Top 5 financial things to do before labour get in?
Discussion
I 8 a 4RE said:
Is an ISA worming your way out of tax?
Is pushing your income below the 60% (or whatever) effective tax bracket by funding your pension working your way out?
No - both have been explicitly accepted as legitimate by HMRC.Is pushing your income below the 60% (or whatever) effective tax bracket by funding your pension working your way out?
The method being used by Jimmy Carr was legal at the time - see how well that turned out.
What if the school is fined for running a dodgy scheme - and that needs to be paid for by other parents ?
It's all right posting anonymously on the internet, but would you really want to live with the potential consequences Jimmy ?
If I were running a school, there would be no changes. If we'd accepted pre-payment in prior years, then carry on. If not, then don't introduce it.
Car bon said:
The method being used by Jimmy Carr was legal at the time - see how well that turned out.
The K2 scheme Jimmy Carr used was never legal….we are all taxed on our worldwide income and that has been the case in the UK for many years. The K2 scheme involved people like Jimmy Carr resigning from their jobs and being hired by an offshore entity who would then loan the money back to the UK domiciled individual. Just utter nonsense….a scheme devised to allow the companies that structured it to make off with some structuring/upfront fees and to make off in to the sunset whilst the idiots that signed up for it get chased by HMRC.Similar to the Film Deals which tried to utilise something called SIdeways Loss Relief which to qualify for you had to effectively demonstrate that you worked 10 hours a week/month (IIRC) for the film partnership whilst still doing your normal job. Again utter nonsense….the people that signed up didn’t read the small print or do any research. Many went bankrupt because the deals were structured in such a way that they had significant leverage. In the these were legal but again the originators never told people they needed to prove that they worked for the company they were “investing” in.
stuthe
said:
said: With the election on the 4th, what sort of timelines do we expect a new government to actually make any changes to laws/budget announcements?
Is this likely to occur immediately or a few weeks after?
Tactically, it would make sense for Labour to do the "nasty" stuff early on - assuming they can go to term its largely forgotten by the voters. I think they could roll some stuff pretty quick (like the VAT on school fees), they won't however be able to do anything highly controversial or Truss like because the bond and currency market will mince them. Recent UK FDI performance has been relatively good - going off reservation is fatal for them and the economy. Its a risk they do, but they are getting schooling on the limits / redlines from business already.Is this likely to occur immediately or a few weeks after?
Given the level of debt and dependence on the kindness of strangers (read foreign support of UK debt), their manoeuvre room is much smaller than 2019 - its post Covid / populist politic now.
PositronicRay said:
Won't it be invoice date?
Precisely. Prepayment won’t make jot of difference to the VAT rate in force at the time the services are delivered, in this case, educational ones.As a comparison, as of January 2024 the basic VAT rate here in Switzerland moved from 7.7% to 8.1%, as voted by the people in a referendum in order to provide extra finance for state pensions.
For customers with annual service contracts (often not Jan-Dec) we were obliged to invoice the period up to 31.12.23 at the old rate, and after that at the new one.
Some idiot customers were insisting that by prepaying in December for Jan/Feb deliveries, we could invoice them at the old rate. We politely informed them that the law is very clear, and that it would not make the slightest difference and their invoices would indeed be made at the prevailing rate at the moment of delivery.
Switzerland isn’t the UK, but such basic accounting principles are pretty much the same the world over.
stuthe said:
said: With the election on the 4th, what sort of timelines do we expect a new government to actually make any changes to laws/budget announcements?
Is this likely to occur immediately or a few weeks after?
Labour have stated that they wont make any changes to fiscal policy until they have been reviewed by the OBR, that apparently takes ten weeks. Given they have stated they will give the OBR more power it seems unlikely that the first thing they do is introduce new tax legislation without allowing the OBR to review it.Is this likely to occur immediately or a few weeks after?
Cheib said:
stuthe said:
said: With the election on the 4th, what sort of timelines do we expect a new government to actually make any changes to laws/budget announcements?
Is this likely to occur immediately or a few weeks after?
