Tax amnesty for tax evaders

For decades those who are self employed and get work cash in hand have been hard to keep track of and make sure that they are paying tax as well as declaring all money that they earn. Now HMRC have had enough and are offering all self employed tradesmen a tax amnesty before the crackdown begins on those who do not declare their earnings.

As we know builders, plumbers, electricians and gas fitters are they most notorious offenders who fail to declare most of their earnings, they still pay tax but only on the small amount that they declare it on. All people who are self employed have to submit their paperwork yearly so that HMRC can calculate how much tax they need to pay, the more you earn the more tax. Those who work for companies do not need to do this as they will pay tax and NI contributions on a monthly basis and not as a lump sum once a year.

It’s important that all people who work pay tax and contribute NI as this is what will pay towards your state pension when you are older. If you do not have sufficient NI contributions then you will not receive the full state pension but in some cases a letter will be sent so you can cover the gap that you didn’t pay so that you don’t miss out. Tax on earnings also play a huge part in the country’s economy it’s what goes towards child benefit and other help you are able to get from the government.

Tax amnesty
The tax amnesty is up until May 31st after this time HMRC will start investigating those that still refuse to declare earnings and are working cash in hand. Those who are caught will be investigated and asked to pay back all money earnt, fines of 35% or more on the money owed will also have to be paid. If however a tradesman admits to underpaying tax then fines of 10-20 % will apply.

The national chairman of small businesses has said that this will cripple small businesses and that HMRC should have a system in place to help self employed people with better record keeping skills and provide more education on tax obligations.

So if you are self employed and have been under paying tax for the last few years or more, your luck may be about to run out.

Council house rent arrears, tenant cannot be evicted

A landmark case was brought to the Supreme Court just recently when a council tenant had rent arrears of £3,500 but under the new European human rights ruling couldn’t be evicted. A single mother from Hounslow with four children in her care and raking in an impressive £15,000 in benefits was granted permission to stay in her council house because evicting her and her family would be a breach of her human rights because she would be made homeless.

Legal experts have said that they find this has become a new trend for council tenants, by saying it would breach their human rights the courts are powerless to pass any hard sentence. Neighbours from hell and those that fall behind in their rent are regularly looking for loopholes that mean they do not get evicted so easily.

Hounslow council have had to accept defeat but the tenant has agreed to pay back her £3,500 rent arrears at a rate of £5 a week or contribute more if she can. Seems like a joke really and all the other council tenants out there who find out about this will no doubt try to do the same. It’s shocking that the council and courts have no power over this matter so scroungers can continue to try their luck.

I don’t see why a homeowner with mortgage arrears couldn’t do the same thing; I somehow don’t see how they could get away with it? Others have also seen this ruling as a joke that could pave the way for even more benefit fraud that could make the economy worse. As this case was dragged through the courts in 2007 the money it has cost taxpayers to date is a whopping £200,000!  Surely they could have resolved the case without the need to involve so many costly lawyers and no doubt the woman in question got legal aid and did not have to pay a penny for legal advice.

The Government really need to do something about this as they promise to crack down on benefits, if council tenant is genuinely struggling then they should be offered help but if they can afford to pay but choose not to their benefits should be reduced until the full amount is paid for in full with interest!

Bait and switch

What is bait and switch?
This is when a service or product is advertised at a low price to draw in customers but then swapped for a higher price service instead. A common one circulating is leaflets advertising carpet cleaning at a price too good to be true. Usually under £15 for an average sized living room, when the cleaner comes over they advise a deeper clean that will cost as much £150 more. Unfortunately people who are most likely to be taken in by this scam are the elderly and those who live alone with no support or guidance from family and friends.

Bait and switch is illegal under the 1998 consumers act; companies are not allowed to advertise a service or product at a low price with no intention of honouring or even swapping it for a higher priced deal instead.

It is illegal in most countries as it is so easy to persuade customers to go for a better package at a higher price, what’s worst is some companies who offer products at a low price do not even have the intention of selling them. It is merely a ploy to get customers in so they can persuade them to spend more.

