How does tax avoidance get people into trouble?
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- Lemon Slice
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Re: How does tax avoidance get people into trouble?
If you want to wade through a lot more info on tax avoidance schemes then this is a good site to start from: https://forums.contractoruk.com/hmrc-scheme-enquiries/
Some of the folks who signed up for the dodgy offshore loan schemes are now finding that in addition to HMRC wanting to charge them tax on the loans, the companies loaning the money have wound up and sold their loan books to third parties who are now claiming the loan needs to be repaid to them or at least a significant fee paid to write off the loan.
Some of the folks who signed up for the dodgy offshore loan schemes are now finding that in addition to HMRC wanting to charge them tax on the loans, the companies loaning the money have wound up and sold their loan books to third parties who are now claiming the loan needs to be repaid to them or at least a significant fee paid to write off the loan.
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- Lemon Half
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Re: How does tax avoidance get people into trouble?
What would be the difference between using a "scheme" to do this, and just doing it?Lootman wrote: Probably. Sounds a bit like those schemes where someone sells their house for £100K and then sells separately the fixtures and fittings for £400K, to lower the stamp duty.
Just curious.
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Re: How does tax avoidance get people into trouble?
Presumably something like:Mike4 wrote:What would be the difference between using a "scheme" to do this, and just doing it?Lootman wrote: Probably. Sounds a bit like those schemes where someone sells their house for £100K and then sells separately the fixtures and fittings for £400K, to lower the stamp duty.
Just curious.
" Thanks for the house for £100k. It's a great deal. But I've been thinking about that other stuff. £400k seems a bit expensive so I don't want it any more. I'm off to Ikea and B&Q. But thanks again for the house."
So the sensible seller still needs an intermediary.
Greg
PS - The ultimate scam probably continues. "Actually you'll need to remove the fittings and all before I take possession, or I'll have to bill you for removing them afterwards"!
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- Lemon Quarter
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Re: How does tax avoidance get people into trouble?
So the sensible seller still needs an intermediary.vandefrosty wrote:Presumably something like:Mike4 wrote: What would be the difference between using a "scheme" to do this, and just doing it?
Just curious.
" Thanks for the house for £100k. It's a great deal. But I've been thinking about that other stuff. £400k seems a bit expensive so I don't want it any more. I'm off to Ikea and B&Q. But thanks again for the house."
So the sensible seller still needs an intermediary.
Greg
PS - The ultimate scam probably continues. "Actually you'll need to remove the fittings and all before I take possession, or I'll have to bill you for removing them afterwards"!
Why? Surely, you simply include all these details in the contract when you sell the place.
Steve
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- Lemon Quarter
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Re: How does tax avoidance get people into trouble?
But isn't some form of deception necessary to avoid easy detection, surely by the solicitors at the time, or by HMRC if they have reason to question it later?stevensfo wrote:
So the sensible seller still needs an intermediary.
Why? Surely, you simply include all these details in the contract when you sell the place.
Steve
I must admit that I'm not aware of how this 'scheme' is supposed to work, and it's not clear where the benefit is for the seller - presumably part of the buyer's stamp duty saving is shared via a higher sale price.
I'd assumed that the house value would appear in the contract, but the overvalued fittings price would have to be hidden to avoid the revealing what's really going on. The easiest way to do that would be with a separate agreement, executed independently of the conveyancing solicitors. But how can the seller trust the buyer on that when his duplicity is already fully revealed. So the buyer has a clear interest in ensuring that both agreements are completed at the same time, or he runs the risk of being in the situation of my anecdote. That's what the intermediary would be for.
Anyway, it's all hypothetical as no one here is so dishonourable as to consider such an undertaking!
Greg
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- Lemon Half
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Re: How does tax avoidance get people into trouble?
That reminds me,vandefrosty wrote:But how can the seller trust the buyer
on the day of a house I was buying, I happened to be working 200 miles away from the property
the seller phoned me to ask if I wanted to buy an extended ladder from him that was in the garage
I said yes and he said is £20 quid OK
We agreed, but he then said I can trust you to pay me the money?
I said I am trusting you that there is a ladder in the garage
it all went fine.
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- The full Lemon
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Re: How does tax avoidance get people into trouble?
Yes but considering that it is usually the buyer that benefits, why would the seller propose such a division of the purchase price?vandefrosty wrote:Presumably something like:Mike4 wrote: What would be the difference between using a "scheme" to do this, and just doing it?
Just curious.
" Thanks for the house for £100k. It's a great deal. But I've been thinking about that other stuff. £400k seems a bit expensive so I don't want it any more. I'm off to Ikea and B&Q. But thanks again for the house."
So the sensible seller still needs an intermediary.
Greg
PS - The ultimate scam probably continues. "Actually you'll need to remove the fittings and all before I take possession, or I'll have to bill you for removing them afterwards"!
Back to the topic, About 20 years ago when I sold my previous house, my buyer proposed a division of the purchase price exactly along these lines. At the time, the stamp duty increased on a purchase price over £500,000 so he said that the purchase price of £525,000 should be regarded as to £500,000 for the building and £25,000 as to the contents. I did not like that but as long as I was getting my money well so what? But I always regarded it as a lot of money for a kitchen dresser and a few other bits and pieces scattered throughout the house.
I was never sure if I would have been regarded as a party to the tax avoidance but heard nothing more.
Dod
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- Lemon Quarter
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Re: How does tax avoidance get people into trouble?
