Research and analysis

Exploring wealthy customers’ views on links between their personal and mid-sized business tax compliance behaviours

Published 29 May 2025

Prepared by NatCen and Walnut Unlimited for HM Revenue & Customs

Gregor Jackson, Drew Still, Zoe Wearden, Amy Rayland (Walnut Unlimited)

Research report number: 800

April 2024

Key Messages

HM Revenue & Customs (HMRC) commissioned the National Centre for Social Research (NatCen) and Walnut Unlimited (Walnut) to carry out qualitative research with wealthy UK individuals who own or operate mid-sized businesses, as sole owners, shareholders, or salaried directors. The research aimed to gain further evidence and to deepen understanding of the possible links between attitudes and behaviours around business and personal taxes.  

It will be used by the Wealthy and Mid-sized Business Compliance directorate (WMBC) to develop compliance strategies, simplify tax, and improve the customer experience.  

Within the research sample, most participants viewed their personal and business incomes as separate. This was particularly true for shareholders and salaried directors, who received a salary from the businesses and were less connected with the day-to-day financial dealings of the business. Sole owners and joint owners who owned smaller businesses in terms of the number of employees, and often did not pay themselves a significant salary, were more likely to see their personal and business incomes as interconnected. 

There was evidence of a link between wealthy individuals’ approaches to risk in terms of personal and business tax:  

• all participants claimed to be risk averse with both their personal and business tax affairs  

• when shown hypothetical scenarios featuring characters carrying out a range of risky tax behaviours, there was a strong degree of consistency of response; generally, those who empathised with risky business tax behaviours also empathised with risky personal tax behaviours. Those who did not empathise with risky personal tax behaviour showed little empathy with risky business tax behaviour   

• when asked their opinion on the matter from their experience as wealthy owners of mid-sized businesses, participants believed that there would be a connection between risk appetite relating to both personal and business taxes 

Propensity to take risks with tax was more strongly related to other factors than whether the tax was a personal or business tax. Common motivations identified were: 

• seeing the behaviour as insignificant or inconsequential: relating to risky behaviour where the amount involved was deemed small 

• believing that the behaviour was common: again, generally relating to low-value sums such as minor expenses inflation, with the exception of abuse of the furlough scheme during the COVID-19 pandemic, which was perceived to be common, but for more significant sums 

• perceived grey areas, such as extending a business trip for holiday purposes or potentially risky interpretation of IR35 rules 

• certain taxes being considered unfair: particularly in relation to Inheritance Tax, which was almost universally considered to be unfair 

Common barriers to risky behaviours in relation to both personal and business taxes were: 

• participants’ self-perception as moral individuals: regarding themselves as law-abiding citizens who met their social responsibility to pay due taxes 

• risk aversion: fear of being investigated or facing enforcement action and the reputational threat this would have 

• lack of reward: particularly for small amounts of money, the perception that the risk-benefit equation was unbalanced 

• perceived limited opportunity: for personal taxes on the basis that the system is clear and transparent. For business taxes, because they viewed their business taxes as relatively straightforward or there was sufficient oversight (either internal or external) to make most risky behaviour impractical 

Risky behaviour was most likely when motivations were higher and barriers lower. This scenario occurred in two main circumstances: 

• for smaller mid-sized businesses with a sole or joint owner, where the owners had greater control over the company finances and tax affairs, limited or no formal training in tax and accountancy, and there was less scrutiny of accounts either due to a less established finance team or lack of external audit 

• in relation to Inheritance Tax, which was viewed as both highly motivating to evade and potentially difficult to detect

1. Introduction

1.1 Background to the research  

HMRC commissioned NatCen and Walnut to carry out qualitative research to gain further evidence and to deepen understanding of the possible links between attitudes and behaviours of business and personal taxes, which will be used by the WMBC directorate to develop compliance strategies, simplify tax, and improve the customer experience.

