk, substituting rights and control of work to be able to fall outside IR35 to avoid PAYE like an employee and be able to go through their limited company and pay a dividend to the instead.
> 
> ...


IR35 is a joke for your average punter. Non of the benefits of PAYE, pension contribution paid holidays, healthcare etc etc, but most of the tax liability. Whoever thought than one up is a pillock.


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## bikingdad90 (19 Feb 2020)

Grant Fondo said:


> IR35 is a joke for your average punter. Non of the benefits of PAYE, pension contribution paid holidays, healthcare etc etc, but most of the tax liability. Whoever thought than one up is a pillock.



Or a bloody genuis depending on which side of fence you sit on! 

It is possible you can make it more likely you fall outside in some cases depending on the arrangements; common one is a move to statement of works with staged payments rather than a day rate.

At least HMRC have confirmed they will not pursue arrangements that change in April for tax due before April.


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## BoldonLad (19 Feb 2020)

Grant Fondo said:


> IR35 is a joke for your average punter. Non of the benefits of PAYE, pension contribution paid holidays, healthcare etc etc, but most of the tax liability. *Whoever thought than one up is a pillock*.



I could be wrong, but, I believe it was prudent Gordon (Brown). He of the Tax Credit Fiasco.


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## Grant Fondo (19 Feb 2020)

BoldonLad said:


> I could be wrong, but, I believe it was prudent Gordon (Brown). He of the Tax Credit Fiasco.


Was that Gordon 'I will stick 1p on NI and only use it to build new hospitals' Brown? Worked a treat as the £14bn now owed by NHS Trust's to HM Treasury surely underwrites our Gordon's shrewd fiscal management


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## BoldonLad (19 Feb 2020)

Grant Fondo said:


> Was that Gordon 'I will stick 1p on NI and only use it to build new hospitals' Brown? Worked a treat as the £14bn now owed by NHS Trust's to HM Treasury surely underwrites our Gordon's shrewd fiscal management



The very same 

But, like Football Managers, or, indeed Chief Executives, etc, total failure, does not seem to diminish earning potential


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## nickyboy (19 Feb 2020)

Pale Rider said:


> In his OP @nickAKA says he is looking to buy the bike 'without bending the rules' and he is 'not looking to defraud the taxman'.
> 
> Sounds reasonable to me, and certainly not stealing.


But then goes on to suggest "schemes" that are breaking the law and defrauding the IR.

He has every intention of breaking the law. All he wanted was a bunch of interwebbers to validate him.


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## I like Skol (19 Feb 2020)

Pale Rider said:


> In his OP @nickAKA says he is looking to buy the bike 'without bending the rules' and he is 'not looking to defraud the taxman'.
> 
> Sounds reasonable to me, and certainly not stealing.


Brings to mind two common phrases...

If it looks too good to be true then it probably is.
If it looks like a fish and smells like a fish then it is probably a fish.
Both phrases apply to what the OP is proposing!

I have been in business myself. 13 years as a sole trader and later a limited company. What is wrong with being honest and having a clear conscience? The way some people are talking here makes it sound like doing the right and decent thing is a crime.


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## vickster (19 Feb 2020)

bikingdad90 said:


> HMRC don’t look kindly on limited companies controlled, owned and effectively operated by one man, they don’t trust them to get it right so it’s One of the reasons why the IR35 disguised employment comes into force in the private sector on 5th April 20, HMRC will make a killing just like they did in 2017 when it was brought in for public sector as they found in a lot of cases the “worker” was an deemed employee of the engaging company regardless of the contracting parties and the contractual arrangements.
> 
> A one man band will need to substantiate the financial risk, substituting rights and control of work to be able to fall outside IR35 to avoid PAYE like an employee and be able to go through their limited company and pay a dividend to the instead.
> 
> ...


Yes this change is an utter pita for contractors like me and the types of large business I contract at


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## confusedcyclist (20 Feb 2020)

I like Skol said:


> This 'creative accounting' you talk off. Isn't it the kind of thing we all lambast Amaz0n and offshore companies of that ilk for being guilty of and paying unfairly shrunken tax duties on their huge UK ear ed profits?
> Strange how it is deemed obscene, immoral and unfair when they do it, but it's alright when you do the same.....


