Mortgage rates / interest etc

[akirk]

You stated "you do not tax expenses". I noted expenses are taxed in the UK by things like VAT. I assume that you accept that taxes are paid on expences so it is quite possibe to introduce more taxes on expences.

I tax like VAT is not VAT, it would have its own rules on how it taxes expences.

If Company A pays Company B a fee the amount of IP is quantified for the taxman. it is no longer intangible, it is a line on the balance sheet.

If the directors are working for the benefit of another company than the one that employs them I think it is very dubious.

no - in accounting terms you do not pay corporation tax on expenses - to most businesses (and the ones we are discussing) - VAT is a neutral tax - you supply a chair to me at £100 + VAT, I pay you £120 and I reclaim the £20 - so the VAT is neutral. If you are referring to VAT on expenses - that is always reclaimable if Company A is VAT registered.

besides - VAT is charged on supply, not on purchase - so, the UK government would have no ability to put VAT onto the supply from another country.

Company A will have the payment for brand / IP on their accounts, and it will be visible, but it can't be directly taxed as you don't tax expenses - you tax the company that receives the payment not the one making the payment - and Company B is not in the UK's area, so can not be taxed by them.

Directors work for their shareholders (the company is simply the mechanism) - if Company A is owned by Company B, then Company B is the shareholder of Company A - and the directors must work for the benefit of their shareholders, so in this case MUST work for the benefit of Company B - that is the law!

If both are owned by a third party Company C, then that is the shareholder, so they must work for the benefit of Company C - same outcome.

Ultimately I am not sure this is a discussion worth continuing unless all concerned actually understand how companies work
What Amazon and other multinationals are doing is not illegal - it is fully compliant with all British legislation - anyone can shout loudly that they want them to be taxed more and lots will agree - but it is a meaningless desire unless there is an environment in which the UK government has a right to tax them!

Get the environment right first and you will be seeing far more tax - but put simply that means making your country a low taxation area - as Ireland have done, and many others, and not surprisingly International companies who can choose where to do transactions / where to establish / where to base contracts, choose those countries... So, there really is no logic based in simply increasing corporation tax - all you will do is hurt the small national companies - a very naive approach to building support for business - low taxation will end up with more money in the coffers, and more employment - it is really that simple and proven time and time again...

 

[Jacob]

......

Get the environment right first and you will be seeing far more tax - but put simply that means making your country a low taxation area .....

This comical Alice Through the Looking Glass fantasy crops up a lot!
Charging less tax brings in more tax? Hmm. What about a diagram it doesn't make sense to me?

 

[Sean33]

Again, i would ask for clarity -

The government spent £600 billion over covid. My 3 person family does not have an extra £45k in the bank, so where has that money gone?

Its a simple question.

May be a dumb reply but that money was spent on Furlough payments, covid drugs, PPE etc etc I can’t see how you can figure that you are each £15,000 worse of. Yes at some stage in theory the government will want to reduce the public debt but can you show me any country on planet earth that hasn’t spent fortunes because of the pandemic.
Going back to the original thread, base rates, if the Bank of England had acted like the fed £ would be at a whole different level and inflation would still be high but not as bad as it currently is. That being said if you follow the dots in the US rates are near there peak for now, rates I think will go up in the UK and Euro area as they should have done months and weeks ago but this will lead to strength in both currencies that will lead to a lower inflation point. We have seen a big move in gilts over the last 2 weeks, funny enough our ever scaremongering news outlets have not really highlighted the significance of this and what it actually means but that doesn’t fit there remit!
Personally think we are at or near peak, if the system was working rates should be circa 4% and mortgage rates between 5&6%.

 

[Jacob]

........ So, there really is no logic based in simply increasing corporation tax - all you will do is hurt the small national companies - .....

It doesn't hurt companies at all. It hurts profits in the short term, and bonuses and dividends, but it encourages re-investment in the company and perhaps even higher wages, rather than seeing it spirited away into offshore accounts

 

[Dibs-h]

no - in accounting terms you do not pay corporation tax on expenses

Only on Allowable Expenses. Those that HMRC deem as non-allowable - effectively get "added" back onto your taxable profits and taxed as if you never had those expenses.

HMRC could easily alter the CT600 (Corporation Tax Return) by adding 1 or 2 fields and force the declaration of IP\Licensing\similar costs being paid to another company (UK based or abroad) above a certain threshold.

Whether it should be done etc- is another question, but the technicalities of it are straightforward.

HMRC's Connect system would then spit out cases for "closer examination" once accounts are filed.

 

[Dibs-h]

It doesn't hurt companies at all. It hurts profits in the short term, and bonuses and dividends, but it encourages investment in the company e.g. higher wages, rather than seeing it spirited away into off shore accounts

I'm somewhat with Jacob on the above. Increasing Corporation Tax doesn't hurt anyone other than the shareholders. It does not affect the company investing in itself (see below).

