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Comments

A Dilbert

'there is more joy in heaven over one lost sinner who repents'

I hope it was our reasoned discourse that won you round. Which proves to me you are a true Conservative. Open minded and fair.

Welcome back.

Andrew Morrison

Look, I'm going to be brief here. Tax should be low, I agree with that - this goes without saying. But that means it should be low for everyone. Not all potential nor current Conservative voters are directors, and even of those who are, not all of them have incorporated their trade (becoming a close company) and purposefully paid dividends and salary of a certain amount for tax efficiency.

Being a party of government rather than of opposition means standing up for everyone. That means equality in the eyes of the taxation system. The strongest card in the hand supporting a flat-tax, right?

Therefore, under such a system, Corporation Tax would remain as it is, and those who I aim this legislation at would then commence paying tax on the dividends they are receiving, correct?

Coming from me, a Scot, it becomes a Red policy. If I were black, I'd be tempted to play the race card. Instead, I'll just play the morally superior one.

I have nothing to worry about from the party hierarchy. I do hope indeed that they read this. Some of you, the cesspit of this party that keeps us unelectable, are just as bad as the Militant Tendancy that once populated Labour.

Your opinions on this policy, the manner in which you express them, and the dispicable jibes from people who hold themselves out to support a Unionist party, are awful. They actually merit expulsion.

A Dilbert

Steady on there. Maybe I spoke too soon.
I think the responses were detailed and telling but the jibes were unnecessary. However, you were never going to win friends with a massive tax hike on owner managed companies. We regard these people as wealth creators who take little from the state and should be actively encouraged.
The cost of employing someone is way too high but the gap should be narrowed by reducing these taxes not inflating them elsewhere.

This thread has made me think about the whole area of self employment and how the powers that be perceive it.
There seems to be quite a resistance to the 'wrong sort' of people improving their lot by their own endeavour. Does it not strike you as odd that the NHS will happily pay £800 - £1000 a day for an agency nurse (of which the nurse may get £60 in her hand) but will not countennace the idea of paying £200 directly for a self employed Nurse. With appropriate insurance it would cost them £250 a day. The NHS would save a fortune, the nurse would be better off so why not? Ask yourself what prevents this simple scenario. It seems that the idea of someone with a skill who isn't a manager earning a decent wage cannot be tolerated.
Self employment for all who want it I'd say. Now that would be a revolution (have a google on Mark Prisk MP, The Right to Be Self Employed).

Austen

Oh dear, this is not a repentent sinner at all.

Look, I'm going to be brief here. Tax should be low, I agree with that - this goes without saying. But that means it should be low for everyone. Not all potential nor current Conservative voters are directors, and even of those who are, not all of them have incorporated their trade (becoming a close company) and purposefully paid dividends and salary of a certain amount for tax efficiency.

** and what is wrong with organising one's affairs for tax efficiency. It's not illegal and is common sense.

Being a party of government rather than of opposition means standing up for everyone. That means equality in the eyes of the taxation system. The strongest card in the hand supporting a flat-tax, right?

** given your comments in this thread I doubt if you really understand the implications of a flat-tax.

Therefore, under such a system, Corporation Tax would remain as it is, and those who I aim this legislation at would then commence paying tax on the dividends they are receiving, correct?

** Dividends are already subject to corporation tax and income tax. What you apparently mean is that National Insurance Contributions should be paid on Dividends in a close company ..... which is where we came in.[smile]

Coming from me, a Scot, it becomes a Red policy. If I were black, I'd be tempted to play the race card. Instead, I'll just play the morally superior one.

** one can hardly be morally superior when claiming to be a conservative and yet demonstrating a complete ignorance of tax law. [frown]

I have nothing to worry about from the party hierarchy. I do hope indeed that they read this. Some of you, the cesspit of this party that keeps us unelectable, are just as bad as the Militant Tendancy that once populated Labour.

** A would be MP should refrain from demonstrating his moral superiority by insulting his readers. The people writing on this thread are trying to run businesses which generate revenue for the government, themselves and for their staff. They do not deserve to be insulted and it does you no good either.

