Corporation Tax back up to 25% - press conference 2pm today
- Thread starter Ecommerce&MailOrderGuy
- Start date
- Original Poster
- #42
As with all Budgets the devil is in the detail.
Often quite significant changes aren't immediately apparent (or I might just be a bit slow on the uptake
)
I only found out today that the ill-fated Mini Budget dropped the Top Rate of Divi Tax (38.3%).
The highest rate to become the 33.7% level (this was the 'usual' second level if you catch my drift)
As mentioned I missed this first time around. Wow Liz really was stretching her luck wasn't she?
After today Divi tax increases by something like 1.5%. The top rate payable now being over 39%.
If a business owner with a major shareholding in a relatively successful business (let's say £5m turnover with 10% pre-tax) wants to take a large lump of cash out of their business in the future it's gonna be expensive!
Often quite significant changes aren't immediately apparent (or I might just be a bit slow on the uptake
)I only found out today that the ill-fated Mini Budget dropped the Top Rate of Divi Tax (38.3%).
The highest rate to become the 33.7% level (this was the 'usual' second level if you catch my drift)
As mentioned I missed this first time around. Wow Liz really was stretching her luck wasn't she?
After today Divi tax increases by something like 1.5%. The top rate payable now being over 39%.
If a business owner with a major shareholding in a relatively successful business (let's say £5m turnover with 10% pre-tax) wants to take a large lump of cash out of their business in the future it's gonna be expensive!
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Up to £50k ... then its gradually upweighted to 25% on the way to 250k - fiendishly complex especially when combined with also complex dividend tax ...
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As with all Budgets the devil is in the detail.
Often quite significant changes aren't immediately apparent (or I might just be a bit slow on the uptake
I only found out today that the ill-fated Mini Budget dropped the Top Rate of Divi Tax (38.3%).
The highest rate to become the 33.7% level (this was the 'usual' second level if you catch my drift)
As mentioned I missed this first time around. Wow Liz really was stretching her luck wasn't she?
After today Divi tax increases by something like 1.5%. The top rate payable now being over 39%.
If a business owner with a major shareholding in a relatively successful business (let's say £5m turnover with 10% pre-tax) wants to take a large lump of cash out of their business in the future it's gonna be expensive!
They effectively want to equalise the rate of dividend and income tax. Owner/shareholders will have more incentive to take the money out as income (or rather, less incentive to take it out as a dividend).
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- Original Poster
- #45
I can kind of understand this.
And the IR35 objectives.
But it does feel like they are taxing us SME's to bits while the USA Corporations (and others) continue to get away with murder.
I don't see this ending well.
In another thread I argue about the rising fees from Amazon/Ebay and Google threatening the sustainability of UK based ecommerce companies.
Next year is going to be carnage.
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As I mentioned, SMEs are the middle class of the business world. Rich people have loopholes they can exploit using high powered accountants, in order to pay less tax. Like the middle class, SMEs can't afford the creative accountancy to avoid tax.
Imagine if a government pursued a multinational as diligently as they (well, local councils) do parking tickets.
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So what's to stop someone setting up a company in the BVI or similar paying no / little corporation tax and sending a dividend back to the UK (obviously declaring it and paying tax on it) ?
That would presumably be a legal way of avoiding (not evading!) the corporation tax rise? Or am I missing something?
That would presumably be a legal way of avoiding (not evading!) the corporation tax rise? Or am I missing something?
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CT is a huge part of why the UK is no longer open for business. It is a signal to overseas investors that the UK is not a place to set up your business.
The reason we have inflation around the world was Biden's insane tax and spending policies. And to ensure that no country gained a competitive advantage, he bullied the Western World to follow a minimum global Corporate Tax rate. Even Ireland had to sign up to it.
I think this segment on the Farage show on GB News spelt out what is likely to happen over the next few months. What we saw today was an attack on the self-employed and small business.
The reason we have inflation around the world was Biden's insane tax and spending policies. And to ensure that no country gained a competitive advantage, he bullied the Western World to follow a minimum global Corporate Tax rate. Even Ireland had to sign up to it.
I think this segment on the Farage show on GB News spelt out what is likely to happen over the next few months. What we saw today was an attack on the self-employed and small business.
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The issue is (and i say this with 27 years experience in recruitment until the pandemic) that an awful lot of small ltd's are really disguised employment. Forget you 50+ yr old specialists, i am talking about 22 year old warehousemen working through LTDs. It was that rampant abuse that led to the crackdown.