Examples of bait and switch
Advertising a car with no intention to sell – there have been many classic examples of car dealers that advertise cars and vans at low prices that seem too good to be true. When you do get to the showroom you are told that another vehicle is available at a much better deal or price. Some places even have the car still being advertised months later when it was sold long ago.

Retailers offering bargain discounts – if you are waiting for a specific product to be reduced so you can buy it like a barbeque, sofa or other electrical appliance but when you go to the store or look online it is out of stock. Some places will never have had this stock in the first place; it was a ploy to get customers in the door, once in they are bound to find something else to buy instead.

Travel companies advertising cheap holidays – some places will state a starting from price whereas some do not. Some places will advertise cheap holiday deals but when you call they are sold out or there are other ‘better’ deals available.

If you feel you have been a victim of swoop and bait contact the Trading standards with details of what happened and the details of the company you feel tricked you. It helps if you have evidence such as a leaflet where the service was advertised or even a newspaper advert.

Negative reviews and defamation law

The defamation laws are clear; you should not say publicly (on television for example) anything about another person that could injure his/her reputation unless you can prove that what you say is true. Having said this, you are entitled to your opinion, but have to careful in the way that you express it if you are speaking or writing negatively. You have to be able to justify that opinion with hard facts. In Europe the European Convention of Human Rights defends our right to free speech. We can say or write what we like as long as it is not defamatory and cannot be proved. If you think about John Donne’s line “No man is an island” you have the problem in a nutshell. Or perhaps you would like to consider R.D Laing’s statement “My freedom ends where yours begins.”

The defamation laws seek to protect an individual against unfair slander and libel. (Slander is spoken defamation, and libel is written or spoken in public and reaches a wide audience.)

Now let’s take a look at negative reviews. You may be asked for example, to review a book written by your arch-enemy. The obvious thing to do in this case would be to decline the invitation to write the review, explaining your antipathy to the author. While it is perfectly fine for you to write a negative review of the work, as long as you can justify this and the review is written objectively, then you have not broken the law as contained in the Defamation Act of 1996. If you concentrate on why the book is not very good and can use passages from it to back up your opinion, all well and good. The problem arises if you review the author in a negative light, which is not what you were asked to do. Obviously in some cases reviewers refer to an author in reviews, but usually this is done to explain the similarities between the work of fiction and the author’s personal experiences.

Similarly you can write a negative review of a restaurant as long as it is justified by actual experiences of your and is not just a way of getting back at the owner who you happen not to have liked for a number of years.

Reviews of any kind must be written objectively, and whatever your personal feelings, you have to remove yourself from them and concentrate on what you are reviewing. Your personality should not come into it, and if you harbour negative feeling about the author or owner of a work, these should not colour your review.

A rule of thumb is not to be tempted to write a review if you feel that you cannot be absolutely objective. You don’t want to be involved in a law suit which will do nothing to enhance your reputation.

Domain laws

You might think that there are no regulations governing the use of the internet, but you would be wrong. The law was slow to get into gear as regards protecting copyrights, trademarks and domain names, but it is now up and running.

If you have a business and you want to drive traffic to it you will have used your business name in your domain name and probably your trademark will be prominent in your site too. You have probably bought your domain name and use it to attract clients or customers to your site so that you can sell your products and/or services online. You domain name needs to be protected as much as your office premises and any stock you carry.

There are two types of infringement of your domain name which can be very damaging to your business. First of all there is a crime called Cyber squatting which you should be on the look-out for. This comes in two forms; the first is when you approached by an individual or a company, offering to sell you a domain which bears your trademark or domain name. This is classed as a “bad faith intent to profit” situation, according to the Anti cyber squatting Consumer Protection Act. The name might be construed as being “substantially and confusingly similar” to your domain name and this can be successfully stopped by law. Usually a strongly worded solicitor’s letter is sufficient to stop such actions.