Your opinions on this policy, the manner in which you express them, and the dispicable jibes from people who hold themselves out to support a Unionist party, are awful. They actually merit expulsion.

** The comments on this thread have been quite restrained. I would suggest that a would be conservative MP who does not understand corporate tax AND decides to post on the subject may be more eligable for expulsion.

All in all, it is clear you still do not understand the subject and I would suggest that you consider the subject closed. You are merely continuing to dig your own hole.

Jake

Is there any editorial control over which policy ideas go on the site here? I doubt Andrew is a leftie lunatic - I think he has simply failed to grasp the mechanics of how the tax works in this case. The Editor could have saved him and the Scottish party embarrassment here. The policy isn't just wrong - it is based on a factual error.

The point has been made by other but I will try once more. My income as an employed person goes down as a cost for my firm - it is not paid out of taxed profits. Since the firm don't pay tax on it, it is fair that I do (although in practice I share the cost with my firm because I demand higher pay than I would absent tax). An entrepreneur taking a dividend is not in the same position. The dividend has already been taxed as profits of the firm and it would be wholly unfair to tax it a second time. The money is not tax free - the entrepreneur simply deducts the tax already paid by the company from her tax liability (hence if the dividend takes her income over the top rate threshold, she is taxed on the top slice at the top rate less the deduction).

People have been saying this is a Brown-style tax. In fairness, even Brown hasn't actually imposed this even though it is an obvious one and he has had a decade in which to do it. So, amazingly, even Gordon gets the point here apparently.

Stephen

This is by far the worst policy suggestion I have read on Conservative Home - for all the reasons already stated above, which I won't bother writing again.

Truly Mr Morrison would be more at home as a member of the Labour Party.

Jonno

Look, I run my own company as a Contractor in IT. I and my company have paid a damn sight more in CT and personal tax over the years than I ever would have done employed as a staffie, so if you drive people out of contracting by doing what you propose, the Governmetn will lose tax take, only big business will win (shall we call them "ABC", and other such three-lettered Consultancy cos), and they'll find other ways to avoid tax with their highly paid lawyers. Although in fact UK plc will lose as the companies that use the flexible resource called contractors will just go overseas.

tsmith

Mr Morrison: what commercial, real world experience do you have? Your ramblings here resemble something straight out of the NL handbook of professional politicians who've never had to do a hand's turn in their lives, and really don't know (or care) what the result of their ill-conceived policies will be.

csodalatos

Andrew Morrison a.k.a The Tenement Tory

A gifted political thinker and a man of the people or a person with some very weird ideas and opinions?

Here are some of his ramblings you decide:

We should all support the belief that those who break society's code of laws, especially so far as causing physical harm to others is concerned, are less equal than others and that they rescind some of their civil liberties and human rights.


Those who harm society (and no, I'm not talking about people on benefits here) by breaking serious laws should not be entitled to the benefits living in civilisation provide.

why don't we ship all our lifers and high-risk prisoners out to third-rate prisons in economies where the Pound goes very, very far indeed. If we paid India and China even £10,000 a year to create prison spaces for us, and then we transported some of ours here in Scotland out there (rotating who is here in Scotland, with those in the cheap residences, only bringing them over here for family visits once or twice a year), we would be able to jail everyone who deserved it - contrary to Mr John Reid' pleadings to Judges right now - and save money to rehabilitate petty criminals who stand a chance of being turned around to slot into society like everyone else.

I do not support the death penality. I believe it is unfair to ask people to kill others as part of their work, so long as that job is not within the military.

If, when Margaret Thatcher said "There is no such thing as society", she was correct... then that could only be because the Left had already infilrated all our great British instiutions with their vile, anti-Christian, anti-aspirational, intellectual surrender to Marx.

I used to hold teachers in high opinion. I believe education is the key to a better life for everyone. I used to think teachers had some fundamental principal for going into the profession, and that was to do right by other people, in particular the disadvantaged. This would be admirable. Even the teaching unions that fought against cutbacks; you could argue this was an admirably egalitarian stance.

