Ritchie admits that by Ritchie\’s standards Ritchie is a tax avoider

Can\’t really get much clearer than this, can we?

Secondly, and mainly with regard to tax avoidance, HMRC and Tax Research UK use very different methods of calculating the tax gap. HMRC, perhaps unsurprisingly, wants only to consider something as tax avoidance if it can do something about it. Tax Research UK, on the other hand, considers something to be tax avoidance if it believes something should be done about it. The following example helps explain the difference in approach.

For a number of years HMRC put great emphasis on trying to close down the use of limited companies by people claiming to be self employed when they were actually in what HMRC considered to be, a disguised employment. They were particularly offended that the resulting income within the company was then being paid out to the shareholders of that company by way of dividend. This activity could give rise to tax avoidance in two ways. The first was that national insurance on what was really earned income was avoided. This was because national insurance would have been due on the salary that HMRC thought should have been paid, as it would also have been if the income had been received by a self employed person in their own name.

National insurance is not however due on dividends paid. Secondly, in many cases a person who HMRC thought had not really generated the income enjoyed by the company could be a shareholder in it and have its income shared with them by payment of a dividend, resulting in many cases in families reducing their overall tax rates. However, in 2007 HMRC lost a case in the House of Lords that would have stopped this abuse if they had won it and since then they have largely backed off challenging it.

As a result tax avoidance using this mechanism does not appear to be in their tax gap estimate. That does not, however, mean the tax avoidance has stopped. It just means it is not going to be challenged at any time soon.

Tax Research UK has estimated that such structures and similar avoidance through companies by those who are self employed but “income shifting” to parties not really engaged in the trade may have cost at least £1.2 million in lost tax and national insurance in 2007, and that figure may well be rather more now. This loss is in Tax Research UK’s estimate of tax avoidance, but not HMRC’s. The result is widely differing views of just how much tax avoidance there is.

Ritchie is making a flat out statement there. He defines his own taxation behaviour in those years as being tax avoidance. For he did the low salary trick, the dividends trick and the income shifting trick.

Bad Ritchie!

3 thoughts on “Ritchie admits that by Ritchie\’s standards Ritchie is a tax avoider”

  1. ” Tax Research UK, on the
    other hand, considers something
    to be tax avoidance if it believes
    something should be done about
    it. ”

    After reading that, I wouldn’t use this report to line a litter tray. Even cats deserve better reading on the loo. By that definition, Tim, you’re tax avoidance personified.

  2. Like all the liberal elite, it’s do as I say. They imagine that they are the special people and are exempt from laws that the plebs have to obey.

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