2024 UK politics - now with Labour in charge

Far too complicated for me but could they not just change the rules to include any inter-business loans the in country part gives to others in the taxable profit? I'm pretty sure I couldn't avoid income tax by lending money from my pre-tax salary to a family member in a different country

Beat me to it, there are stats on shortfall by 'type' as you've already found out.

If you look further at those reports and see how much of it is attributable to large business then how much of that is down to avoidance (4% - see link the KG posted) then you will see that tax leakage due to avoidance by large business is a pretty small piece of the overall gap and small in the scheme of things. Part of the problem is that big business often ends up in the spotlight when cases to come up (which they do) but because of that the general public think it is a lot more significant than it is.

Whoops, meant to reply to DB with text I edited. I replied to you below.

Interest on intra-group loans is taxable for the lender and has been for years. It also need to be priced at market rates. Its pretty similar across the globe - for a reason. Trying to the principal amount of a loan taxable would destroy corporate financing pretty effectively.

Where mitigation turns into avoidance is a subjective matter and yep there are grey areas. The HMRC definition has a bit more that what you said but includes looking at the 'intention of parliament' when passing the rules - which in itself is subjective. Making of intra-group corporate loans in not itself avoidance unless they don't follow the rules on transfer pricing, thin capitalisation etc.

The PR issue is that as you say, the MSM will pick up on any large corporate that doesn't pay the largest amount of tax humanly possible and scream 'avoidance' or 'not paying their fair share'. the funniest example I can recall was predictably the Guardian announcing is shrill tones that some company or other had paid no tax on the disposal of a subsidiary, when that was a simple operation of UK tax law know as the substantial shareholding exemption which exempts the sale from CGT provide it is a disposal of a trading subsidiary. Trouble is, once somebody points the finger its difficult to rectify the perception even if the accusation is (as above) complete leftiebollox.

Fact remains that there is no legal obligation to maximise your tax bill and this is supported by long standing case law.

Put another way, if Amazon pay zero corporation tax, there will still be a significant input from PAYE and Business Rates at least.

HMRC were fully aware of these loans and the anti-avoidance regs in UK law such as those i mentioned above are there for them to use where needed - so why did they not take action?

And just to add that UK tax law allows a specified amount which is equivalent to 30% of EBITDA to be deducted as interest expense, with full deduction allowed for groups with less than £2m of interest pa. This is a relief available in law to all companies and taking deductions for this is no more tax avoidance than me putting money into an ISA every year.

So if you have some evidence that these loans were made to avoid tax then let's see it.

So why is the loan company based in Luxembourg where the corporation tax rate is 18% lower if it is not to reduce the tax paid?

If this doesn't bring down the government, I don't know what will.

As mentioned, tax can be part of the decision within the rules. Generally you need to demonstrate that tax was the only or predominant motivation: your question does not demonstrate that. HMRC clearly agreed that it was OK as they took no action.

If as it appears it was priced at arms length and was within the thin cap rules, there is no difference to the amount of UK tax paid, regardless of where the loan came from. So how are you claiming that they avoided UK tax? And the correct amount of tax was paid in Luxembourg.

In Amy event the corporate tax rate in Luxembourg is not 18% lower.

And the Global minimum tax regs will ensure it stays that way.

Too early to tell.

Exactly, shake it off

Cash-in-hand local tradesmen, perhaps?

Or small shops whose "card fees" are so high that it's economical for them to trek into town with bags of change to pay in at their bank, and suffer cash-handling charges?

That's perhaps a little generous! (Although the majority of retirement income generated by such a well-funded pension would be liable to tax at 40% or 45%, so the government's tax would be mainly delayed, rather than greatly reduced from such individuals.)

Googling round, there doesn't appear to be any serious level of complaints about the annual contribution limit of £60k, so we can keep / reinstate that. Likewise, with the demise of the LTA, the new cap on TFLS at 25% of the old LTA is also not obviously unpopular. So we can keep that too. (The only comment I found re the TFLS cap was from a big legal firm highlighting that the new legislation was not very clear.)

But maybe the question that should be asked is "What level of retirement living standard should society aim to incentivise people to target via tax incentives?"

The old final salary scheme concept of 2/3 final salary or 1/2 final salary plus 3*final salary as a TFLS wasn't obviously wrong in the days when very few people really earnt "large" amounts to the extent that pensions could be used as tax-planning tools and save more via pensions than they needed for an "acceptable" (to lefties and other green-eyed types who view post-tax earnings as a gift from the state, rather than viewing tax as contribution to the state) retirement lifestyle.

And it's from this that the old personal pension annual contribution limit of circa 15% derived, as over a typical working life in the "old days" re fund valuations where values were calculated over the long term, not via marking to market) that's the contribution level needed to fund a 2/3 final salary. (Rule of thumb in those days was that to secure a decent pension, you should contribute "age/2"% of earnings each year, assuming you started contribution some time between 25 and 40. But people live longer than in the old days, and interest rates tend to be lower, so 15% then is likely equivalent to 20% now

From some fag-packet calculations, contributing £30k-£40k p.a. for 40 years should generate enough investment return to fund a retirement income of £100k p.a. (all ignoring inflationary impacts) so there's definitely an argument to be made that the annual contribution limit should be capped at much less than £60k. (£20k to generate a £50k retirement income?

But as with any reductions to the TFLS, changes should be phased in over 10-15 years, to allow people to plan round the impact.

Obviously, if you're Chancellor, have committed to not increasing the sensible taxes, and need cash in a hurry, you'll just grab what your Union paymasters will allow, and not worry about fairness, dysfunctional behaviour etc!