But no, it appears they are just self-serving gits too. More people who believe in the 'entitlement culture' rather than the 'earning culture'. What people to give an example to our young folk! Bumper pay rises without merit? What sort of lesson is that for teachers to be giving?

Right thinking people conclude that equality and meritocracy do not reconcile: you can only have one or the other. Considering there is no single human being out there the same as another, and that we cannot possibly iron out every inconsistency, each person is obviously going to have traits that wins them benefits or draws to them disadvantages. Good looks, versus unattractive looks? Tallness, versus smallness? Puppy fat, versus scrawniness? There are just too many variables to achieve equality.

Those in favour of a master race where everyone is superiorly equal, and where we force kids to go to schools where they do not fit in, get bored, get mistreated, only because of an obligation forced upon them by State planners are as much Nazi’s as their jew-gassing, dead counterparts.


Want to be a lawyer?
- Sure thing.
Want to start a business?
- Why not.

.... WHY NOT INDEED ?

Battered Motorist

The Conservative Party is supposed to be a broad church, but this is political satanism.

While the crazy experiment of dancing to PC tunes over 'the environment', 'social justice' and all the other big government trojan horses continues, the Party will simply alienate the natural supporters it took for granted.

(Unfortunately it carries on the Majorite tradition of stealth taxes in the 1990s, through whittling away tax credits, so shows an inability to learn from the subsequent voter desertion. More recently, the Party went back on its pledge to repeal the insidious IR35 rule).

What could be more fair than letting those who take commercial risks with their own money benefit from the dividend scheme when they are successful?

BM

Andrew Morrison

csodalatos,

Ah, so you found my blog, well done. Hardly the Commie, the Red, a New Labour activist in disguise, now, am I?

It is right not to repeal IR35. I agree with the party's stance on this totally. If a person who was employed when leaving the office on a Friday, yet returned as a self-employed person on the Monday working under pretty much the same contractual obligations, but now able to incorporate a company and operate out of that and save tax under pretty much the same working conditions the following Monday. Do you not feel there is an unfairness here when this person is compared to another hard-working person who still has to pay 40% + 1% NI?

I know tax must be lower. It is very high right now thanks to fiscal drag. 40% top rate, plus the 1% NI on earnings over £2795/mnth - approximately when the 40% band starts (which was introduced by Gordon Brown I believe?). I believe the money could be spent cut be reduced, with the remainder spent more effectively. Not that I'm sure my statements along these lines carry any weight on this site right now.

So my whole point was, if the balance is restruck between people deliberately incorporating to save tax whereas without the tax saving they would simply be self-employed, paying tax under Sch D Case I/II, then the Treasury would have enough money to cut the top rate of tax from 40% down to xx%. Thus, acheiving a fairer system under a tax neutral policy.

Perhaps I should have explained this a little better in my proposal. Perhaps I shouldn't have offered a proposal without having more practical experience. Being still a teenager, perhaps I should have tried my hand within Conservative Future first.

All I know from this experience, after suffering personal abuse among a few constructive suggestions and clarifacations, is that there are some rather nasty elements within the party and indeed hostility from the English in the party towards the Scottish. All of this is shameful, and I think there would be quite a few regretful people if the mainstream media were to encounter this thread. And that wouldn't originate from me, nor what I've said.

That's the last I've got to say on the matter.

Austen

So my whole point was, if the balance is restruck between people deliberately incorporating to save tax whereas without the tax saving they would simply be self-employed, paying tax under Sch D Case I/II, then the Treasury would have enough money to cut the top rate of tax from 40% down to xx%. Thus, acheiving a fairer system under a tax neutral policy.

--------------------------------

Now apart from being unable to spell achieving[smile], were you also aware that the Inland Revenue forced many self employed consultants to encorporate into Ltd companies. Any consultant wanting to use recruitment companies to market them to clients has to encorporate. Encorporation in these circumstances is compulsory not an option.

Many consultants have been forced to become experts on business taxation since the introduction of IR35 in 1997. Your ignorance is perfectly excusable as a teenager but you must try to study your subject before you go pontificating in public.