Capital Allowances (the purchases of kit\machinery etc) and R&D allowances - used to be you could only claim tax relief for a portion, or only available for niche sectors\industries. Now IIRC - it's 100% (or thereabouts) and in Year 1. And not limited to niche sectors\industries. Although they may have additional ones.

 

[Jacob]

Occasionally someone pops up and says something intelligent! CBI this time. CBI warns Rishi Sunak against ‘doom loop’ of public spending cuts

 

[julianf]

May be a dumb reply but that money was spent on Furlough payments, covid drugs, PPE etc etc

Yes. The money was spent on all sorts of things.

And then maybe it got sucked into a wormhole, and no longer exists....


You have water in a dish. It evaporates. That doesn't mean its vanished. Its still somewhere. Someone has it. Unless you have [total money spent / uk population] then its either a) gone overseas, or b) someone else has it.

It really is that simple. The whole exercise was, once again, a vast re-distribution of wealth, up the spectrum, with the additional cost that of inflation.

Money does not vanish. I mean, i guess you can have a bonfire, and just throw cash on it, but in general...

Next someone will be along to claim that the Tulips that the Tulip craze was centred around were not physical items either.

 

[sploo]

I think your view - and that of many comes from an inherent Britishness or fairness where we want it to be fair, and therefore something must be possible -I agree it is not fair, but equally not much is possible...

Qualified "yes". But my desire to see multinationals prevented from engaging in tax avoidance isn't so much about being fair; it's about not stealing from the society in which they operate.

Now, yes, I know, it's legal, therefore it's not stealing. However, ultimately (as already noted) they are only able to do business (and make profit in the first place) as a result of the taxpayer funded infrastructure that exists in their target markets. By then using tax avoidance schemes they leave those remaining (smaller companies, and individual taxpayers) to pick up the costs of maintaining that infrastructure. I'm sure they'd refer to that as "tax efficiency" (or some other buzzword). I call it theft.

It is also, of course, unsustainable - as if everyone did it then the infrastructure collapses; and even the multinationals have no roads on which to deliver goods and services, no police to protect their places of business, no education services to provide them with (hopefully) competent workers, and no healthcare services to patch up their workers and keep them producing.

 

[sploo]

- everyone gets the same opportunity (capitalism)

Only just noticed the above. So... how exactly does modern capitalism give everyone the same opportunity? As Vaush's Coconut Island analogy rather crudely points out; it's not a level playing field. Or to put it another way, there's a great quote I heard (in reference to the likes of Jacob Rees-Mogg); "Born three-nil up and think they scored a hat trick".

We all inevitably try to do the best for our families and friends; so of course any privilege we have, any resources, any contacts; we're going to use to give "our" people a leg up in life - nothing nefarious about that. The problem is the level of disparity in many countries (and the ability of those at the top to maintain those disparities) means that capitalism (at least as far as I see it today) definitely does not give everyone the same opportunity.

I'm not suggesting communism either; that doesn't work - just in different ways. Maybe "capitalism but once you're so rich you run out of space to park your Ferraris maybe you pay a bit more tax"?

 

[baldkev]

@Richard_C
Thank you for your reply / comprehensive answer. Ultimately, pick 1 and forget about it, is probably very wise

@everyone else, CARRY ON!

 

[akirk]

Proper capitalism looks after others in the pile as it is long term more beneficial - tread on everyone and you become the top of a heap of dead bodies - not very exalted - but support those who need help and you build a good work force, educated people, and open the doors to all - but you don’t need to stop the opportunities at the top to do it - so true capitalism should have a socialist element to it but sadly often doesn’t- however true socialism shouldn’t be the current embittered mess that tries to bring everyone down

So for me our current version of capitalism is better than our current version of socialism and then I do what is possible to help others (as indeed have my ancestors over the centuries demonstrating a strong commercial value in doing so)

 

[Sean33]

no - in accounting terms you do not pay corporation tax on expenses - to most businesses (and the ones we are discussing) - VAT is a neutral tax - you supply a chair to me at £100 + VAT, I pay you £120 and I reclaim the £20 - so the VAT is neutral. If you are referring to VAT on expenses - that is always reclaimable if Company A is VAT registered.

besides - VAT is charged on supply, not on purchase - so, the UK government would have no ability to put VAT onto the supply from another country.

Company A will have the payment for brand / IP on their accounts, and it will be visible, but it can't be directly taxed as you don't tax expenses - you tax the company that receives the payment not the one making the payment - and Company B is not in the UK's area, so can not be taxed by them.

