Elfinsafety - Member
I assume you studied at London Business School
I did!
Hopefully then you can separate the fact from fiction.
Chat Forum
Tax avoidance/minimisation - what's realistic?
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Posted 4 months ago #
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Is every investor a millionaire?
Your example not mine.
Capital gains are also taxed but an annual allowance allows people a small amount of tax free earnings and tax bands on the amounts above this allowance allow basic rate tax payers to pay less than others
But at a lower rate than earnings, which is not justifiable IMO, after all that's what they are.
Posted 4 months ago # -
No not always - you assume my position most of the time. I normally argue about a point of logic or principle. So you stated earlier that FRT was unfair and not progressive. I showed that that was not necessarily the case with some simple maths. Didn't say whether I approve of it or not. You merely assumed.
Ditto we argued about Eton Collge before when you argued that you don't have to be intelligent to go there - or words to that effect. I argued against that by posting a copy of one of their scholarship papers for 12/13 year olds. Just pointing out the flaws in your diatribe at the time. Didn't say one way or the other what I thought of Eton College. But noticed that you failed to respond the the questions in the exam paper. Convenient that. (FWIW - I wish everyone could be educate to that standard)
But it gives me a laugh to be described in the way that you do!! If only you knew.....!!
Posted 4 months ago # -
I did!
Elfin really? I went to Manchester Business School myself. I wasn't clever enough for LBS!
Posted 4 months ago # -
teamhurtmore
You accuse me of not reading your posts
- both those examples you have not represented what I saidOn the flat rate tax I said it was not progressive unless thresholds and rates were high ( when you then un into the drawback of high marginal rates)
there is a difference between going to Eton because you can pay and going on a scholarship.
You do not have to be clever to go if you are rich
Why do you only ever espouse a neoliberal stance? Good point tho that it is too easy to assume what people are arguing for - I get caught on that one a lot as on scottish nationalism. Point taken
Posted 4 months ago # -
Guess I misread:
Flat rate tax is only very slightly progressive. Its manifestly unfair. we have historically used the tax system to redistribute wealth from those who have the power to grab it to those who do not. flat rate taxation unless thresholds are very high and the rate is very high would increase inequality
As my maths showed, the threshold in a different argument (albeit related) and the progressive nature can be quite strong. Look at the maths. Threshold can be low and income still redistributed.
You do not have to be clever to go if you are rich
And you are accusing me of dogma???? They have rigorous pre-testing, entrance exams and scholarship papers. Actually you do have to be clever...you are 50, go and try one of the maths papers I posted.Posted 4 months ago # -
Is this about tony blair only paying a fraction of the tax that he should be?
Posted 4 months ago # -
TandemJeremy - Member
Why do bonuses get given in shares - to avoid tax.
Or you could look at it another way - why are tax reliefs available for share-based payments that are not available for cash payments?
Posted 4 months ago # -
Elfin really? I went to Manchester Business School myself. I wasn't clever enough for LBS!
Erm, when I say 'studied'...
It was a lady's bottom actually. I can't lie. And she caught me looking too.
Posted 4 months ago # -
Bonuses are given in shares for a number of reasons, but from a corporate governance and management perspective, it's about aligning an individual with the fortunes of the company, it's tax efficient FOR the company (you don't pay PAYE) and they are controllable from the point of vesting, which means they act like golden handcuffs.
When you sell them, you get taxed on them at the capital gains tax rate and usually the shares issued to employees are structured so they don't pay dividends; which is where the income would be tax efficient for the individual but since you pay capital gains on the vested and cashed shares, it's not a tax doge for the employee.
Posted 4 months ago # -
you pay capital gains on the vested and cashed shares, it's not a tax doge for the employee.
Well thats 12% lower than income tax, which isn't an option available to most employees.
Posted 4 months ago # -
teamhurtmore was that the scholarship exam or the entrance exam.
Lets put it this way - I have known a couple of old etonians and they were not particularly clever.
Posted 4 months ago # -
Well thats 12% lower than income tax, which isn't an option available to most employees.
It may be, but shares are far more risky than salary. That risk will change depending on the company (you can measure that degree of risk by the company's beta and capital structure) but ultimately the higher degree of risk should be compensated by a higher return.