When gaming the tax system, we are effectively saying we don't want to support sick people in hospitals, the homeless and our elderly folk. Flip side of the coin, you're not funding the arms industry, MPs expenses, unsustainable public services etc. There are other ways to give to charity that don't involve such unpleasantries, so how about any money you save goes 100% and directly to a good cause?


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## Dogtrousers (20 Feb 2020)

OK! OK! I admit it! 

I used to claim the VAT back off purchases of office supplies from Rymans and then sometimes put the pens to personal as well as professional use, such as doing the sudoku on the train.

You may be able to find it in your hearts to forgive me, but I'll never really forgive myself.

That ink ... it tortures me. It's the tears of orphans.


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## Bazzer (20 Feb 2020)

bikingdad90 said:


> HMRC don’t look kindly on limited companies controlled, owned and effectively operated by one man, they don’t trust them to get it right so it’s One of the reasons why the IR35 disguised employment comes into force in the private sector on 5th April 20, HMRC will make a killing just like they did in 2017 when it was brought in for public sector as they found in a lot of cases the “worker” was an deemed employee of the engaging company regardless of the contracting parties and the contractual arrangements.
> 
> A one man band will need to substantiate the financial risk, substituting rights and control of work to be able to fall outside IR35 to avoid PAYE like an employee and be able to go through their limited company and pay a dividend to the instead.
> 
> ...


You are conflating a number of issues.
The way you have written suggests IR35 is a major hurdle to one person companies. There are dozens of business activities which would fall outside IR35, but IR35 would be major thread derail in its own right.
Larger organisations are not risk averse. Banks and larger firms of accountants have made many £millions out of flogging tax avoidance schemes, some of which were so aggressive they ought to have been considered as evasion.
Larger organisations tend to have checks and balances in place, either put into place by the company accountant or director/s, to ensure employees don't rip the company off. Those same checks and balances can prevent directors doing the same, therefore there is a lower risk. That is not to say it doesn't happen, as someone dishonest in control of a company, or a group of individuals, may still try to find a way of evading taxes.
Penalties are there for a reason; just like when a driver is caught speeding. It makes sense that penalties for a prompted disclosure are more severe than for an unprompted disclosure. In the same way that a prompted disclosure is dealt with less severely than a disclosure which should have been made, but was concealed.


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## nickAKA (20 Feb 2020)

Milkfloat said:


> If I were becoming a partner, the last thing I would do as my first action is to do something financially dodgy.



Hence the question. I'm not an accountant, I was looking for advice from people who understand the rules better than I do, that's all.

I put "creative accounting" in the title more to pose the question if it could/would be seen as such by HMRC if the VAT was reclaimed using existing & transparent rules, which _seem_ to allow such claims but you need to be a bit of an expert to understand it properly - I was hoping that a fellow cyclist who works in accounts might know, having been there & done it. Those that _have_ posted relevant info, I appreciate it.

I'm becoming a partner due to retirements here when my responsibilities will change, it's not a tax ruse. I've been an employee on PAYE for 30-odd years and it doesn't bother me one bit. I know plenty of self-employed people though through the business who expend a lot of energy "avoiding" tax - it certainly isn't that (I'm aware enough to know the 'tax avoidance' isn't illegal - immoral? Probably).

But if anyone can explain why you shouldn't the use existing tax rules (not loopholes) to save _less_ tax than you would using the accepted & popular C2W scheme on PAYE, I'm all ears... 

Didn't anticipate a small scale "pay your taxes!" dogpile IIH  but you live & learn.


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## nickAKA (20 Feb 2020)

PaulSB said:


> I'm interested to note the OP hasn't responded since the initial post.



Why's that? Not been near the desktop since yesterday, there's no conspiracy here.


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## nickyboy (20 Feb 2020)

nickAKA said:


> Hence the question. I'm not an accountant, I was looking for advice from people who understand the rules better than I do, that's all.
> 
> I put "creative accounting" in the title more to pose the question if it could/would be seen as such by HMRC if the VAT was reclaimed using existing & transparent rules, which _seem_ to allow such claims but you need to be a bit of an expert to understand it properly - I was hoping that a fellow cyclist who works in accounts might know, having been there & done it. Those that _have_ posted relevant info, I appreciate it.
> 
> ...


What you floated out is not "using the current tax rules". It's misrepresenting the facts to illegally reduce the tax burden. 

To use your example, C2W is a very specific piece of tax legislation. Use it, it's 100% legal. But the ideas you've suggested are not legal.

