Taxmanship In Britain Pays Big Dividends

Press, Volume XCVI, Issue 28434, 14 November 1957, Page 20

Taxmanship In Britain Pays Big Dividends

LONDON. People who dodge tax illegally, spending lavishly and openly the money they should have handed over to the Government, may think they are very clever. They are not. The really clever ones are those who dodge tax legally. The law will never catch up with them.

For they—or the experts they employ—have found the loopholes through which they can tip some of their tax burden. Artful dodgers of Income Tax can be divided into three classes: Evaders, avoiders and tackers. Evaders deliberately break the law, cooking books. dealing strictly in cash—with no questions asked and no records kept—and trying to keep out of the Income Tax Inspector’s sight. Most of them come to a sticky end. Avoiders arrange their affairs to provide comfort for themselves and discomfiture for the Income Tax inspectors. Tackers sail close to the wind, hoping that nobody will look too closely at their affairs and tacking quickly back into legality when anybody does. Britain’s “Pay As You Earn” income tax system makes it difficult for wage-earners to evade or avoid tax. Short of inventing children or dependents, they’re stuck with their assessments. And avoiding tax with the help of an expert is expensive unless the benefits are big. For the successful tax avoiders. look in the ranks of the top professional men. the company directors, the entertainment stars and the heirs and heiresses. Tax avoidance pays off for them. How do they do it? There are many ways, varying almost from person to person. Entertainment stars have found that one good method is to form a limited company to exploit their talents. The savings can be enormous. That impecunious relative who must be supported—he can be made an employee quite legitimately. The non-deductible hand-outs become deductible salary. A lot of other items that would be non-deductible for tax purposes from a private person’s] income become deductible from a j company’s profits. This is not to* say. of course. I that all entertainment stars have formed companies or that all j those who have, ruthlessly press home their advantages. But it is a temptation—and one to which a lot of company directors succumb. That holiday in Italy with the wife —make it into a business trip, with the wife’s presence explained by her skill as a secretary. All those expensive lunches out —put them down as business expenses. Most of them probably are for business purposes, but a few old friends can be included. This is the world of the Tacker. He’s acting not quite legally, but it would be difficult to prove anything. Cars, for example. Most of the miles on the clock are probably represented by business journeys, but it’s usually easy to slip in a few that are purely private. Baby Sitter’s Allowance One man even claimed a £25 tax allowance for paying a babysitter. His wife’s presence, he said, was vital at business conferences. Companies can gain a lot from study of the tax regulations. The loss on a company that is not doing well can be set against the profits of a company that is. Hence the vigorous trade in companies with agreed tax-losses. Death duties also can be eased. The rule is that presents given five years before the giver’s death are not dutiable. But weddingpresents to a giver’s children are not dutiable even if he drops dead the next day. A wealthy man can take out insurance policies on his own life in favour of all his children and grandchildren. Each policy rates as a separate estate. Heavy death duties can greatly embarrass the heirs of a man whose wealth is tied up in the physical assets of a private company. Often, they must sell or borrow to pay the duties. That is why one astute business-

man a few years ago bought the shares in an almost worthless public company, then sold his private company to it. When he died, he was assessed on the Stock Exchange quotation on his shares i—and not on the value of the company’s assets. The saving was considerable. "Do-it-themselves” What about Purchase Tax? That can be got round, too. Knowledgeable sports car enthusiasts, [for instance, pay no Purchase Tax on cars they build themselves—even though they use new parts. But. just to make sure, the wariest build the new car round the chassis of an old wreck that is already registered. The principle works for otherexpensive items that can be made by do-it-yourself experts from standard parts. Loophole-seeking is certainly a profitable occupation. People have a curious outlook on it. Most would shudder at the thought of stealing, yet congratulate themselves on throwing off part of their tax burden, even though it must be shouldered by somebody else.

Experts have estimated that if everybody were strictly honest. Income Tax could be cut by between 6d and Is in the £ —a nice little bonus for those who are not Artful Dodgers.— (Central Press.)