UK Taxation.....Don't pay it????

[elsaQ]

Hi all

Had dinner with a friend of mine who's a London based trader last night & I was amazed to hear that he doesn't pay any UK tax. NONE! He's traded for over 7 years & is without doubt very successfull. Anyway he let it slip about the tax situation, after a couple of bootles of wine.

Basically, he operates 4 different brokerage accounts at any one time and closes each after 6 months & replaces them with new ones. He uses different addresses on each application (hes got access to a few properties in his property portfolio) but always gives his real name. Has never filled in a tax return & hasn't heard anything from the inland revenue.

He's "avoided" tax well into six figures during this time & is confident that he'll be ok?

This guy is real. My question is how can this happen?

More importantly, whats stopping me or you from doing the same?

Anybody with any experience of this please contact me, by pm if preferred in complete confidence given the nature of the subject:whistling

Thanks

Elsa

 

[Trader333]

There is a big difference between "Avoiding" tax which is all very legal and "Evading" tax which is completely illegal. It is easy to avoid hearing from the Inland Revenue as they rely on you being honest with them much of the time. If what he is doing is illegal then eventually they will catch up with him and even possibly jail him.

I have heard of people who have got away with not paying tax often for over 10 years but they always got caught in the end.

Do you know if what he is doing is within the law ?


Paul

 

[fifty2aces]

As Paul said, this is tax evasion rather than tax avoidance, so it is definitely illegal, unless there are other factors which you haven't mentioned. An example would be if the accounts are spreadbetting accounts rather than DMA, in which case they probably won't be subject to tax anyway.*

If he is evading tax, he's been lucky so far - that luck might run out...


*(By way of disclaimer, while I studied tax law at university, and believe this to be the law, the tax status of spreadbetting is potentially open to dispute, so this post should not be taken as financial advice - speak to a tax accountant if you are in any doubt.)

 

[Hoggums]

Agree,

If any of that money goes into his normal bank account the inland revenue will get a report from the banks about it.

Sometimes they are slow - but they will catch up - demand payment and add on interest too.

Your friend is an idiot thinking he can get away with it.

 

[blackcab]

More importantly, whats stopping me or you from doing the same?

A conscience. I think this behaviour is despicable and little different from walking into a hospital and stealing equipment. Whatever makes you fulfilled and happy, though. From what I know, the odds are quite high he'll be caught.

 

[Crap Buddist]

Complete confidence, err , are you sure ? Did you tell "your friend" that little porkie ? LOL..

 

[donaldduke]

The fines for tax evasion are upto 100% of the amount owed + compound interest.

If he has evaded 200K in tax he better be prepared to pay 500K+ if they catch him several years after the event.

Unless he has been saving that kind of money from legit sources it will be bankruptcy time if they ever catch him. He will lose his property portfolio if he doesnt have that kind of cash..

 

[Lee Shepherd]

Hi all

Had dinner with a friend of mine who's a London based trader last night & I was amazed to hear that he doesn't pay any UK tax. NONE! He's traded for over 7 years & is without doubt very successfull. Anyway he let it slip about the tax situation, after a couple of bootles of wine.

Basically, he operates 4 different brokerage accounts at any one time and closes each after 6 months & replaces them with new ones. He uses different addresses on each application (hes got access to a few properties in his property portfolio) but always gives his real name. Has never filled in a tax return & hasn't heard anything from the inland revenue.

He's "avoided" tax well into six figures during this time & is confident that he'll be ok?

This guy is real. My question is how can this happen?

More importantly, whats stopping me or you from doing the same?

Anybody with any experience of this please contact me, by pm if preferred in complete confidence given the nature of the subject:whistling

Thanks

Elsa

Interesting!

The mere fact he keeps using different address's and changes his brokerage account every 6 months and not filling out a tax return is a big huge slap in the face, blatantly obvious that he is running from tax, therefore, evading it, which is illegal.

If this was genuinly legal, why not use the same brokerage house and same address? come on, lets wake up and smell the illegal contriband, it's not coffee.