Massive generalisation coming but one I saw often
Once a few companies saw the easy sell to young guys who had come over from eastern Europe (and some locals) - work as many hours as you like and keep a greater % of those earnings by not paying NI/Pension/taking holiday etc, within a year or 2 with you living cheap in a doss house you can earn enough to go back and set yourself up for life with a house
That is what led to this crackdown - as soon as PSC's became so easy to set up and so prevalent the crackdown was inevitable - the trouble is that it was so hard to distinguish between disguised employment and skilled contractor in an objective manner (which laws have to do)
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It always amuses me when small business owners play the victim.
After 30 years of dealing with small businesses, I can honestly say that I've yet to meet one that wasn't actively looking for ways to avoid tax - some more assiduously than others.
A hefty portion are actively evading tax, from the odd sneaky 'cash job', family meals on expenses through to outright fraud.
One reason that system become complex is because it becomes a cat and mouse game between systems & avoiders - in the case of small business the IR35 thing is a key example.
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Ah yes, but there are fewer ways for SMEs to avoid tax than multinationals.
When you see the likes of Starbucks paying next to no tax, you wonder if there's one rule for one and one rule for everyone else.
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I think you'll find that small businesses are broad and resourceful in the many ways they find to not pay tax. Not always legally.
Big companies rely on a single resource, which is top quality advice
I'm not defending exploiting loopholes but I also don't feel that small business has any claim to the moral high ground
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And it is the cat and mouse game which leads to labyrinthian tax rules
We need to rip up the rules and start again with less differential between different forms of tax to remove the incentive for people to move their money /earnings between different vehicles for tax avoidance reasons
Easier and more equitable the systems are the less likely people are to spend time and energy trying to avoid them
We need to rip up the rules and start again with less differential between different forms of tax to remove the incentive for people to move their money /earnings between different vehicles for tax avoidance reasons
Easier and more equitable the systems are the less likely people are to spend time and energy trying to avoid them
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Which is why I say SMEs are the middle class/low hanging fruit for HMRC. It's not entirely unjustified to say that SMEs are unfairly taxed compared to multinationals, and so it's not unreasonable to expect them to try to avoid as much tax as they can. It's far easier for HMRC to squeeze more out of SMEs than to try and recover hundreds of millions owed by multinationals.
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And continuing the theme of the thread, clearly the issue (tax evasion/avoidance) becomes more prevalent the higher taxes go (wonder why?); most don't begrudge paying what they deem to be an appropriate level of tax to the State, I certainly don't, infrastructure doesn't grow on trees. Naturally though, that "appropriate" level will vary person to person, such is human nature. There being this arbitrary point, above which, for the likes of my me et al. in the same mindset it does become legalised theft and as such the game of cat-and-mouse is fair game. Also it is not surprising those who pay most tax whinge more than those who pay very little comparatively. As per upthread, poll people who pay less tax than me and unsurprisingly the majority will be a lot happier with a status quo of 70-year high taxes than I am. And yet ask them to pay more themselves to help someone a little less well off than themselves and you get a different reaction...It appears most are in favour of high taxes until the State arrives at their door with the bill.
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T
The Byre
What's with all the moaning and quetching? I pay 30% CT in Germany and it starts with the very first Euro of profit.
So why do we do business there when it is so unwelcoming to the corporate world? Why do we also run a property portfolio there when rents are strictly controlled, all rental property must be properly insulated and we cannot evict people except for non-payment, criminal activity and property damage? What possible motivation could any sane business person have for doing business in such an expensive and bureaucratic state?
Answer - because that's a country where everybody has enough money to be able to buy stuff (well, almost everybody - someone will always fall between the cracks of even the best organised welfare state!) As long as you have a well-fed, well-educated and healthy population, you can have a market.
Replace half your population with people struggling to pay for uninsulated homes that they cannot heat properly and working for miserable wages and you have a great place to live - if you have money. The poor and the middle classes are all huddled together in townships, the rich live in their townhouses or their country estates and watch the poor on television. All those vox-pops of single mothers visiting foodbanks!
Ensuring that everyone has enough to live costs money. It costs taxes. Of course, we organise our affairs to avoid paying too much tax, but as Ben Franklin said, the two certainties of life are death and taxes. Live with it - suck it up and enjoy life in the UK where nobody has to pay taxes unless they want to or unless they are poor or middle class.
So why do we do business there when it is so unwelcoming to the corporate world? Why do we also run a property portfolio there when rents are strictly controlled, all rental property must be properly insulated and we cannot evict people except for non-payment, criminal activity and property damage? What possible motivation could any sane business person have for doing business in such an expensive and bureaucratic state?
Answer - because that's a country where everybody has enough money to be able to buy stuff (well, almost everybody - someone will always fall between the cracks of even the best organised welfare state!) As long as you have a well-fed, well-educated and healthy population, you can have a market.