The second infringement which again can usually be stopped by a similarly worded solicitor’s letter is that of another website using a name similar to yours to attract visitors to a competitor’s site or to sell shoddy merchandise, using your trademark, to unsuspecting people who will equate your name with the inferior counterfeit goods they have purchased online.

How can you prevent these situations occurring? You can’t really, but you can take steps to nip such actions in the bud. When you have bought your domain, you should monitor the registration of any names that are similar to yours, for example those which incorporate your trademark or business name. You can also buy up any domain names that are close to yours, so that no one else can buy them and capitalize on your good name.

Nominate is a non-profit organization which maintains a register of “.co.uk” domain names. And ICANN maintains a register of “.com” domain names, so check these regularly. As for copyright, please note that everything that is on the internet is now protected by copyright laws unless it specifically gives permission for its use by others. Do not copy any content or photos or images unless you know for certain that you have permission to do so. The Digital Millennium Copyright Act put a lot of legal power behind copy protection systems and reduced the ‘fair use’ rights that had up until then prevailed. Check out your rights and make sure that you are not violating the copyrights of others.

Tax evasion – How the wealthy are doing it

Tax evasion is illegal; it is punishable by fines and/or a prison sentence. The term covers a wide variety of money related crimes, including not paying taxes at all; paying some tax, but not declaring everything; and money laundering activities. This list is not exhaustive.

There have been many famous cases where tax evaders have been successfully prosecuted. The most famous example is probably that of the Mob boss, Al Capone, who was imprisoned not because of his crimes of murder or bootlegging, but of not paying taxes on the money he had ‘earned’ by illegal means. It was the accountants that caught Capone, not the FBI, as it were.

In Britain there is the requirement that all accountants register themselves, and this was finally accomplished in 2008, although the law requiring them to do this became fully operational in December 2007. Now all registered accountants are required by law to disclose any thing they find suspicious about a client’s accounts. If they do not do so, they will be liable to prosecution. If they suspect a client of any illegality, they must fill in a Suspicious Activity Report (SAR) and must not inform the client that they have done so, as this would also result in legal action against the accountant. There can be no “Tipping Off” a client. It used to be that anything said to an accountant who was employed to deal with a person’s tax matters was confidential. This is no longer the case. Thousands of SARs have been submitted to Her Majesty’s Revenue and Customs department since this legislation came into force.

Tax evasion offences are committed by people from all walks of life, from billionaires to the person on a low income. For example, if a person is on social security benefits and also doing part-time work and does not declare both sets of income on the tax form, then he/she is guilty of tax evasion.

Billionaires in the UK pay ridiculously low taxes, if they pay any at all and figures have been reported in the British press, of 54 UK billionaires paying, between them, only 14.7 million pounds. Of this James Dyson, the inventor, paid 9 million pounds. The British government allows foreigners who claim that they are not domiciled in the UK (despite many of them having British passports and living in the UK for many years) to only pay tax on money that is brought in to the UK.

There are tax havens which are used by the wealthy to avoid paying taxes in the UK. These are based mainly, in the Channel Islands, the Caribbean and Switzerland. Successive British governments have failed to close the loopholes in the law which would effectively tax the wealthy. For example, in 2009 Barack Obama the US President, and former UK Prime Minister Gordon Brown, pledged to close down tax havens, but little appears to nave been done so far.

On the one hand tax evasion is illegal but it seems that tax havens and investing off-shore are legal, so tax evasion laws really only work against people who are not super-rich.

Double taxation

Double taxation may be payable if you live abroad but work in Britain or if you live in Britain, but work abroad. Her Majesty’s Revenue and Customs have agreements or treaties with most countries, which mean that an individual or company does not have to pay tax twice on the same money earned, or gained in profits. If you fall into one of these categories, it would be worth checking out HMRCs web site to find out what agreement has been reached with the country you are living and working in. Agreements are updated regularly, so you really should check to see if anything has changed in the tax agreements or treaties as they are also called.