 

[stevespray]

He'll never be able to spend the money since he'll always be living in fear of that knock on the door. Non declairation is a kin to giving the IR permission to 'guess-ti-mate' how much they think he owes. The can take cash and assets - the question is; is it really worth it?

Surely the solution is to seek out one of these spreadbetting firms who might offer him a bespoke service that effectively makes all his trades 'bets' in exchange for a small cut.

Steve.

 

[arabianights]

A conscience. I think this behaviour is despicable and little different from walking into a hospital and stealing equipment. Whatever makes you fulfilled and happy, though. From what I know, the odds are quite high he'll be caught.

I think tax evaders are heroes personally. The only reason I pay any tax is because of the horrific consequences by government sponsered bullies if I don't.

 

[abottoml]

It's easy not to pay tax, but it's not so easy when the taxman catches up with you. You could always set up an offshore home to flee to if (or when) the man comes around; Check out the non-extradition countries shown on the map here in grey:

Image:UK Extradition.PNG - Wikipedia, the free encyclopedia

It's interesting that Japan is an option. Vietnam could be nice too; But personally, I think it's easier to just lump it and and pay the man his dues.

 

[jamescummins]

I used to work with a trader that earnt a horrific amount of cash, (dont worry, I didnt!), and he once came in to work with a genuine letter he had received informing him he was entitled to tax credits because his salary was so low.
This was someoen that earnt more than my salary by some distance every quarter in bonus. Outrageuos, sure, but then if you earn enough to warrant paying an accountant and all the other incidental costs, you can essentially pay no tax completely legally. I was never 100% sure how he did it, and all the other traders seemed to as well, but I think it has something to do with setting yourself up as a firm, so your employer pays the firm, not you, for your services, and then taking a salary from that of a nominal amount. You can I imagine then write off basically everything you spend as an expense and pay no tax, as well as slapping it all in bermuda or wherever else it is minted people keep their dosh, and not pay anything.
It seems to be the case that if you earn millions you dont pay tax, if you earn next to nothing you pay tax, but I got absolutely shafted and lose half my income!! That bonus never looks quite as nice when you slash it in half immediately!!!!

 

[portomar]

Hi all

Had dinner with a friend of mine who's a London based trader last night & I was amazed to hear that he doesn't pay any UK tax. NONE! He's traded for over 7 years & is without doubt very successfull. Anyway he let it slip about the tax situation, after a couple of bootles of wine.

Basically, he operates 4 different brokerage accounts at any one time and closes each after 6 months & replaces them with new ones. He uses different addresses on each application (hes got access to a few properties in his property portfolio) but always gives his real name. Has never filled in a tax return & hasn't heard anything from the inland revenue.

He's "avoided" tax well into six figures during this time & is confident that he'll be ok?

This guy is real. My question is how can this happen?

More importantly, whats stopping me or you from doing the same?

Anybody with any experience of this please contact me, by pm if preferred in complete confidence given the nature of the subject:whistling

Thanks

Elsa

this is tax evasion, and completely illegal. not to mention immoral.

 

[donaldduke]

From todays FT:

FT.com / World - Tax haven probe targets rich Britons

About 300 wealthy Britons who secretly salted away more than £1bn ($2bn, €1.26bn) in the tax haven of Liechtenstein are facing investigation and possible criminal prosecution by the UK tax authorities.

Some clients have been contacted by Revenue & Customs, which says it will consider prosecuting those who have lied about their assets in other probes. Inquiries are expected to take two or three years.

 

[new_trader]

I used to work with a trader that earnt a horrific amount of cash, (dont worry, I didnt!), and he once came in to work with a genuine letter he had received informing him he was entitled to tax credits because his salary was so low.
This was someoen that earnt more than my salary by some distance every quarter in bonus. Outrageuos, sure, but then if you earn enough to warrant paying an accountant and all the other incidental costs, you can essentially pay no tax completely legally. I was never 100% sure how he did it, and all the other traders seemed to as well, but I think it has something to do with setting yourself up as a firm, so your employer pays the firm, not you, for your services, and then taking a salary from that of a nominal amount. You can I imagine then write off basically everything you spend as an expense and pay no tax, as well as slapping it all in bermuda or wherever else it is minted people keep their dosh, and not pay anything.
It seems to be the case that if you earn millions you dont pay tax, if you earn next to nothing you pay tax, but I got absolutely shafted and lose half my income!! That bonus never looks quite as nice when you slash it in half immediately!!!!