Labour have stated that they wont make any changes to fiscal policy until they have been reviewed by the OBR, that apparently takes ten weeks. Given they have stated they will give the OBR more power it seems unlikely that the first thing they do is introduce new tax legislation without allowing the OBR to review it.Is this likely to occur immediately or a few weeks after?
The OBR is less important than the bond market. That's not to say the OBR isn't a decent predictor, but its irrelevant. Its a fluff to the electorate, the real power (as Truss found out); is the debt markets. Admitting that, doesn't fly with the electorate - despite it being true.
Michael_B said:
PositronicRay said:
Won't it be invoice date?
Precisely. Prepayment won’t make jot of difference to the VAT rate in force at the time the services are delivered, in this case, educational ones.As a comparison, as of January 2024 the basic VAT rate here in Switzerland moved from 7.7% to 8.1%, as voted by the people in a referendum in order to provide extra finance for state pensions.
For customers with annual service contracts (often not Jan-Dec) we were obliged to invoice the period up to 31.12.23 at the old rate, and after that at the new one.
Some idiot customers were insisting that by prepaying in December for Jan/Feb deliveries, we could invoice them at the old rate. We politely informed them that the law is very clear, and that it would not make the slightest difference and their invoices would indeed be made at the prevailing rate at the moment of delivery.
Switzerland isn’t the UK, but such basic accounting principles are pretty much the same the world over.
https://taxpolicy.org.uk/2024/01/26/school_fee_vat...
NowWatchThisDrive said:
Michael_B said:
PositronicRay said:
Won't it be invoice date?
Precisely. Prepayment won’t make jot of difference to the VAT rate in force at the time the services are delivered, in this case, educational ones.As a comparison, as of January 2024 the basic VAT rate here in Switzerland moved from 7.7% to 8.1%, as voted by the people in a referendum in order to provide extra finance for state pensions.
For customers with annual service contracts (often not Jan-Dec) we were obliged to invoice the period up to 31.12.23 at the old rate, and after that at the new one.
Some idiot customers were insisting that by prepaying in December for Jan/Feb deliveries, we could invoice them at the old rate. We politely informed them that the law is very clear, and that it would not make the slightest difference and their invoices would indeed be made at the prevailing rate at the moment of delivery.
Switzerland isn’t the UK, but such basic accounting principles are pretty much the same the world over.
https://taxpolicy.org.uk/2024/01/26/school_fee_vat...
Michael_B said:
PositronicRay said:
Won't it be invoice date?
Precisely. Prepayment won’t make jot of difference to the VAT rate in force at the time the services are delivered, in this case, educational ones.As a comparison, as of January 2024 the basic VAT rate here in Switzerland moved from 7.7% to 8.1%, as voted by the people in a referendum in order to provide extra finance for state pensions.
For customers with annual service contracts (often not Jan-Dec) we were obliged to invoice the period up to 31.12.23 at the old rate, and after that at the new one.
Some idiot customers were insisting that by prepaying in December for Jan/Feb deliveries, we could invoice them at the old rate. We politely informed them that the law is very clear, and that it would not make the slightest difference and their invoices would indeed be made at the prevailing rate at the moment of delivery.
Switzerland isn’t the UK, but such basic accounting principles are pretty much the same the world over.
If a child of 14 was at school with fees normally invoiced / paid annually, should an arrangement made between the parents and the school that the fees for the remaining 4 years of tuition to the age of 18 can paid in one lump sum, then I assume the school would draw up a contract that they will provide for 4 years of service provision on the basis of 100% upfront payment & issue an invoice at the current rate.
As no further invoicing/payment would be due, how could this be retrospectively reviewed should an increase in VAT be applied several months later?
Curious as a friend (with a lot more money than me!), mentioned he'd done more or less the above for his kids & paid the balance of tuition for their remaining time to end of A-levels (4 & 6 years respectively) in the last couple of weeks. He was approached by the school as to if he would consider this, rather than him opening a discussion with them. The place in question is a well-known old public school in England.
Didn't think much of it or ask any questions at the time as don't have kids myself, much less the money to send them to public school if I did!