Replace half your population with people struggling to pay for uninsulated homes that they cannot heat properly and working for miserable wages and you have a great place to live - if you have money. The poor and the middle classes are all huddled together in townships, the rich live in their townhouses or their country estates and watch the poor on television. All those vox-pops of single mothers visiting foodbanks!
Ensuring that everyone has enough to live costs money. It costs taxes. Of course, we organise our affairs to avoid paying too much tax, but as Ben Franklin said, the two certainties of life are death and taxes. Live with it - suck it up and enjoy life in the UK where nobody has to pay taxes unless they want to or unless they are poor or middle class.
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Perhaps some schadenfreude at play here. We may yet end up with a Portuguese expat trumping this and that itself wouldn't be a persuasive argument that a 30% tax rate isn't sufficient.
I can safely claim to have as much knowledge of how German tax affairs play out as I do Irish i.e. very limited. And as I understand it, both are wealthy, successful countries, money in citizens pockets, and very different tax rates and that is as far as interest extends at present...neither of course proves which direction Britain should go, that'd be a silly assertion to make. As neither is relevant to the United Kingdom and its needs - it should set a tax rate dependent on its unique cirumstances, as all countries invariably do. So on the subject of the case study for this thread i.e. Britain, my view is this increase is a mistake for our market and I'd actually be surprised if the £18bn it is lauded to bring in, transpires to be a third of that.
Clearly, there are a multitude of individual factors that lead into a suitable CT rate for a country to have, from its demographics, to its overall indebtedness, size of the welfare state, proximity to other major markets and competitors, cumulative taxes levied in one form or another...we could go on and on. Each country will be unique, we can't possibly understand each when doing quick comparisons on an international level - therefore I don't see the point of invoking too many outside examples. If that were the case, I'd prefer we claim game, set and match and just copy the Swedes at 20.6%, I could stomach 1.6% a hell of a lot better than a 11% increase!
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Many small business owners take huge risks to startup a business and even greater risks scaling them. They often don't have very good pensions. Meanwhile the reward for taking the risk is 25% corporation tax !
Plus as we know a huge amount of government spending is wasteful or goes towards gold plated pensions and cushy jobs for civil servants.
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Most small business owners are not limited companies so the 25% corporation tax is a complete irrelevance. A huge amount of government spending enables government employees to pay small businesses for the services they receive. Do you want to lose 45% of your potential customers?
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T
The Byre
The UK is an unashamedly obvious tax haven. Nobody HAS to pay taxes! If you are paying 25% CT, that is YOUR CHOICE! The only people who pay taxes are ordinary working stiffs. They get clobbered via PAYE and payroll taxes and VAT and all the other taxes.
People moaning about 25% CT are complaining about a tax they don't actually have to pay! The same applies to stamp duty, VAT, inheritance tax - you name the tax and it is probably perfectly avoidable.
People moaning about 25% CT are complaining about a tax they don't actually have to pay! The same applies to stamp duty, VAT, inheritance tax - you name the tax and it is probably perfectly avoidable.
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You don't need to go that far, look no further than the Isle of Man.
Simply register your company in the Isle of Man, your worldwide income will be taxable in the Isle of Man, your corporation tax would be 0% for most types of business, rising to 10% for a few others.
All yours for a few grand.
In fact, move yourself there too, the highest rate of income tax is 20%. There is currently a tax cap of £200k also, so if you earn £500k then you don't pay any income tax on £300k of it.
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Ok so I've done that and still making 250k profit and being taxed 25% ... sounds like a lot but it will have taken a huge amount of work and risk to get to this point and many years of being underpaid vs what I could have earned in a job.
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You've obviously got low acumen, as must I who am in the same boat. If only one had more acumen by lowering our success levels in order to attain significantly less profit per year so 25% isn't a problem...and pay ourselves several hundred £k as a wage too if we're still hitting the buffer...I need to sack my accountant for missing this trick. The only consolation is these policies will be reversed over time once we see the Laffer curve back in action as it was in the 70s, and that the inflation adjusted tax take shrivels in real terms, business investment drops, as does sentiment, and the overall no. of SMEs declines, all rather predictable but it needs to be allowed to play out. The only difference between now and the 70s is the complexity of the tax code and the number of taxes to hide the sheer extent of the tax taken. We still have some who labour under the illusion Britain is a tax haven (?) and British businesses have it easy, to recap from April this year we move to 33rd out of 38 economies in the OECD's tax competitiveness list and the trend in this "Conservative" government has been 13 years of higher taxes. Do we need to be rock bottom on this list of competitiveness before people may just accept the pips have been squeaked so hard the last wealth generator standing also wants on the welfare cheque.
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