By the way have you visited Aberdeen and consulted the independent engineering contractors who are very much affected by IR35. There are over 200,000 independent consultants/contractors in the UK more than in the whole of Europe put together. This is the UK flexible economy which I do not think you would wish to damage.

You are invited to contact www.pcg.org.uk and obtain a free copy of their magazine Freelancing Matters which will provide you with useful background information on being in business. Better still pick up the phone and arrange a meeting with PCG to help you understand the issue.

Best wishes for your learning process.

Guido Fawkes

Hell, nationalise the banks as well while you are at it.

If you are not going to cut obscenely the high tax rate, at least don't increase the burden.

Guido Fawkes

...the obscenely high tax rate...

R Andrews

This proposal is completely barmy and shows a profound lack of understanding of the corporate tax system, and as for branding this state of affairs a "loophole" when it is not... I won't bore on here with details since it has been comprehensively ripped to shreds above.

Andrew Morrison (the real one, not the fake repenter) would be wise to keep quiet for a long time and gain an education. A hair shirt and several years penance should do. Or he might be happier in a true bile-driven eat-the-rich party.

Paul

"It is right not to repeal IR35. I agree with the party's stance on this totally. If a person who was employed when leaving the office on a Friday, yet returned as a self-employed person on the Monday working under pretty much the same contractual obligations, but now able to incorporate a company and operate out of that and save tax under pretty much the same working conditions the following Monday. "

This is not conservative policy which when it last published a policy was to abolish it. This in fact states the policy of the only marjor party to support IR35 - New Labour!

It might be worth havin a look at case law in emplyment status law. Following a case often known as Muscat. This was a classic Friday-Monday, and the treatment of Muscat did not change once he became a contractor.

Ergo the classic idea of Friday to Monday would in many cases still be considered an employee.

However once you become an independent consultant the relationship changes fundamentally. The rights and benefits of employment are now no longer available; even to those who do use Friday-Monday.

In addition it ignores a based fundemental business practive. it is very likely that the person setting up in business will do so in an area they know and very likely that their first customer will be a previous employer.

In addition this proposal ignores many large companies; owned by individuals which employee 100['s.

It ignores the venture capitalist who invests and becomes a director to look at that investment.

It is poorly conceived and straight out of the New Labour handbook.

Jonno

Andrew, you really have bought Dawn Primarolo's line hook line and sinker haven't you?

Friday to Monday!? Do you really believe this happens quite like the description. Part of why IR35 is so iniquitous is that where a large company makes someone leave and then takes them back on on the Monday, it's not so the Contractor can save money - it's so the large company can save costs, and it won't be that the Contractor makes any more money. A major UK household name did this a few years ago (just as one example) and its former employees were then very much at a disadvantage - no more money and very much less security.

And then comes the point about incorporating just in order to save tax. No it's not. Firstly, the agency regs don't allow people who go self-employed to be self-employed (sole trader), secondly when you are writing critical software or designign offshore platforms, you do indeed need limited liability. For a Tory, you are incredibly left wing - really!

And you still don't get the thing about dividends being after tax, do you?

OK, lets spell it out:

Let's say the company has £10000 of profit at year end. This is taxed at 19%, so £1900 of CT. That leaves £8100 of money available for dividend. So maybe the director takes this all. And if he's not in 40% tax, that's it. If he's in the 40% tax bracket, he has more tax to pay - as I said before - dividends are not "not taxed"

Alternatively, the company pays out the £10000 as salary. So this (excluding NI, which is a different argument, which I'll come to) is now £10000 of costs, so is £10,000 less against CT - so the CT take on this £10K is NIL. Then the £10,000 is taxed at 22%, so £2200 tax - slightly more than £1900, but hardly the "dividends not taxed" scenario you claim.

Now to NI.

In fact, if the £10K is allocated to salary, firstly there's 12.8% Employers NI, so that leaves £8720 of money allocable to the employee. That's then taxed at 22% = £1918 tax, and 11% NI = £959. Net salary left is thus £5843.