(Qualified accountant, Finance Director of several companies. Know what I'm talking about!)


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## nickAKA (20 Feb 2020)

nickyboy said:


> What you floated out is not "using the current tax rules". It's misrepresenting the facts to illegally reduce the tax burden.
> 
> To use your example, C2W is a very specific piece of tax legislation. Use it, it's 100% legal. But the ideas you've suggested are not legal.
> 
> (Qualified accountant, Finance Director of several companies. Know what I'm talking about!)



As I said, thank you for posting relevant info.


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## vickster (20 Feb 2020)

I'd ask the accountant you'll presumably be engaging when you need to start doing self-assessment about the rules & regs


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## Crankarm (20 Feb 2020)

Supersuperleeds said:


> If the business is buying for legitimate business use then they will be able to claim the VAT back. If it isn't for business use then they cannot claim the vat back.
> 
> Chances of getting caught, next to none.


 But he's just told all of us and the rest of the internet that he plans to set up a tax dodge.


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## Crankarm (20 Feb 2020)

nickyboy said:


> You say you're not seeking to defraud the taxman but what you're proposing is exactly that.
> If the bike is bought by the company and given to someone it cannot recover the VAT.
> If the company donates it or whatever to a cycling club that would be ok if it could be shown that the bike was not for a particular person who happened to be a partner in the firm. Any half decent VAT or IR inspector would see right through this



I don't know why he can't just buy himself a bike. Being a partner or director he's probably not short of a £1 or two, just short on decency and doing the right thing like paying taxes as he should. Typical business owner or some one used to getting others to subsidise their lifestyle.


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## Crankarm (20 Feb 2020)

slowmotion said:


> The tax rules for company vans used to be that a company could provide you with a vehicle if it's main purpose was for the business. All the fuel, insurance costs, servicing, VED etc could be paid for by the company and were not taxed as a benefit to the user if it was solely used for work. Commuting to work in it was allowed, but if you deviated from the direct route between home and work, the mileage was taxed as private use.
> The use of a company bicycle might have similar restrictions but I'm not an accountant or a taxman.
> 
> *BTW, I believe that HMRC have greater powers than the police when it comes to smashing down your front door at three in the morning.*



They do. The VAT men and women have far more powers of entry and their use of rubber gloves are terrifying. The only other authority with similar are Environmental Health Officers.


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## Crankarm (20 Feb 2020)

nickyboy said:


> Except in this case it isn't tax avoidance. It's tax evasion. It's illegal
> 
> I've no problem with anyone organising their affairs to minimise the tax they pay whilst remaining within the law. But people who do what the OP are suggesting are stealing from you and me. If someone evades tax it just means that someone else has to pay more tax to make up the shortfall
> 
> The idea that evading tax is fair game cos it's just means the IR is out of pocket is bollox


 ^^^^^ +++1. A****


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## Grant Fondo (20 Feb 2020)

Crankarm said:


> I don't know why he can't just buy himself a bike. Being a partner or director he's probably but short of a £1 or two, just short on decency and doing the right thing like paying taxes as he should. Typical business owner or some one used to getting others to subsidise their lifestyle.


If C2W is kosha, then why isn't a tax break to small ltd companies?


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## vickster (20 Feb 2020)

Grant Fondo said:


> If C2W is kosha, then why isn't a tax break to small ltd companies?


Wasn't it intended as an employee benefit to encourage more cycling to work, not a company related benefit. Nor is it available to the self employed, technically the OP will be such come April if no longer on PAYE I think


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## bikingdad90 (20 Feb 2020)

Grant Fondo said:


> If C2W is kosha, then why isn't a tax break to small ltd companies?



Because your already getting a tax break in the form of one of the lowest corporation tax rates in Europe which on average are closer to 22-23% and you get the £3000 employers allowance.


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## Crankarm (20 Feb 2020)

Grant Fondo said:


> If C2W is kosha, then why isn't a tax break to small ltd companies?



It is my understanding that C2W was actually for employees not companies themselves. C2W was so abused anyway, another massive fraud by many who used it to increase the numbers of bikes in their collections and didn't actually need new bikes at all to ride to and from work. I could have used the C2W scheme some years ago but got a much better deal on a new bike by haggling and using 0% finance over 12 months. I have also built my own bikes for which C2W was not available. In any case most retailers typically would only sell bikes on the scheme at full RRP, no discounts. The only people the C2W really benefitted were the well paid in the 40% tax bracket. If you were a basic rate tax payer the marginal benefits were not worth all the hassle.