He said the primary reason for doing this was to avoid additional VAT costs if applied in future & seemed to think it was all done & dusted.
Would assume that the school in question & their legal advisors have looked into potential ramifications before making the proposal, and more than likely it's been checked by the lawyers of some of the parents too, so those parties must have some confidence that it is legally and financially workable.
NowWatchThisDrive said:
For what it's worth, Dan Neidle (former Clifford Chance UK tax partner, now independent commentator) has suggested that VAT being retrospectively chargeable on advance payments - made before the election, at least - isn't a given, but something they'd have to explicitly legislate for.
https://taxpolicy.org.uk/2024/01/26/school_fee_vat...
I’d imagine the UK govt and HMRC will have a reasonable handle on what would appear to be quite aggressive avoidance (prepayment of one or numerous years when there was no precedent for that behaviour).https://taxpolicy.org.uk/2024/01/26/school_fee_vat...
That said, here in Switzerland VAT is very simply declared by the supplier at the moment of delivery (goods or services), as invoices tend to based on delivery notes, not orders/(pre)payments.
Whereas the UK does indeed have multiple (and moveable) tax points in such transactions, so my previous statements are perhaps not entirely applicable to the vagaries of UK VAT law/practice.
OzzyR1 said:
Would assume that the school in question & their legal advisors have looked into potential ramifications before making the proposal, and more than likely it's been checked by the lawyers of some of the parents too, so those parties must have some confidence that it is legally and financially workable.
As I mentioned above, over there you do have different rules for VAT declaration on prepayments, so there could be an argument based on when the taxable (or non-taxable in this case) event was actually created.The (school’s/parent’s) lawyers in this case obviously believe their contract would stand up to future HMRC scrutiny; however they could just be winging it as well. The worst case would be having to pay the VAT anyway.
I still suspect that it would fail, as there is no precedent for such a disproportionate advanced payment arrangement, and it is pretty obvious to all and sundry that the contract exists for one sole purpose. That is something that HMRC would usually come down on like a ton of bricks.
Just read the article linked a couple of posts above.
As I said, didn't ask any questions as it's not a situation that affects me personally, but may bump into him at a party we are both invited to in a couple of weeks & if so will find out from curiosity if the agreement was caveated to allow VAT being applied retrospectively should that be legislated.
Having looked up the fees, he has probably forked out between £500 and £750K.
Don't think £100/£150K on top will be a big issue if VAT applied, more likely that he doesn't want to spend it if he doesn't have to.
We live in different worlds - less than half of the amount he has spent on school fees would pay off the balance of my mortgage!!
As I said, didn't ask any questions as it's not a situation that affects me personally, but may bump into him at a party we are both invited to in a couple of weeks & if so will find out from curiosity if the agreement was caveated to allow VAT being applied retrospectively should that be legislated.
Having looked up the fees, he has probably forked out between £500 and £750K.
Don't think £100/£150K on top will be a big issue if VAT applied, more likely that he doesn't want to spend it if he doesn't have to.
We live in different worlds - less than half of the amount he has spent on school fees would pay off the balance of my mortgage!!
Yeah, obviously it's just one (presumably well qualified) person's opinion and no doubt others are available so I'm not taking it as gospel by any means. I'm ultimately just an interested observer here, as irrespective of where things land tax-wise, I'm not a fan of locking money away for long periods under potentially thorny circumstances so it's not something I'll be taking up with our schools anyway.
Michael_B said:
The (school’s/parent’s) lawyers in this case obviously believe their contract would stand up to future HMRC scrutiny; however they could just be winging it as well. The worst case would be having to pay the VAT anyway.
I think that is probably the mindset for the person described above paying multiple years fees early. HMRC will almost certainly say the VAT has to be paid, at that point it is a question of how much you want to fight their claim.NowWatchThisDrive said:
I'm ultimately just an interested observer here, as irrespective of where things land tax-wise, I'm not a fan of locking money away for long periods under potentially thorny circumstances so it's not something I'll be taking up with our schools anyway.
