Ken Livingstone – out of the frying pan

Ken Livingstone has released his personal income details in an attempt to stop criticism over tax avoidance.

Now, I don’t think there’s anything wrong in law in doing what he does. It looks legit, though there are aspects relating to his employees which need answering.

For starters, I don’t think they meet the requirement of being incurred wholly and exclusively for the purpose of the trade. And he says he needs a company because he has employees. Which is just plain bullshit.

But that’s besides the point of this post.

My real issue is the hypocrisy of criticizing tax avoidance by others whilst doing it himself.

There are two reasons why Ken’s disclosure doesn’t answer the criticism against him on this count.

1. It’s irrelevant what his income is, because the issue is income diversion. If anything, less income is indicative of more avoidance.
2. The breakdown of his income is also indicative of tax avoidance.

The first point is self-explanatory.

But, note that following the introduction of the personal allowance abatement, his income dips beneath the £100,000 mark where it applies.

This is normally the second threshold (after the higher rate threshold) where you would start to consider shifting further income to your spouse.

The second point relates to the fact that Ken takes a minuscule salary, maybe not even from his company (it doesn’t say), and takes significant dividends.

Despite accounting for the corporation tax paid on the dividends, which is a subjective estimate, the total paid will be less than paying salary.

The amount of dividends falling in his basic rate band (about £10-15k in 2009/10 and 2010/11) doesn’t suffer any further tax. This being the same as the basic income tax rate, you might think “so what?”

But it avoids paying employer’s Class 1 NICs. These are still payable by an employer when the employee is over 65.

He points out the corporation tax paid on “his income” through the company. I agree with this as a fair calculation principle. But…

Corporation tax has been calculated at 21% of the net dividend apparently. Exactly 21%. Which suggests that they are assuming that the income either relates to earlier accounting periods of the company (indicating deferred income on a first-in-first-out basis) or that they have used a flat rate estimate.

Incidentally, although a deduction has been given for corporation tax, they have used the gross dividend figure, inclusive of the tax credit that is representative of the corporation tax paid.

This means that there is an element of double-counting when using the figures to provide a total tax paid amount in comparison to income. There is a notional tax credit included in the income. Anyway…

No mention of benefits in kind either. Presumably this has been included in salary or there are none.

Nothing is incorrect as such. But the way the numbers are intended to be used, it is misleading, to say the least.

And the numbers show that Ken has definitely saved money with his company structure.

Now, in 2010/11, Ken paid higher rate tax on dividends is about £12,000, being £(((63,333 – 10,000) x 32.5%) – 10%x(63,333-10,000) . Corporation tax of £11,970.

So, from available funds of £((63,333 x 0.9) + 11,970)=£68,970, Ken received £((63,333 x 0.9) – 12,000 = £45,000. That’s an effective rate of tax of about 35%.

But, take that £68,970 and pay it out as salary? Well, that’s salary of about £61,450 after a conservative £7,520 of employer’s NICs (still payable after 65).

Which, would pay £22,580 in income tax (no employee’s NICs after 65). So he’s take home £38,870. Effective rate of tax here would be about 44% taking into account the company.

The figures show he’s avoided about £7k of tax (specifically employer’s NICs) in 2010/11 without taking into account:

income diverted to his wife
Income retained in the company and paid out in future years

So, this disclosure might shut the papers up and get him out of the frying pan. But he should be landing in the shit.

Tax credits – a bit of advice

I was watching BBC Breakfast the other day when an item about the changes in working tax credits came on.

In it, a woman named Kerry was discussing how she would lose her tax credit entitlement because she couldn’t get four more hours of work. Now, I’d some sympathy for people who find themselves on the cusp of a cliff-edge to entitlement to relief, but it’s always been there for tax credits, and it has got tougher to meet the working hours criteria.

But then the reporter said she would be better off “on the dole”. And I lost any sense of sympathy.

The problem isn’t the increased criteria, it’s Kerry’s lack of imagination.

She complained that she couldn’t get four more hours of work. What about self-employment?

I mean for just four hours a week on top of her job. Keep her job, and start her own four-hour-a-week business.

Self-employed individuals are entitled to working tax credits. See HMRC’s advice on what work qualifies.

OK, it’s a bit of effort, but not much. And for £3k she has an incentive to make her small business work.

It’s easy to do. Just sell stuff on Ebay. Go buy cheap tat at a car boot sale and try to sell it online for a profit.

It doesn’t matter how small the profit is, you get your working tax credits so it’s probably profitable in itself.

This isn’t a tax dodge, by the way. I am suggesting starting a genuine commercial adventure.

Working tax credits are an incentive to work. So work.

Two bits of information

The world is only “round-ish”.

There’s no such number as 2.

Unsworth

Xu geir ahs ir.

He qow fhIrwdt.

Span 5.

Turbot r.

Blue.

People

My mistake, everyone appears to be alive and well… That’s egocentricity for you.

