Everyone has to pay some tax to the government for which they have introduced the ratio for the payment of taxes. In UK, when the person earning income of £150,000 a year then it is assumed that he can pay the tax at the rate of 50%. There are various industrialists, celebrities and various other high earners whose annual income is very high but they use some relaxation to avoid tax payment to the government. They take advantage of various schemes and involve in them and get benefit of them to save their income from being paid in tax.
The famous comedian, Jimmy Carr is one of the people who get benefit of the schemes and avoid tax payment. He used his income of £3.3 million in a tax avoidance scheme every year which is known as ‘K2’. About 1100 high earner people along with the popular comedian get advantage of this scheme and they save about £168 million annually in tax. The K2 gets amount in trust and then pays it to the people as interest free loan which is also free from tax payment.
While involving in such type of business, Jimmy Carr along with other high earners paid only 1% annually in shape of tax on their incomes of millions of pounds. When Carr has about £1.7 million then he will pay the tax. He also bought his home through a company to save the tax which he had to pay if bought directly.
When all these information received by the government body, HMRC then he started his investigation towards K2 and if it think that the function of K2 is illegal then K2 will have to pay millions of pounds. By the practice of these schemes, the government exchequer will have to bear a loss of £4.5 billion annually.
The tax dodgers or high earners who use the ways to avoid tax paying:
- Offshore employee benefit trusts (EBTs): This scheme works just like K2 and various people including Arsenal midfielder, Ray parlour used this scheme to avoid heavy payments of taxes. He saved about more than half million pound by using this type of technique.
- Payments in kind (PIKs): Some people use this trick as they do not pay in shape of salaries and they just award gifts in gold or diamond or in shape of high value items which they can sell to meet their demands and in this way they save tax payment.
- Domiciled in an overseas tax haven: There is another kind of saving tax for settling someone in a place which is tax free and proves a tax heaven. The precedence of the Sir Philip Green to understand that he gave his wife Lady Green a cash share of £1.2 billion. She lived in tax heaven so he saved about £285 million in tax.
- Partnership subsidies: some of the people bought their homes through some companies or showing it as partnership to avoid tax payment. Kenneth McFarlane used this method to save his tax payment.
There are various other schemes or methods to avoid tax payment but these are considered illegal or unjustified. This is manipulation of the wealth for looking some illegal way to avoid tax payment. It is very ugly and shameful that the poor citizen of the country pay the whole tax and they also contribute in nation building but the high earn class of society seek some unreasonable ways to avoid tax. The money saved by these people has no mission or their target to give benefit to a large number of people. This amount is also useless and cannot be used for the life saving or some other purposes which are vital for the nation building. They must think that their lavish livings and their higher incomes are the result of the payment of tax by the low earners.