No, not quite Richard

Oh what silly boys you are

Yes I’ve run companies and there is nothing to stop me doing so

And yes my wife has owned shares in them

Fulcrum Publishing was set up to publish her articles and my software. It was owned 50 / 50 as a result

It turned out – I agree – software made more. She decided that writing was not for her. It’s one reason the company stopped trading. But the intention was right throughout. It’s why |I now argue that limited companies are not suitable for use in such situations.

The Tax Gap and its successor – Tax Research LLP – have both had massive input form my wife. She reads much of what I write, comments extensively, edits, helps make strategic decisions, is fully aware of financial activity and more besides. The real question is why she has been underpaid.

Except as you note she’s a part time GP – but GPs are rightly well paid and do pay NIC and so income was not shifted to secure tax advantage but reflected work done and NIC was not paid as the alternative measure was self employment where NIC was being paid in full as required by law – a point I have made before

No, not really. For the income was paid as dividends from the company, not as pay from the company. Which alleviates the need to pay employers\’ national insurance. Some 12 or 13% of income.

Now, I do agree absolutely that there are (at least) three possible ways of handling this income stream. As self-employment income, attracting a very light to none at all NI charge and standard income tax or higher rate income tax.

As a company, with the income being paid out as wages. This would attract at least one set of NI payments and possibly two (depends upon total income in the year) and that income tax.

The third, which is the one chosen, is as a company and then a small amount is paid as wages. This attracts no NI charges. But the usual income tax at whatever rate. The rest of the income being paid as dividends, which attract no NI and the usual income taxes.

Except, no, not quite. For in the years Fulcrum was operating (or at least some of them) there was a £10,000 tax free profit allowance for small companies. Thus that share of the profits was not taxed as profits to the company. However, when those profits were paid out as a dividend they were, in common with all dividend payments, regarded as having already paid basic rate income tax. So the only income tax to be paid upon that dividend income would be higher rate such, if total income in that year was sufficient to make such payable.

Now, all three of these structures are entirely valid, all three are entirely legal. My point is simply that the one chosen was the one which made the most of the available options to reduce, entirely legally, the tax due on said income.

And this is the personal behaviour of the man who tells us that using all of the entirely legal available options to reduce tax paid is immoral.

That\’s the dichotomy. Not that a retired accountant and his wife have used every Englishman\’s right to order their affairs so as to reduce the amount sent to The Treasury. But that that same retired accountant and his wife are running a highly vocal campaign to insist that the rest of us may not use those same laws so as to order our affairs and reduce the amount sent to The Treasury.

I suppose we could invoke St Augustine of Hippo and his \”Not yet Oh Lord\” but even he regarded that as a wry commentary upon human desires, not the way to really organise our affairs.

10 thoughts on “No, not quite Richard”

  1. So he says he had good commercial reasons for this structure, which just happened to save him some tax/NI. But he sadly can’t prove that because commercially it didn’t work out as he planned.

    You know what this sounds like?

    The facts are different, but the style is just like the letters that multinationals write to HMRC, arguing that their tax haven subsidiaries shouldn’t be taxed under the CFC rules because they have a legitimate commercial reason for being there, and the tax advantage is small and entirely incidental.

  2. It doesn’t sound a difficult point for him to prove: a half dozen links to articles that she *did* write would show everyone that she did at least make a go of it. It didn’t work out, and that’s to be anticipated, but at least she tried.

    Didn’t she?

  3. “That’s the dichotomy. Not that a retired accountant and his wife have used every Englishman’s right to order their affairs so as to reduce the amount sent to The Treasury. But that that same retired accountant and his wife are running a highly vocal campaign to insist that the rest of us may not use those same laws so as to order our affairs and reduce the amount sent to The Treasury.”

    To which Ritchie will most probably respond, “What’s your point, Tim?”

  4. Tim, you know full well that lefties are two-faced – one law for them and another for the proletariat. It has always been thus.

    Something I’ve always wondered, which you might know, if a company based abroad (say India) imports a worker to its UK office, does that company have to pay UK minimum wage? Or can they pay living expenses and the usual pittance back in India?

    Tim adds: I know there are rules about this but I’m sorry I don’t know what they are. Could be a complex area. If you send in a salesman to sell to a UK company, does he have to be paid UK wages for the sole 8 hour working day he’s doing here? How about if you post him for 6 months?

    As I say, don’t know the details but I am aware that there are some laws/regs bout it.

  5. Something I’ve always wondered, which you might know, if a company based abroad (say India) imports a worker to its UK office, does that company have to pay UK minimum wage?

    I suspect, but don’t know, that anyone who holds a work permit in the UK is subject to minimum wage laws. Of course, a lot of people might be working in the UK on business visas (like half the global oil business does) but that’s not strictly legal.

  6. I think I’ve got this right – you can import gangs of Poles and pay them Polish rates – free movement of labor within the EU – but Indians would need visas to work and would then have to live up to UK rules and UK minimum wages and tax etc.

  7. As Jim points out:

    NIC [a tax by anyone’sdefinition] was being paid in full as required by law – a point I have made before

    Isn’t this what he argues is tax avoidance and therefore against the spirit of tax law?

  8. I don’t know why so many of you attack Murphy all the time . There are things about him to be admired – his solid brass neck for example.

Leave a Reply

Your email address will not be published. Required fields are marked *