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## Drago (21 Feb 2020)

vickster said:


> I'd ask the accountant you'll presumably be engaging when you need to start doing self-assessment about the rules & regs


What, his accountant that works down the cycle shop?


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## screenman (21 Feb 2020)

Crankarm said:


> I don't know why he can't just buy himself a bike. Being a partner or director he's probably not short of a £1 or two, just short on decency and doing the right thing like paying taxes as he should. Typical business owner or some one used to getting others to subsidise their lifestyle.



Most small business owners would earn more working for a company or public sector, more should have a go and find out what it is like, bit angry as I just had another small business go bankrupt on me this moring oweing over £1,000.


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## nickAKA (21 Feb 2020)

Crankarm said:


> But he's just told all of us and the rest of the internet that he plans to set up a tax dodge.



No I didn't - I asked if there was a _legit_ way of buying a bike, saving tax using the existing tax system rules on self assessment, much in the same way as I can on PAYE using C2W, for exactly the same purpose. Maybe the choice of words could have been better; "tax efficient" would work but that's a pretty loaded phrase.
You're entitled to your opinions & "morality" but don't get your kecks in a bunch and start accusing me of things that A) I haven't said and B) I haven't done. And why the fanciful assumptions about my financial situation and the ad hominen grief? WTF is that all about?
I should have known better really, I must have seen variations on this argument on message boards hundreds of times down the years. New experience being the one being on the 'wrong end of it' tbf 
Anyway, stop worrying about it, I'll ask the accountant when the paperwork goes through. He's a straight-down-the-line type so rest easy, I'm sure it'll all be above board and the tax man will be fine.


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## bikingdad90 (21 Feb 2020)

screenman said:


> Most small business owners would earn more working for a company or public sector, more should have a go and find out what it is like, bit angry as I just had another small business go bankrupt on me this moring oweing over £1,000.



Get your creditors claim into the administrators in order to get half a chance of getting some money back from the company from any remaining cash and proceeds of assets sold.


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## screenman (21 Feb 2020)

bikingdad90 said:


> Get your creditors claim into the administrators in order to get half a chance of getting some money back from the company from any remaining cash and proceeds of assets sold.



Nothing there, it has happened a few times in the past.


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## fossyant (21 Feb 2020)

nickyboy said:


> What you floated out is not "using the current tax rules". It's misrepresenting the facts to illegally reduce the tax burden.
> 
> To use your example, C2W is a very specific piece of tax legislation. Use it, it's 100% legal. But the ideas you've suggested are not legal.
> 
> (Qualified accountant, Finance Director of several companies. Know what I'm talking about!)



Also Qualified Accountant. 

But, you know these 'partners' and business owners are a dodgy lot also. I was Financial Controller of a 'big' business owned by two brothers. We had to go along with a few dodges, but most of it ended up on their P11D - like one used to fill his 4x4 from the truck pumps out back, or the other that was buying property (that went through tax - we needed a big firm of accountants to help). One of the bosses more or less permanently had one of the weekly staff permanently at his house, and some of the building materials weren't for our jobs, if you know what I mean. It was a £200m company, and if we could 'trace it' it went into Directors loans, if we couldn't trace it, then who knows where it went ! 

My wife's worked for some dodgy lot, where the benefits (cars/TV's/ upgraded car info-tainment/'holidays' etc etc) went via the directors loans, 
then the tax paid via the company (for the director) again via directors loans.


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## mr_cellophane (24 Feb 2020)

I used to work through a one man limited company. My accountant let the company buy a bike. However, it had to be a pool bike and available for anyone who worked for the company to use. It could not be for personal use at any time and any sundries (except clothes), insurance, lights, service, etc could be put through the books.
I was the only employee, so only for my use was not a problem and I'd like to see the tax man prove that I went out for a pleasure ride on Sunday. Decent set of lights on the company and spare mounts for other bikes paid from my own pocket.
I bought two this way, with three years between them.


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## mr_cellophane (24 Feb 2020)

PaulSB said:


> My ex boss once told me how he engineered losses in the business to ensure his daughters received state support to attend uni. Fraud.


I stopped paying myself a salary or dividends for 2 years for the same reason. I just took a few director's loans when the need arose.