Imagine that you took a job where there was a one in ten chance that you wouldn't get paid every month. How much more would you want to earn over and above your market rate (assuming that this was a known/absolute value) to compensate for that risk.
Posted 4 months ago # -
TJ - that may be the case (you know OEs that aren't particularly clever) but the notion that you can get in on connections/with lack of intelligence today is flawed.
It was actually a scholarship exam if I recall correctly. Not sure apart from their pre-test if they use common entrance or their own entrance paper like Winchester. Have a look at one of those, they are even harder!!
Thank you geetee, you explained shares and bonuses much better than me. You really did go to B School - CAPM on a cycle thread. Its amazing what we cover!!
Posted 4 months ago # -
but ultimately the higher degree of risk should be compensated by a higher return.
Again you state that share investment is a risk worthy of tax benefits, its just a value judgement based on giving preference to earning money from one source rather than another. I just do not see owning shares as any more worthy of tax breaks than earning money from employment.
Tax earnings as earnings no matter what the source.Posted 4 months ago # -
Well put geetee1972.
TJ - plenty of people who work for listed companies have shares in them, not just senior management. We have a family friend who worked for Bank Of Scotland for 30 years as branch staff then later as a branch "troubleshooter".
He'd put money into shares most of his working life, and held a large part of his wealth as HBOS shares when he retired in 2008. You can probably work the rest out - he's not having the retirement he had hoped for.
Posted 4 months ago # -
MSP I think you are partially right but bear in mind that income from selling vested shares as an employee is not share investment it is deferred salary that had a higher risk than regular salary.
Posted 4 months ago # -
OK say someone works for a private company, gets paid 50k a year, and earns a bonus of 50k in shares, sells the shares but takes a loss and only gets 40k for them
50k,
8k taxable allowance
taxed 20% on 29,500 = 5900
taxed 40% on 12,500 = 500010k capital gains allowance
taxed 28% on 30,000 = 8400total 19300
Then say you have a Doctor employed direct by the health authority earning 80k
8k taxable allowance
taxed 20% on 29,500 = 05900
taxed 40% on 42,500 = 17500total = 23400
The reality is the person getting the shares, even after making a loss on those shares, still earns 10k more and pays less tax. And that's at the 40% tax rate and not taking into account NI. We all get a raw deal from this, we have to pay more tax to make up the shortfall of these loopholes.
Its not just a matter of taking capital gains up to the income tax levels, they could meet somewhere in-between. Levelling the playing field between income and capital gains tax and allowances would give a boost to the income of the majority of the country.Posted 4 months ago # -
Actually I think I got that wrong, I seem to recall shares are taxed as income on issue, but not at the full value of the share, in fact usually far lower then the shares true value. iirc the value, as well as being low to start with, can be set some time in advance, and agreed with the HMRC at that point.
Posted 4 months ago # -
Surely the aim for HMRC and the government should be to move as many people as possible to be regular PAYE that way avoiding all this tax avoiding rigmarole?
And the "progressive" tax system mentioned earlier is surely a euphemism.High earners pay more tax even if they are taxed at the same basic rate so why penalise them with higher levels?Posted 4 months ago # -
Either my employer and HMRC have got this wrong or shares are taxed as income when released from a share scheme. When I cash in shares from my share incentive scheme it's paid through the normal payroll system and I have to pay income tax on it. Even the capital gain on any increase in value of the shares goes through PAYE so is taxed as income, as are any reinvested dividends. Even if I take the shares as shares I have to pay income tax on them. Do any of those who think its taxed as a capital gain actually have share incentive schemes or are you making this up?
Posted 4 months ago # -
TJ PWC is a limited liability partnership (LLP), it's not the same structure as a Ltd company or a PLC. The meaning differs around the world, but ultimately, if you make equity partner (in PWC or any law firm which also uses LLP as its structure) then ostensibly you have to buy in. This costs a small fotune, so much that usually it's facilitated by taking a big discount against your salary/share structure of some time.
So all in, there is a significant investment and therefore risk (even if the LLP shields you as an individual).
I can categorically tell you that not one part of that is actually accurate. I'm a Partner at PwC.
Posted 4 months ago #
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