So: by divvies, the tax man takes £1900, by salary, £1918, all from the original £10000. So can we perhaps put the "not taxed" argument to bed???

Now, the perceptive will have noted that the difference is not tax but NI (if you read IR35 carefully, NI is in fact what it's about, not tax).

The difference is that when £10000 excess profits are paid by dividend, there is an NI reduction of employers and employees NI of £2239.

So, is this fair? Absolutely. The director of his own company cannot claim the dole if his company has no work, or claim a whole raft of state benefits. He has no employment security that the employee does. No redundancy money. No, instead, he/she must look after themselves in the bad times(the option to do this is a Tory principle, isn't it? or have you forgotten). This is the choice he makes. Live off his own abilities, and take the risk that it might all go pear shaped - which I assure you it does more often than you might think. I've been taken on for contracts and been let go overnight, with no compensation at all, just because the project was wound up overnight. I've been off work ill for a YEAR and not claimed anything from the government (having had to insure myself privately for income protection). I know guys who have not worked for anything up to 5 years but have not gone on the dole.

Any employee who wants to do this is welcome to. I guarantee they'll soon understand why when the legal option exists to avoid NI - legally, I stress.

And even the HMRC, Tax Commissioners, and Judiciary seem to agree. One trade organisation has fought 1200 cases against IR35 and has won all but 3 - i.e. the entire premise of IR35 has been proven to be flawed - the very same premise you are now dragging up again. And you wonder why people are getting upset at you.

Instead of clingign to your wonderful principles, recognise they are flawed, LISTEN to what's being said, and get it right.

If not, leave the Tory party and join labour. They'll love you.

Jon

csodalatos

Andrew

Let me start by saying I'm not anti-Scottish although at times I am ashamed to be so.

I read your blog with astonishment that somebody could be so very wrong and opinionated on so many different things. I dread to think what your views on immigration are.

I was merely showing the readers here that your latest idea here is just as whacky and the language used not too dissimilar.

You whine about personal abuse but what do you expect when you write an article that paints a picture of hard working honest business people as tax dodgers.

Many people here will have paid more tax personally or through the business they own than the average employee. It goes without saying that they earn more but in general they work harder. They don’t opt for the easy life and many make huge personal sacrifices (e.g. work away from their family) to earn the money they earn and pay taxes they pay. That they take professional advice on how best to reduce their tax liability does not make them tax dodgers. They would be foolish not to do so.

You talk about dividends paid to Director shareholders as a loophole. Let’s look at the definition of the word loophole - a small mistake in an agreement or law which gives someone the chance to avoid having to do something. That it’s a mistake that the law as it stands does not discriminate between shareholders of a company and Directors shareholders is subjective and a view held by few people as has been confirmed here.
In the absence of a tally of votes, I think it’s a fair assumption that the people who took the trouble to vote also posted a comment too. Score on this basis – For 1 Against 45.

If you think everyone here is acting out of a selfish self interest then ask your local Conservative party campaigner for his opinion. See if he thinks it’s a vote winner. A policy or idea is only as good as the acceptance it gets in public. Personally I believe the average man in the street won’t care how the self employed ‘cheat’ the taxman. He is more likely to praise their ingenuity. Especially when an accurate figure (i.e. not based on your calculations) of the extra tax that could be raised were put to him. IT'S SMALL BEER.

In answer to the questions :

Does this tax reform seem fair, or do directors deserve to earn ~ £32000 per annum tax free?

Not possible to answer due to inaccuracies. But £32k tax free. Yes please!
Can you think of a manner to sell this policy to the public, so we can gain more political capital from its enactment?

A huge advertising campaign with a subliminal message that Directors of companies are evil and use their money to fund terrorism.

Are there any other tax-loopholes which could be closed that come to mind?
Yes …. Student loans to rich families.

You talk about there being no costs. What world do you live in? Foregoing the costs to get new law drawn up properly such that there are no loopholes, every new tax law will be challenged and when the Revenue loses do you really think there are no costs? IR35 is a classic example. I would not be surprised if the cost to defend IR35 is more than the revenue raised.