Same here. No real dog in the fight: not paid UK tax (apart from a bit of VAT during rare visits) since 2000, and our children, now aged 33 and 31, had free Swiss state secondary schools (of a generally higher standard than local private alternatives) and then £1000/year tuition under/postgraduate education.But the idea of those with sufficient cash reserves conspiring with schools to avoid VAT, compared to those struggling to pay school fees, obviously convinced of this investment in their children’s future, does rather boil my piss.
Michael_B said:
NowWatchThisDrive said:
I'm ultimately just an interested observer here, as irrespective of where things land tax-wise, I'm not a fan of locking money away for long periods under potentially thorny circumstances so it's not something I'll be taking up with our schools anyway.
Same here. No real dog in the fight: not paid UK tax (apart from a bit of VAT during rare visits) since 2000, and our children, now aged 33 and 31, had free Swiss state secondary schools (of a generally higher standard than local private alternatives) and then £1000/year tuition under/postgraduate education.But the idea of those with sufficient cash reserves conspiring with schools to avoid VAT, compared to those struggling to pay school fees, obviously convinced of this investment in their children’s future, does rather boil my piss.
- Genuine question, not being punchy here, for those who got their kids educated partly or fully in Europe (especially having dual languages or more somewhere like being in Switzerland), what would you say?
ooid said:
It is finance topic but since private education keeps popping up, I genuinely wonder seeing some of the massive fees upfront payments(400-500k), do you really think you are getting a good deal with private education in U.K. ? I mean I will probably go the same route but there is a possibility of us moving to Europe for a few years and I'm quite familiar with education there, and keep asking ourselves about the value.
- Genuine question, not being punchy here, for those who got their kids educated partly or fully in Europe (especially having dual languages or more somewhere like being in Switzerland), what would you say?
Our reasons for moving to continental Europe were both professional and personal, but one of them was indeed that our children (then aged 7 and 9) would learn new languages and be exposed to more educational/travel/cultural opportunities than in the UK. With hindsight, I am fairly sure that the (mostly*) public education they received was comparable to anything offered public or private in Britain at either secondary or university level.- Genuine question, not being punchy here, for those who got their kids educated partly or fully in Europe (especially having dual languages or more somewhere like being in Switzerland), what would you say?
* After attending the local state primary school, they both attended a private French (not Swiss) curriculum school aged 12-15, which also had an English-speaking section where Mrs B was a teacher. We got free fees in the French section for them (though at £5k/year each it would not have been extortionate), they could continue some lessons in both languages, and it made things a lot easier logistically. After that they went back into the Swiss state system for the last four years of high/grammar school and gained a national leaving certificate (maturité).
ooid said:
Michael_B said:
NowWatchThisDrive said:
I'm ultimately just an interested observer here, as irrespective of where things land tax-wise, I'm not a fan of locking money away for long periods under potentially thorny circumstances so it's not something I'll be taking up with our schools anyway.
Same here. No real dog in the fight: not paid UK tax (apart from a bit of VAT during rare visits) since 2000, and our children, now aged 33 and 31, had free Swiss state secondary schools (of a generally higher standard than local private alternatives) and then £1000/year tuition under/postgraduate education.But the idea of those with sufficient cash reserves conspiring with schools to avoid VAT, compared to those struggling to pay school fees, obviously convinced of this investment in their children’s future, does rather boil my piss.
- Genuine question, not being punchy here, for those who got their kids educated partly or fully in Europe (especially having dual languages or more somewhere like being in Switzerland), what would you say?
He did very well, but felt it was pretty awful: the tech they used was almost non-existent - overhead projectors with slides the tutors had written!
He found most people there (& believes it true in France) had simply moved on to the Uni as their local one. It felt to him more like moving on to the sixth form. Not desperately challenging....but he did enjoy his year there.
Went on to a good Masters at Edinburgh and now in a decent job.
On the broader question of UK private education value for money - hard to tell during or immediately afterwards - some children always appear favoured, including those more sporty ones - but at least the pupils were there because their parents wanted them to be there, so very few genuine bullying or other issues.
Now, some years on, we can see ours are both confident young adults with views and opinions that we feel are decent. Easy company, able to speak at many levels.....so overall, worthwhile.
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