Everybody is dead

I haven’t seen a live human being in days.

Not a sausage from UK Uncut on pasty tax?

Who gives a fuck about putting VAT on pasties and sausage rolls?

Oh, your average sausage-munching chavvy lard-arse who likes his cholesterol delivery mechanism of choice to be greasy rather than claggy…

So fucking what?

I’ve heard a lot of shit spoken about tax avoidance. A massive lot of shit. Mainly from the UK Uncut and Tax Retard crowd who seem to populate the internet.

But not a peep from them on pasty tax. Nothing.

Which you have to expect really. They should endorse it. It was a massive unintended loophole in VAT law. There isn’t any reason why a pasty or sausage roll served “hot” shouldn’t be VATable. It’s intended as takeaway food, tax it as such.

But it’s a tax on their demographic.

UK Uncut’s silence belies an issue at the heart of their philosophy. Somebody needs to pay for “uncutting”. But they’re quick to try to resolve that question.

The easy answer is always “somebody else”.

It’s easy to point at a faceless corporation that has at its legislative heart the duty to return a profit to its shareholders. It’s easy to point at executive employees who act on behalf of the legal entity and you can’t say exactly how they earn their salary. But Wayne Rooney they ain’t, so you don’t see that they might be worth it.

It’s harder when it’s your average working Joe who enjoys the odd warm snack from Greggs.

I suspect it’ll be mentioned only once the fuss has died down a bit. I suspect it’ll be mentioned when some suitable avoidance issue rears its head and somebody from UK Uncut says “oh right, we have to pay VAT on our pasties but they don’t on blah blah!”

When that happens, I want you to remember that UK Uncut have said fuck all about pasty tax. They haven’t congratulated the government on closing a loophole, or condemned them for taxing your average working class man, or even criticized for prioritizing this over some other tax hike.

No. It’s a joke to them. They don’t give a fuck about the small bakeries who will struggle to implement the changes and interpret the rules and, yes, pass on a VAT rise to their customer. They don’t give a shit that to some small businesses this could be a proper kick in the nuts.

(But others it won’t. It’ll represent an even playing field. One door shuts, another opens.)

They’re just waiting until the heat goes out of the issue and they can joke about it without getting burned.

Until then, from UK Uncut you won’t see a sausage.

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Either:
A) say something interesting
B) fuck off and die

Legal disclaimer: this blog does not represent advice of any nature.

Nurses to lose the vote under NHS reform bill?

Apparently, according to wild and unconfirmed reports I have seen on twitter, if the NHS reform bill passes, nurses will have less rights than convicted rapists.
When you wake up on Wednesday, all the NHS will be owned in the British Virgin Islands and Jersey. St Thomas’ will have been uprooted and sold to a Russian gas conglomerate.
Richard Branson is purchasing neo-natal and maternity wards and will be “sponsoring” all newborns. They will be forced to carry Virgin branding until they are 16.
RBS will be allowed to force cancer patients to partake in half-time entertainment at six-nations rugby matches from now on.
It’s all very depressing reading.

NHS profiteers

I haven’t bothered reading the NHS reform bill. And I don’t intend to.

But, it seems to me that something should be done about private sector interests in the NHS. I don’t think it’s right that the government can grant monopolies to businesses so that they can milk the NHS cash cow.

So that’s why we probably need a bit of competition… Yes, competition. That’s the supposed means of delivering benefit that the private sector brings, so why not introduce it?

Let me give you an example.

I made an appointment with my GP. I say my GP, I mean my GP’s business. My local GP surgery is the only one for miles. And it’s owned and operated by a company. Yeah, the doctors own the company. But maybe their spouses do too…

It took me two weeks to see a doctor.

Now, I’ve been to GP Ltd several times in the past year. About six times. I have not once seen the same doctor.

So, I’m not particularly happy with my current ‘service’. I’d quite happily change provider, if I could. But, because my doctor’s company has the GP contract for the area, nobody else can compete.

If I could switch, I perhaps wouldn’t mind. I could move to a new surgery and encourage others to do so. That would reward a successful surgery and remove pressure from an ailing surgery. Or encourage the bastards to offer a better service.

So when I hear the Save The NHS mob rallying against profiteers, citing GPs as being against the bill, it winds me up.

GPs are the profiteers.

Yes, they stitch and glue me up, prescribe me with anti-depressants and occasionally stick their finger up my arse. But, I pay for my anti-depressants and the review process just gets in the way. Especially when it takes two weeks to see my ‘dealer’.

I can do the other two myself.

So, whatever the bill says, whatever it does, I really don’t give a fuck. The critics of it seem to be making an argument against the entire GP system, whilst relying on the beneficiaries of that system for their support.

Sell it off, nationalize it, do what the fuck ever. Just don’t pretend that someone isn’t milking the NHS right now for providing a fucking awful service.

They are. And you’re sucking their dicks for the privilege.