What you don’t want is to be taxed twice on the amount you earn. For example, if you are a UK national and working in Saudi Arabia as a teacher, trainer, instructor, lecturer or professor, or working in an educational establishment, then you are exempt from tax in Saudi for two years. If a Saudi Arabian national works in an educational institution in Britain, then he/she is also exempt from tax for two years under the terms of the reciprocal agreement between the two countries. If you live and work in Saudi Arabia for longer than two years, then the reciprocal double taxation agreement or treaty will come into play.

Recent updates to the double tax treaties between the UK and Japan and the Faroe islands came into force in August 2010, so if you are a Japanese citizen working in Britain or a Briton working in Japan, you should check out what the differences may be for your particular situation. Also if you work in the Faroes but are a UK citizen, check out the updates to the double tax agreement.

There are admissible and inadmissible taxes within the regulations for double taxation. Inadmissible taxes are the ones that you can’t get out of paying despite the double taxation agreement or treaty between the UK and the other country. For example, if you are a UK citizen working in Cameroon, and are not registered as a resident of Cameroon, you are liable to pay a fifteen per cent ‘special tax’ on income earned or gained from Cameroon. Any other income you have cannot be taxed in that country, of course, only money or profits made there.

However, there are usually exceptions to a rule and this one in Cameroon is for air transport businesses. There is a tax exemption from any Cameroonian tax on profits, distributed profits, income or capital gains on all profits which are derived form a UK business.

At the moment there is some concern about dividends paid to share holders; if a company has already paid tax on its profits, the argument goes, then share holders should not have to pay tax on that same money. However as the company and the share holders are not a single entity, the double taxation agreements do not apply.

Tax avoidance – Is it legal?

The former Chancellor of the Exchequer, Denis Healey explained the difference between tax avoidance and tax evasion in this way:-“The difference between tax avoidance and tax evasion is the thickness of a prison wall.’ Tax avoidance is legal.

Tax avoidance is finding ways to ensure that you pay less tax than you would normally be expected to do on earnings, profits or gains, legally. For example, if you have some savings and don’t want to pay tax on the interest from them, you could open an Individual Savings Account or buy National Savings bonds or make deposits into National Savings accounts. If you do this, you don’t pay tax on the interest which accrues. This is a perfectly legally acceptable way of not paying tax.

Someone who pays the right amount of tax on money declared is ‘tax compliant’ i.e., that person is paying the amount the law requires. However, he/she is not paying tax on all the money he/she has earned or gained that year. A person who refuses to pay a percentage of tax because of objections on moral grounds of a government’s policies (for example the amount of the defence budget) is known as a “tax protester”. This is not classed as tax evasion or avoidance, but is in a separate class.

Tax havens are still operating, and those who make use of them are classed as tax avoiders. Millions of pounds are lost by Her Majesty’s Revenue and Customs service because of these tax havens for the wealthy every year. However the UK government has been reluctant to legislate against these over the years. Such havens are the Channel Islands, some of the Caribbean islands and Switzerland. There are also off-shore companies set up by the very wealthy, so that they do not pay tax in Britain, which is higher than taxes in some other countries. In the past there have been ‘tax exiles’ wealthy Britons who have chosen to live in countries outside the UK so that they were not liable to pay high British taxes. When this kind of money leaves the country, economic damage ensues, and so the government tries to make tax laws easier to attract those tax exiles back to Britain as would any government.

Of course a lot of planning goes into setting up an off-shore company, and not everyone can do this, but if you consider the case of the entrepreneur Richard Branson, whose money is tied up in his companies, he could retire, liquidate his assets and pay virtually no taxes if he were to move abroad. Of course he may not do this and might willingly pay UK taxes, as the laws might have changed by the time he retires.

Independent financial advisers can help you avoid paying taxes, as this is not deemed suspicious. If you earn a lot of money, you may object to paying high taxes. However, those with a social conscience will realise that by avoiding paying taxes they are depriving others of services such as the National Health Service, the police force, etc.