You can reduce the amount of personal income tax you pay by setting up a Private Limited Company to trade under. Company tax is at a lower rate than personal income tax. As a director of your own company you can pay yourself a very small salary (or none at all) and instead pay yourself via a dividend on the shares you own in your company, which you pay less tax on I believe. The bookkeeping and paperwork can get a bit tedius though.

Corporation and Income tax UK - Companies Limited

 

[jamescummins]

How much do you need to earn for it to be a worthwhile exercise to set yourself up as a firm? I am thinking in salary terms now, say it cost me 5k to set it all up, pay an accountant blah blah, then that is well worth it, but then that would be worth it even if you only earn say 30k?!? Why have I never done this before, in fact, why doesnt everybody?? What am I missing, or are the costs just actually much higher than I am guessing...

Also, I assume if you do pay yourself in this way to avoid tax, then you are losing out on company pensions and that type of benefit - I dont really have a clue of the top of my head what that would work out as, but even so, if your tax each year is say 60k, then this seems worthwhile - so why are we not all doing it already?!? Why are there not firms set up and advertising all over the place to help you do this?!? Basically anyone working in the city that has been there for a couple of years is going to be upwards of 50k, so 20k tax bill....

I have now confused myself. Please help!!

 

[fifty2aces]

You can reduce the amount of personal income tax you pay by setting up a Private Limited Company to trade under. Company tax is at a lower rate than personal income tax. As a director of your own company you can pay yourself a very small salary (or none at all) and instead pay yourself via a dividend on the shares you own in your company, which you pay less tax on I believe. The bookkeeping and paperwork can get a bit tedius though.

Corporation and Income tax UK - Companies Limited

When you consider the tax on dividends as well as corporate tax, you''ll actually be paying slightly more than you would if you just paid income tax normally. You would save money by not paying national insurance, though I'm not sure if that would be a big enough saving to make forming a company favourable - can't remember the numbers off the top of my head.

The best thing (from a tax perspective) about forming a company is that retained profits will only be taxed at the company rate, so if you are only taking a small income from your trading, and the rest of your profits are being used to build up your account, you'll pay less tax than a sole trader would.

 

[arabianights]

The way to do it is you form an offshore trust (chosen relatives beneficieries), which lends you money (effectively as salary) which you have to pay back to the trust when you die. You trade for the trust. When you die the trust goes to your relatives IHT free as well .

The guys who run administer the trust charge about 8% admin fee, and that's all you have to pay.

Much fairer than giving your money to theives in power.

 

[sinimini]

Fifty Aces is right, you would be paying more tax, in fact depending on whether you needed to tap into company profits to pay youself more of a salary (for some reason), then you would be in effect be paying tax twice.

Charitable trusts is how all the big boys are doing it like Arabian says.

 

[jamescummins]

See now it is beginning to sound more expensive, which makes me think this is why most people are not doing it...
Also, I assume if I was to set myself up as some sort of offshore trust, I would then have a nightmare trying to get any sort of loan like a mortgage...
Still, I am intrigued by the numbers here... There must be a fair percentage of the people on this board that are paying over 40k tax say. If you are paying that per year, then it must be well worthwhile doing... I am guessing, but it seems reasonable that employers may well not want employees doing this. I am not sure how it would affect me, but certainly I would be less protected I think since I would not personally have a contract with them, a trust would have a contract to provide services--- If anyone has an example with the numbers, I would be keen to know... Not specifically for the day traders here, but just for anyone working earning a half decent amount.... Maybe I shouldnt have been so keen to disown everyone I know that read accountancy after all