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## PK99 (24 Feb 2020)

Pale Rider said:


> Agreed, one person's tax avoidance is another's prudent tax planning.



The OP is looking not at avoidance but evasion by manipulating the rules


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## PK99 (24 Feb 2020)

mr_cellophane said:


> I stopped paying myself a salary or dividends for 2 years for the same reason. I just took a few director's loans when the need arose.



No doubt what you did was legal , but equally no doubt that it was immoral.


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## mr_cellophane (24 Feb 2020)

PK99 said:


> No doubt what you did was legal , but equally no doubt that it was immoral.


Before I set up my own company, I was working for the man paying around £28k a year in income tax. I looked at it as levelling out.


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## winjim (24 Feb 2020)

mr_cellophane said:


> Before I set up my own company, I was working for the man paying around £28k a year in income tax. I looked at it as levelling out.


It's only the extremely wealthy who seem to have the ability to do these tax dodges and such, isn't it? Funny that.


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## mr_cellophane (24 Feb 2020)

winjim said:


> It's only the extremely wealthy who seem to have the ability to do these tax dodges and such, isn't it? Funny that.


extremely wealthy ? not me, just careful with my money.


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## vickster (24 Feb 2020)

mr_cellophane said:


> extremely wealthy ? not me, just careful with my money.


You must've been earning a solid amount to pay £28k income tax however (£100k a year?)


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## I like Skol (24 Feb 2020)

vickster said:


> You must've been earning a solid amount to pay £28k income tax however


It's a fair point. Many people earn less than the mentioned tax bill. Quibbling about the tax bill for that amount seems a bit unreasonable. I'm not complaining about someone earning the amount needed to generate that tax liability, but to complain and 'cheat' because of the tax when your job/earnings put you in such an advantaged position is bordering on immoral.


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## mr_cellophane (24 Feb 2020)

Lots of overtime, every weekend and making sure rotas were to my advantage. It was only for about 5 years and I knew it would come to an end.


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## winjim (25 Feb 2020)

mr_cellophane said:


> Lots of overtime, every weekend and making sure rotas were to my advantage. It was only for about 5 years and I knew it would come to an end.


If you made sure rotas were to your advantage, were they to anybody else's disadvantage?


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## Drago (25 Feb 2020)

screenman said:


> Most small business owners would earn more working for a company or public sector, more should have a go and find out what it is like, bit angry as I just had another small business go bankrupt on me this moring oweing over £1,000.


As an average, the self employed work a third longer and earn a third less than employees.


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## mr_cellophane (25 Feb 2020)

winjim said:


> If you made sure rotas were to your advantage, were they to anybody else's disadvantage?


No. We covered 7 - 7. No one wanted to do early or late by choice, so as I only lived 3 miles away, whenever anyone was off I rostered them for late and me for early, 20 hours at time & half an extra weeks pay.

To those saying playing the system legally to my advantage is immoral. What is a fair tax system ? Any tax system will always be unfair to someone. Fairest system IMO is a very large tax free amount and then one flat rate


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## winjim (25 Feb 2020)

mr_cellophane said:


> No. We covered 7 - 7. No one wanted to do early or late by choice, so as I only lived 3 miles away, whenever anyone was off I rostered them for late and me for early, 20 hours at time & half an extra weeks pay.
> 
> To those saying playing the system legally to my advantage is immoral. What is a fair tax system ? Any tax system will always be unfair to someone. Fairest system IMO is a very large tax free amount and then one flat rate


I'm happy with a progressive system. I'd be happier with a system that couldn't be gamed by company directors and people rich enough to afford clever accountants. I'd be even happier if when people did game the system, they just admitted it was for their own gain and didn't try and frame it as getting one over on 'the man' as if they never benefitted from any of the things that our tax money pays for.




I am aware of the existence of cash in hand tradespeople and I am also aware that the government doesn't always spend our tax money wisely...


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## mr_cellophane (25 Feb 2020)

I look at tax like I look at shopping. I go to Lidl, Tesco, etc to pay the least amount possible, I don't shoplift as that would be illegal.


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## Gunk (25 Feb 2020)

Drago said:


> As an average, the self employed work a third longer and earn a third less than employees.



That wasn’t my experience, I was self employed for 12 years and it was reasonably lucrative, I worked less hours than the PAYE job I had before.


