Scrooge was trying to concentrate, but it was warm in the office and he found himself nodding off to sleep……….
The Ghost of Tax Planning Past
It seemed to Scrooge that he woke up still in the office, but his familiar adviser was no longer there. Instead, sitting opposite him was a young man in a suit with very wide lapels and flared trousers, and a shirt with an improbably large collar. He tried to focus on what the young man was saying:
“…so you see, Mr S, we’ve got to start dealing with the modern world – it is the Nineteen Seventies, after all. With income tax at 95% on your investment income, it’s time to start hitting back! Now, I’ve got this little scheme for you:
“We set up a couple of companies, one of them in Bermuda and the other in the Channel Islands – I know a couple of ornithologists in Jersey who’ll be the directors for a few quid so the Revenue can’t say you’re running the companies. Now, company A lends Company B £1,000,000 – I know a bank in the British Virgin Islands that will fund this for us, as long as we only need the money for a week, and then Company B offers to acquire Company A’s shares in exchange for some of its own shares – oh, and we’d better set up an Anstalt in Liechtenstein………”
Scrooge dozed off again for a moment, and when he woke up he heard:
“…….and then we liquidate company N, and we’ve created a tax loss without actually losing any money, and we can set that against the profits from your business – we can do all this in an afternoon sitting round the table with the directors of the other companies – and so we’ve saved you 80% tax, and all at the cost of a few quid to the BVI bank and the ornithologists, oh, and my fee, of course….”
Scrooge’s head was aching by now, and mercifully he dozed off again, to wake up with:
The Ghost of Tax Planning Present
Scrooge found himself with a Tax Adviser he’d never met before, who was saying…..
“……I’m so sorry Mr Scrooge, but I’m not allowed to advise you until I’ve established your identity, so I need your passport, a copy of a utility bill with your address on it, and I’ll have to run a few background checks and then we can get started.
“Now, my advice to you is to sell your business before 5 April 2008 so you can pay CGT at only 10%, and then invest it all in Unit Trusts. There’s no point running a business – if it’s a success you’ll have to employ people to help you and a PAYE inspection is bound to cost you a fortune, and you’ve got to pay NIC on the salary they will make you pay yourself instead of taking dividends – what with the employer’s NIC and the secondary NIC you have to deduct from your salary, the tax on the income you make as an entrepreneur will be about 50%, whereas if you just live on investment income, the most you’ll pay is 40%. No, running a business and creating jobs for people is so last century, just stick to investments, they won’t let you down, and they won’t sue you for wrongful dismissal either…”
Scrooge’s headache was getting worse, and he was glad when he drifted off to sleep again, to wake up to…………
The Ghost of Tax Planning Yet to Come
Scrooge found himself sitting in a tax office, in front of a tax inspector dressed in grey overalls. His Tax Adviser was there too, but seemed too afraid to say anything. The tax inspector was talking:
“So, Mr Scrooge, under the Income Tax (Inspectors Know Best) Regulations of 2013, I have decided that the correct amount of tax for you to pay for the year is 100,000 credits. Now we’ve accessed your bank accounts and cleaned them out, but unfortunately there’s still 100 credits owing, so we thought we’d get you in to settle the matter. Now, under the Alternative Payment Methods (And the Shirt) Regulations of 2012, we can accept payment in kind, so if you’d just remove your shirt and wristwatch…”
Scrooge woke up again in 2007, sweating. His Tax Adviser was looking at him rather strangely.
“I’m so sorry”, said Scrooge, “I just nodded off, and I had the most awful nightmare. Still, never mind, it’s nearly Christmas so God Bless us all, every one………..”