I think that so long as the price does not look abnormally cheap to the District Valuer's office, there will be no problem. Assuming the DV even has the staff to check sale prices nowadays.Dod101 wrote:About 20 years ago when I sold my previous house, my buyer proposed a division of the purchase price exactly along these lines. At the time, the stamp duty increased on a purchase price over £500,000 so he said that the purchase price of £525,000 should be regarded as to £500,000 for the building and £25,000 as to the contents....vandefrosty wrote: Presumably something like:
" Thanks for the house for £100k. It's a great deal. But I've been thinking about that other stuff. £400k seems a bit expensive so I don't want it any more. I'm off to Ikea and B&Q. But thanks again for the house."
I was never sure if I would have been regarded as a party to the tax avoidance but heard nothing more.
V8
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- The full Lemon
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Re: How does tax avoidance get people into trouble?
The buyer and seller could collude. splitting the stamp duty saving.Dod101 wrote:considering that it is usually the buyer that benefits, why would the seller propose such a division of the purchase price?
The other stamp duty scam was mentioned upthread, using a company to buy a property. Then for subsequent sales, it is the company that is sold whilst the property title stays the same - owned by company XYZ.
I was not aware that a DV would do that anyway. Aren't they only concerned with valuations for council tax, not stamp duty which is a HMRC issue?88V8 wrote:I think that so long as the price does not look abnormally cheap to the District Valuer's office, there will be no problem. Assuming the DV even has the staff to check sale prices nowadays.Dod101 wrote:About 20 years ago when I sold my previous house, my buyer proposed a division of the purchase price exactly along these lines. At the time, the stamp duty increased on a purchase price over £500,000 so he said that the purchase price of £525,000 should be regarded as to £500,000 for the building and £25,000 as to the contents....
I was never sure if I would have been regarded as a party to the tax avoidance but heard nothing more.
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- Lemon Quarter
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Re: How does tax avoidance get people into trouble?
That is no longer true. Tax Avoidance (as defined by law) is now illegal. Avoiding tax, on the other hand, is legal provided that it does not constitute Tax Avoidance. Here is HMRC's introduction to Tax Avoidance:stevensfo wrote:Apart from knowing that Evasion is illegal and Avoidance isn't, I'm not really sure what tax avoidance actually is (Isn't an ISA one?).
https://www.gov.uk/guidance/tax-avoidan ... troduction
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- Lemon Half
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Re: How does tax avoidance get people into trouble?
Lootman wrote: The other stamp duty scam was mentioned upthread, using a company to buy a property. Then for subsequent sales, it is the company that is sold whilst the property title stays the same - owned by company XYZ.
Is that considered a scam then? To me it seems a perfectly legitimate way of avoiding SDLT.
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- Lemon Half
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Re: How does tax avoidance get people into trouble?
What a shame that HMRCs understanding of English has gone down hillGeoffF100 wrote:That is no longer true. Tax Avoidance (as defined by law) is now illegal. Avoiding tax, on the other hand, is legal provided that it does not constitute Tax Avoidance. Here is HMRC's introduction to Tax Avoidance:stevensfo wrote:Apart from knowing that Evasion is illegal and Avoidance isn't, I'm not really sure what tax avoidance actually is (Isn't an ISA one?).
https://www.gov.uk/guidance/tax-avoidan ... troduction
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- The full Lemon
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Re: How does tax avoidance get people into trouble?
I do not know for certain. But it was claimed upthread that Tony Blair did this, so presumably it was OK at that time anyway.Mike4 wrote:Is that considered a scam then? To me it seems a perfectly legitimate way of avoiding SDLT.Lootman wrote:The other stamp duty scam was mentioned upthread, using a company to buy a property. Then for subsequent sales, it is the company that is sold whilst the property title stays the same - owned by company XYZ.
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- Lemon Quarter
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Re: How does tax avoidance get people into trouble?
As I recall they closed that loophole some time ago, though I can't remember the details.Mike4 wrote:Lootman wrote: The other stamp duty scam was mentioned upthread, using a company to buy a property. Then for subsequent sales, it is the company that is sold whilst the property title stays the same - owned by company XYZ.
Is that considered a scam then? To me it seems a perfectly legitimate way of avoiding SDLT.
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- Lemon Quarter
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Re: How does tax avoidance get people into trouble?
I looked at the link but I cannot find where it says it's illegal.GeoffF100 wrote:That is no longer true. Tax Avoidance (as defined by law) is now illegal. Avoiding tax, on the other hand, is legal provided that it does not constitute Tax Avoidance. Here is HMRC's introduction to Tax Avoidance:stevensfo wrote:Apart from knowing that Evasion is illegal and Avoidance isn't, I'm not really sure what tax avoidance actually is (Isn't an ISA one?).
https://www.gov.uk/guidance/tax-avoidan ... troduction
On the contrary, it simply says to take care and to check the scheme carefully. i.e. it 'may' get you in trouble.
It involves operating within the letter, but not the spirit, of the law.Tax avoidance involves bending the rules of the tax system to try to gain a tax advantage that Parliament never intended.
It often involves contrived, artificial transactions that serve little or no purpose other than to produce this advantage. It involves operating within the letter, but not the spirit, of the law.
Most tax avoidance schemes simply do not work, and those who use them may end up having to pay much more than the tax they tried to avoid, including penalties.
What a strange sentence! Was this really composed by highly paid, intelligent lawyers? Who defines what constitutes 'the spirit'
Steve
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- Lemon Half
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Re: How does tax avoidance get people into trouble?
I believe you can still hold property through a limited company and it's a useful device if intending to frequently buy or sell by cutting out all the issues coupled with ownership changes to land and buildings.scrumpyjack wrote: As I recall they closed that loophole some time ago, though I can't remember the details.
There are tax consequences though
https://www.optimiseaccountants.co.uk/k ... -property/