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## mr_cellophane (25 Feb 2020)

You have to remember that all the Big Issue sellers are classed as self employed which must skew those figures somewhat


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## rivers (25 Feb 2020)

If you are no longer PAYE and now self-employed/director, could you not purchase a bike for the purposes of commuting and write it off against your taxes? My wife was able to put her e-bike and various accessories through her books as it's main purpose is commuting. She uses it 95% of the time to commute to her classes around the city when the weather is cooperative, and the other 5% is when on holiday or a nice sunny day. Her accountant said it was fine to put through.


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## srw (25 Feb 2020)

mr_cellophane said:


> whenever anyone was off *I* rostered


I've highlighted the important word. You were in charge of the roster and you chose which shifts to work. So you chose to pay yourself the most. 


winjim said:


> I'd be happier with a system that couldn't be gamed by company directors and people rich enough to afford clever accountants



I'd be even happier with a system where someone couldn't find a way to bend the rules in the artificial ways that have been described in this thread. 

I've probably paid more tax over the years than most of the people in this thread. I've never used an artificial means to reduce it. The tax I pay is the very reasonable price for living in a country with healthcare that's free when you need it, where all our children get a free education and where those members of the community who need a helping hand while they're down can get it when they need it. It's called civilisation.


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## mr_cellophane (25 Feb 2020)

srw said:


> I've highlighted the important word. You were in charge of the roster and you chose which shifts to work. So you chose to pay yourself the most.


Or by not wanting to do the late shift others chose to pay themselves the least.



srw said:


> where all our children get a free education


So you aren't in England or Wales then


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## nickyboy (25 Feb 2020)

srw said:


> I've highlighted the important word. You were in charge of the roster and you chose which shifts to work. So you chose to pay yourself the most.
> 
> 
> I'd be even happier with a system where someone couldn't find a way to bend the rules in the artificial ways that have been described in this thread.
> ...


So you don't have an ISA? You don't make pension contributions before tax is calculated? Both of these are tax shielding devices designed to benefit the individual.

A large majority of the working population take advantage of certain tax planning opportunities. Whilst they may not be at the esoteric end of the scale like Venture Capital Trusts and Seed Equity Investment Schemes they're just another form of planning for tax mitigation

I personally see no difference between someone using an ISA and another person using a more esoteric but similarly legal tax planning device.


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## vickster (25 Feb 2020)

mr_cellophane said:


> Or by not wanting to do the late shift others chose to pay themselves the least.
> 
> 
> So you aren't in England or Wales then


Education in England is free from age 4/5-18 surely, ie for all children?


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## srw (25 Feb 2020)

nickyboy said:


> So you don't have an ISA? You don't make pension contributions before tax is calculated? Both of these are tax shielding devices designed to benefit the individual.


I have ISAs. Any future pension contributions I make would effectively be taxed at nearly 100%, so I don't make any.

Both ISAs and pensions have specific policy aims. The tax minimisations discussed in this thread are artificial, have no policy aims and are beyond what ministers and civil servants intended as they designed policy.


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## srw (25 Feb 2020)

mr_cellophane said:


> Or by not wanting to do the late shift others chose to pay themselves the


Or, as likely, didn't want to rock the boat by standing up to the person who chose the rota and snaffled all the best GIFs for himself.


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## mr_cellophane (26 Feb 2020)

srw said:


> Or, as likely, didn't want to rock the boat by standing up to the person who chose the rota and snaffled all the best GIFs for himself.


Trust me, most of the others were lazy buggers.


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## nickyboy (26 Feb 2020)

srw said:


> I have ISAs. Any future pension contributions I make would effectively be taxed at nearly 100%, so I don't make any.
> 
> Both ISAs and pensions have specific policy aims. The tax minimisations discussed in this thread are artificial, have no policy aims and are beyond what ministers and civil servants intended as they designed policy.


So tax mitigation is OK if it's part of a specific policy aim but not OK otherwise. What happens when I have two choices A and B as to how to structure a particular business transaction. Both lie within current tax legislation. A results in me paying less tax than B. Such as whether a business owner is paid via salary or dividend
My position on this is that so long as both A and B are legal then an individual can structure their affairs as they see fit. That's what tax legislation is there for. It is to draw the line as to what is acceptable and what isn't. I am as critical as anyone regarding people who fall the wrong side of the line but so long as you're on the right side it's fine


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