Top 5 TaxBuzz posts of 2011

Which TaxBuzz posts grabbed your attention this year?

During 2011 I added almost 90 new posts to this blog taking the total over the last 4 years to well over 400. At different times I got bored, distracted and overly enthusiastic. This is apparent from the wildly different number of monthly posts across the year.

Here is a reminder of the Top 5 most-visited TaxBuzz blog posts of 2011. Click on the titles if you want to read them again. Your comments are also still welcome too.

Are stamp duty avoidance schemes worth the money?
16 May 2011

This post was inspired by a intriguing article in the Sunday Times and a conversation I had with a top Stamp Duty tax lawyer.

Unreliable evidence: A high level Radio 4 discussion about tax avoidance
7 Apr 2011

The programme included an interview with Graham Aaronson prior to the publication of his GAAR report

Tax tease: Late filing penalty stays at £100

31 March 2011

A classic case of debunking misleading media stories about a theoretically possible rise to£1,300

HMRC turn the Spotlight on the newest EBT related tax avoidance schemes

10 Mar 2011

Fair warning to anyone tempted to pay good money for putting funds into such schemes

The best tax advice you will ever hear
9 Aug 2011

All too often the tax advice shared by amateurs proves the truth of that old adage that 'a little knowledge is a dangerous thing'.

Tax fallacy of the week: The Frozen CGT threshold

The media is reporting that the Chancellor's decision to freeze the annual CGT exemption at £10,600 is bad news for 'normal' people. What rot.

I read in The Telegraph today, for example,

“It looks like this freeze will pay for the SEIS,” [Seed Enterprise Investment Scheme]

and that:

“That will be very good for start-up businesses, but will have limited appeal for ordinary investors. This is robbing the ordinary people to pay for perks for the very rich.”

Come on. The annual exemption is intended as a convenience to avoid 'normal' people being in default for failing to disclose relatively small capital gains. I had been more concerned the exemption was going to be reduced to £1,000 (as was proposed in the Lib Dem manifesto).

As it stands the only people to benefit from the exemption on a regular basis need to be wealthy enough to realise capital gains of more than £10,000 each year. 'Gains' here means capital profits, which means disposing of capital assets (eg shares) worth many times that sum. They do it as an alternative to generating a further £10,000 of income which would be subject to 40% or 50% tax. Few 'normal' people can do that year after year.

So today I speak to all those commentators mourning the freezing of the CGT annual allowance at £10,600. For attempting to paint this as a problem for 'normal' people you get my Tax Fallacy of the week award.

Tax temptation of the week: Stamp Duty Land Tax avoidance

The Saturday Times* was headlined with reference to a story about how the 'super-rich' avoid paying Stamp Duty Land Tax (SDLT) when they buy their mansions.

Simply stated the property doesn't change hands. The purchaser buys the shares in a limited company that owns the property. As long as the company itself doesn't sell the property there is no SDLT to pay.

Easy? Not at all. How to do you get the property into a limited company in the first place without paying SDLT? There are many complex tax related minefields to negotiate to make such a plan work. And it costs thousands of pounds to find out if it would be possible and to navigate the minefields.

Please do not be fooled into thinking that any of this is something to consider doing for the sort of properties that we normal mortals can afford. And there are no other simple ways to avoid SDLT any more, as I explained in May when answering the question: Are stamp duty avoidance schemes worth the money?

A similar view to mine was shared on CityWire in March. They explained: The chancellor has finally clamped down on stamp duty avoidance schemes widely used by rich individuals buying high value residential properties as well as buyers of commercial properties.

And I note that Solicitors have been advised by the Law Society not to get involved in SDLT schemes. That, I think, says it all.

The real issue here is the jealousy that the Times story generates. We don't like paying SDLT. The media are highlighting the facility available to the super-rich and we are in uproar that they can avoid this tax. But how many readers would choose to pay hundreds of thousands or millions of pounds in tax on a new property if there was a reliable legal way to avoid doing so?

So we agree that the 'loophole' should be plugged. Will it be? Don't hold your breath.

*As The Times story is behind their paywall I have linked to a rehash of the same story on the 'This Is Money' website.

Tax taunt of the week: “A quarter of drivers say cyclists should pay road tax”

The quote in my title refers to a survey attributed to Confused.com which led to this headline in the Metro: 'Irresponsible' cyclists should pay road tax, say quarter of drivers

Surprisingly though I could find no reference to the survey or, what I would describe as, the Tax Taunt, on the Confused.com website. Could this be because of the criticism and backlash the report produced?

Cycling website RoadCC, denounced Confused.com "as PR campaign goes spectacularly wrong". The site goes on to say:

"Insurance comparison firm Confused.com has provoked a storm of criticism from both cyclists and drivers alike with a ham-fisted and error-strewn press release aimed at promoting an equally confused road safety campaign and ostensibly highlighting the problem of road rage on Britain’s roads which has instead managed to alienate – not to mention confuse – almost everyone at whom it was aimed."

RoadCC then lists a number of alleged errors and further commentary in the same style and tone

Assuming the maths on RoadCC site are correct I think it's only fair to present Confused.com with my Tax Taunt of the week award.

Tax tosh of the week: 50p tax rate to STAY

Another day, another report about how the 50% top rate of income tax is BAD for the British Economy. This week it is the respected UK Centre for Economics and Business Research (CEBR). In September it was a group of 20 high profile economists.

Let me be clear I don't WANT to pay over half my income away in taxes - who would. (It's over half, by the way, as most high earners also pay an extra 2% NICs). I don't think the 50% rate is a good thing. BUT equally I cannot, for one moment, imagine that the Coalition Government are going to abolish the 50% rate any time soon. The CEBR report is balanced and fair but it's clearly intended to influence the Chancellor and the Coalition Government. In this it won't succeed.

Now, if someone were to be rather more imaginative, a different campaign might have more chance of success. How about showing what the impact would be of raising the income level at which the 50p rate starts from £150k to say, £250k? Clearly this would reduce the tax take but not by benefiting the 'super-rich' - by definition. It would however reduce the concerns of the vast majority of 'ORDINARY' business owners who MIGHT otherwise feel demotivated by the prospect of paying 50% tax. Remember that the rate is actually higher than this for many people earning between £100k and £150k.

As I've said before though at this stage NO-ONE yet knows how much tax the 50% rate is generating. All the reports, letters in the press and campaigns are based on speculation. The CEBR report admits as much.

I have explained the rationale for my observations and predictions before (see below). So today I will simply present the CEBR with my Tax Tosh of the week award.

Related posts

17/8/11 - Why we will have at least 3 years of 50p tax

29/7/11 - Tax tease of the week: Cutting the 50p top rate tax

5/4/11 - 50% tax rate announced in Budget 2009 but 2 years on and the self employed haven't paid it yet

12/1/11 - Tax tease: Fallacious demand to "Abolish the 50p tax rate"