Saving tax?

[Bumble]

Here's a thought I had about how it might be possible to save some tax. It is intended to apply to the UK, but it might well carry over to other jurisdictions. Let me know if you think it might work. To explain it, I'll start with something that doesn't work, then say how my idea differs.

Suppose I wish to buy an item in a shop that costs, say, about £270. The shopkeeper is the owner of the shop or at least is empowered to make business decisions. Instead of offering to pay with money, I offer to barter the item for something that I possess. Even if the shopkeeper agrees to the barter, this does not save tax, because under UK tax law the transaction would have to go through the shopkeeper's books on the basis of a fair value being assigned to the bartered item. Of course, the shopkeeper could decide not to record the transaction, but that would be fraudulent.

But now suppose instead that I go into the shop and ask the shopkeeper for a discount on the item. I would like him to sell me the item for £1. Why should he offer me this discount? Because if he does, I'll pay with a gold sovereign. (At the time of writing, worth about £250.) A gold sovereign is legal tender in the UK and has a face value of £1. So the shopkeeper can legally put the transaction through his books as having a value of £1. This involves writing down the value of the sold item to £1, which entails making a loss that can be set against other profits. It also avoids the profit that would be made by selling the item at the ticket price. Naturally, the sovereign doesn't go into the till, he just swaps it out for a regular £1 coin. Net result is that if he is paying tax at say, 20%, he is saving himself about £50 in tax and can afford to part with the £270 item in exchange for a coin that he can sell to a dealer for £250. He and I both benefit and the taxman is down on the deal.

I don't see how this would be illegal. It differs from the barter case, because I am not bartering the coin, I am offering it for the settlement of a debt at the value set for it by the Bank of England. In effect the scenario is created by the fact that the Bank of England, in issuing both regular £1 coins and gold £1 coins with the same face value, has violated the fungibility of currency.

[SoulUK]

Think the law states you can't intentionally sell something at a book loss in order to migrate tax.

 

I know it in the rent situation. If you buy a flat and rent it at half value to a family member. You as the renter would still be liable for the tax of the rental price at full value, not what you've set it at. So in your situation I would assume if the business did it regularly and it actually got looked at, they would be taxed the amount the sale should be, rather then what it is sold for. As the process has been done with tax avoidance in mind.

 

 

[Pete]

You the buyer are handing over a full sovereign so I cannot see how you are getting such a great deal.
The shopkeeper can reduce tax at any time by writing off the item as damaged, obsolete or stolen stock.
If I was the shopkeeper I would be very suspicious that the coin was a fake.

[breaktwister]

On ‎30‎/‎06‎/‎2017 at 07:25, SoulUK said:

Think the law states you can't intentionally sell something at a book loss in order to migrate tax.

 

I know it in the rent situation. If you buy a flat and rent it at half value to a family member. You as the renter would still be liable for the tax of the rental price at full value, not what you've set it at. So in your situation I would assume if the business did it regularly and it actually got looked at, they would be taxed the amount the sale should be, rather then what it is sold for. As the process has been done with tax avoidance in mind.

 

 

Sorry but this is utter nonsense.  If I own property I am entitled to let anyone I choose stay there rent free if I so wish.  This does not trigger any tax liability.  HMRC cannot say "well you should be renting that out at £xxx so we are going to tax you on that sum".

 

[SoulUK]

Rent free you can get away with. Reduced rent causes tax problems. As HMRC can limited what you can claim as allowances.

[mr-dead]

There was a case where a boss tried to paid his employees wages in gold sovs to save taxes.

As you will probably guess it didnt end well.

*trying to find the link to the story*

[Pipers]

The Tax laws are written for wealth and privilege not the masses, it is ok for them to have bolt holes here there and everywhere.  For us  we have to pay tax and if you are unfortunate enough to have to claim any benefits eg working tax credits then you are bonded to hmrc .I don't claim tax credits but lots do and hmrc want to know everything. 

As for paying with sovereigns you will lose and will be taken to court if you own a business and try to fiddle the tax man and the vat that way.  You can bring legal tender into the country upto £10000 in gold and you can bring in legal tender of silver eg brittanias as face value but not in slab you would have to claim it as coinage and not take the piss out of the customs!

[Roy]

 

2 hours ago, Pipers said:

The Tax laws are written for wealth and privilege not the masses, it is ok for them to have bolt holes here there and everywhere.

Something I've always aspired to 

[Pipers]

23 minutes ago, Roy said:

 

Something I've always aspired to 

Quite right too. The problem is they are soooo tight fisted it's near impossible to get any of that wealth off them no matter how hard one works.