Why don’t you accept that you’re policy has not been received well and see this as a wake up call that if you continue with your badly researched and ill conceived ideas you will not make a contribution to any mainstream political policies.

Best wishes in your political career.

Cleethorpes Rock

Is this policy a wind-up?

John G

How on earth has one of Dawn Primarolo's stooges been allowed to regurgitate the propoganda put about during the time of implementation of IR35, and present it a prospective Conservative policy?

Who is responsible for security of this site?

Mutley

So, you agree that IR35 should NOT be repealed, even if you clearly demonstrate that you have absolutely NO idea how it operates in the REAL world. While you're at it, why don't you defend S660 ?

When you get to my ripe old age, and you spend more time debating with potential clients the nature of the commercial agreement that's been presented in front of you, rather than the actual customer requirement you'll understand what I mean.

By the way, I probably cover 3 or 4 members of the NHS salaries in the variety of taxes that I pay every year, so don't bite the hand that feeds too much, you will regret it.

I wasn't anti-Scottish when I first read your idiotic proposal, but you are slowly converting me.

Mutley
:-)

Charoniv

Is this a joke?

From Andrew Morrisson
>> It is right not to repeal IR35. I agree with the party's stance on this totally. If a person who was employed when leaving the office on a Friday, yet returned as a self-employed person on the Monday working under pretty much the same contractual obligations, but now able to incorporate a company and operate out of that and save tax under pretty much the same working conditions the following Monday. Do you not feel there is an unfairness here when this person is compared to another hard-working person who still has to pay 40% + 1% NI?

The person who incorporates and comes back on Monday now has to deal with the administration of the company and personal tax, will pay more NI on salary, will not get sick/holiday pay, can get the contract terminated usually with no notice but certainly at the end of the contract, is liable for ant mistakes, ...
And you suggest they should be paid less? That would be the effect of paying the same tax on income but not being paid for sickness/holidays.

The statement shows a misunderstanding of the problems with IR35 which seeks to tax as an employee but retains the risk and lower income of not being an employee.

Note - I could probably get more income as an employee (I've been offered it) but don't because I want to choose the work I do and feel I would have less power to negotiate conditions.

andy

I feel the need to comment here.

I'm not a taxation expert, there are others who have made excellent arguments regarding the ins and outs of one form of tax versus another. However your comment

It is right not to repeal IR35. I agree with the party's stance on this totally. If a person who was employed when leaving the office on a Friday, yet returned as a self-employed person on the Monday working under pretty much the same contractual obligations, but now able to incorporate a company and operate out of that and save tax under pretty much the same working conditions the following Monday. Do you not feel there is an unfairness here when this person is compared to another hard-working person who still has to pay 40% + 1% NI?

misses a crucial point.

On Friday the employee had full rights and benefits of employment - sickness, share options, health cover, maternity benefits, full employment protection, 90 notice of redundancy, plus a wealth of other benefits.

Come Monday morning, the employee has none of these. Plus the employer has the benefit of hiring and firing on (usually) a 7 day notice.

So tell me now what's fair about this employee being taxed (and NI) as an employee, rather than a director of a service company, whereby they can structure the payment of income to best serve themselves????

Service companies also have the effect of freeing up business from all the little burdens of employment. That's why large corporations the length and breadth of the UK like service companies.

It's funny, the example you cited, is exactly the same one Brown used at the inception of IR35 all those years ago. It has its basis in the culture of envy, not of rational fairness of taxation.

How dare someone take redundancy when offered by a corporation to whom it seemed the best option on Friday, and then turn up the following Monday (with resultant loss of benefits of direct employment) and optimise the earnings their skills demand in an open market! The audacity of them...

You're in the wrong party, mate.

Alan

Wanted to post a lot of stuff, then thought what the hell. Why waste time reponding to drivel, when I must fill out even more Government paperwork. Time this politician joined the real world. Just lost my vote, time to re-think

Charoniv

Well I emailed my MP about this but got no response.
I don't think I will be voting for him in the next election unless I get some assurance that the party understands more about business and accountancy than this policy maker and that this sort of thing won't be pursued.

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