Directors work for their shareholders (the company is simply the mechanism) - if Company A is owned by Company B, then Company B is the shareholder of Company A - and the directors must work for the benefit of their shareholders, so in this case MUST work for the benefit of Company B - that is the law!

If both are owned by a third party Company C, then that is the shareholder, so they must work for the benefit of Company C - same outcome.

Ultimately I am not sure this is a discussion worth continuing unless all concerned actually understand how companies work
What Amazon and other multinationals are doing is not illegal - it is fully compliant with all British legislation - anyone can shout loudly that they want them to be taxed more and lots will agree - but it is a meaningless desire unless there is an environment in which the UK government has a right to tax them!

Get the environment right first and you will be seeing far more tax - but put simply that means making your country a low taxation area - as Ireland have done, and many others, and not surprisingly International companies who can choose where to do transactions / where to establish / where to base contracts, choose those countries... So, there really is no logic based in simply increasing corporation tax - all you will do is hurt the small national companies - a very naive approach to building support for business - low taxation will end up with more money in the coffers, and more employment - it is really that simple and proven time and time again...

Absolutely correct

Yes. The money was spent on all sorts of things.

And then maybe it got sucked into a wormhole, and no longer exists....


You have water in a dish. It evaporates. That doesn't mean its vanished. Its still somewhere. Someone has it. Unless you have [total money spent / uk population] then its either a) gone overseas, or b) someone else has it.

It really is that simple. The whole exercise was, once again, a vast re-distribution of wealth, up the spectrum, with the additional cost that of inflation.

Money does not vanish. I mean, i guess you can have a bonfire, and just throw cash on it, but in general...

Next someone will be along to claim that the Tulips that the Tulip craze was centred around were not physical items either.

sorry but I must be having a brain fart as I just don’t get where you are coming from, can you explain to me where or how it was a redistribution of wealth?

 

[Sean33]

It doesn't hurt companies at all. It hurts profits in the short term, and bonuses and dividends, but it encourages re-investment in the company and perhaps even higher wages, rather than seeing it spirited away into offshore accountsI

I am sorry but in 30 odd years of business I have never ever seen that happen. What I have seen is due to higher taxation is below or zero wage inflation, if that doesn’t work loss of headcount, delay or cancellation of upgrades to equipment

 

[Jacob]

I am sorry but in 30 odd years of business I have never ever seen that happen. What I have seen is due to higher taxation is below or zero wage inflation, if that doesn’t work loss of headcount, delay or cancellation of upgrades to equipment

Wages are allowable expenses and not taxed. Wage rises means less profit and lower corporation tax.
https://www.unbiased.co.uk/life/sma...oration tax,minus any overheads and expenses.

 

[julianf]

Absolutely correct

sorry but I must be having a brain fart as I just don’t get where you are coming from, can you explain to me where or how it was a redistribution of wealth?

If the government borrows a whole bunch of cash, and gives half the population £100 each, and the other half £50 each, are the ones who get the £50 -

A) richer
B) poorer

?

 

[Spectric]

VAT is a neutral tax - you supply a chair to me at £100 + VAT, I pay you £120 and I reclaim the £20 - so the VAT is neutral.

Never really got my head round VAT, always advised to avoid getting involved. Looks like a case of findingthe missing £20!

I sell you a chair for £100 + vat so you give me £120, you then get the £20 back from government which means I must pay the government £20 so why bother, it is like that tenner that goes back and forth in a birthday card where there is no gain.

 

[Spectric]

Depends if the split was random or targeted, if the lesser well off all got the £100 then they will feel richer, even getting £50 would help some but £100 is neither here or there to most people these days.

 

[Jameshow]

Proper capitalism looks after others in the pile as it is long term more beneficial - tread on everyone and you become the top of a heap of dead bodies - not very exalted - but support those who need help and you build a good work force, educated people, and open the doors to all - but you don’t need to stop the opportunities at the top to do it - so true capitalism should have a socialist element to it but sadly often doesn’t- however true socialism shouldn’t be the current embittered mess that tries to bring everyone down

So for me our current version of capitalism is better than our current version of socialism and then I do what is possible to help others (as indeed have my ancestors over the centuries demonstrating a strong commercial value in doing so)

But I only think that works with a strong moral compass something increasing lacking in politics, business and society in general!

 

[Sean33]

If the government borrows a whole bunch of cash, and gives half the population £100 each, and the other half £50 each, are the ones who get the £50 -

A) richer
B) poorer

If the government borrows a whole bunch of cash, and gives half the population £100 each, and the other half £50 each, are the ones who get the £50 -

A) richer
B) poorer

?

Your argument makes sense but where and when did the government do this? Are you talking about the 3m excluded from furlough etc of which I was one ?