1.2 Research aims:

The core objectives of the research were to 

1. explore links between the compliance attitudes and behaviours of wealthy individuals and the mid-sized businesses they own 

2. identify if there were any differences between sole-owners, shareholders, and salaried directors of mid-sized businesses 

To achieve these objectives, the research needed to answer several questions: 

• how do wealthy individuals approach their personal and business tax affairs? 

• does their perceived level of risk differ between their personal and business tax affairs? 

• how involved are wealthy individuals with the tax affairs of their businesses?  

The research also set out to explore whether ownership models affect factors including: 

• whether wealthy individuals distanced themselves from compliance attitudes and behaviours of their businesses 

• how they compartmentalised different income schemes in relation to tax, whether they treated or thought of their personal and business’ incomes differently, and how this affected compliance 

• whether and how wealthy individuals learned about tax processes and concepts, and whether greater experience led to an increased understanding of tax processes

1.3 Overview of methods 

The research involved 39 in-depth interviews with wealthy UK individuals who own or operate a mid-sized business, as sole owners, shareholders, or salaried directors. 

1.3.1 Topic guide and stimulus development 

An inception meeting was held at the beginning of the research to discuss and finalise the aims and objectives and the research approach.  

NatCen and Walnut then designed the topic guide for the interviews in collaboration with HMRC. A key challenge of this research was the focus on risky behaviours and exploring how to evoke candid responses from participants in terms of both compliant and risky tax attitudes.  

The research team drew upon behavioural science expertise to identify techniques to use within the topic guide to counteract this challenge. This included the inclusion of a pre-task, a section at the beginning of the interview to build rapport, and framing questions in an indirect manner.  

As part of the topic guide, four hypothetical scenarios were designed to present participants with examples of risky tax behaviours and potential justifications. During the inception meeting potential behaviours were discussed, with scenarios then drafted by Walnut and NatCen before being approved by HMRC. Full details of these scenarios can be found in Appendix B.  

Interviews began with an introductory section to build rapport with the participant, discussing their working life and career history. This was followed by an exploration of attitudes towards personal and business taxes before a section reviewing the scenarios. The interview concluded with a more explicit discussion about taking risks with tax, carefully placed after the scenarios to prime and open respondents towards discussing their own behaviours and experiences.  

An initial pilot phase of 10 interviews was conducted. Following this, some minor changes were made to the topic guide to ensure it was fully meeting the objectives of the research. Feedback was also provided on the scenarios, with some changes made to ensure they covered an appropriate range of behaviours that could be perceived as realistic or relatable to participants. These changes included: 

• changing behaviour in scenario one from keeping money in an offshore account to hiring a small number of contract staff as freelancers 

• changing behaviour in scenario two from moving profits into a business with a deliberate low tax regime to setting up an offshore account 

• taking out a rental property hidden from an accountant from scenario three 

Halfway through the main phase fieldwork period, after discussion with HMRC, an extra behaviour was added to this third scenario. In this, the business owner put all of his staff onto the furlough scheme, while still requiring them to work and inflating the hours of others.

1.3.2 Sampling and recruitment 

The research utilised a sample frame provided to Walnut by HMRC. Before the sample was delivered to Walnut, HMRC mailed a letter to all individuals in the sample providing them with details of the research and providing the opportunity for them to opt out. This letter was sent out from 9 August 2023, with the opt-out period closing on 31 August 2023. Those who requested to opt out were removed from the sample file.  

Recruitment took place using Walnut’s in-house executive telephone interviewing team. A short screening questionnaire was used to determine each individual’s eligibility to participate. To qualify, individuals needed to have an annual income over £200,000 or assets above £2 million in the last 3 years, and an association with a business with a turnover of more than £10 million and or more than 20 employees (either as an owner, shareholder or salaried director).  

Quotas were set against ownership model and the use of agents for personal and business tax affairs. No quotas were set against any other characteristic. Further questions were included in the screener to ensure a spread of participants across regions and demographics (such as age and gender). Detail of the final achieved sample can be found in Appendix A. Potential participants were offered a charity donation of £80 for taking part.  

The pilot recruitment period took place between 2 September 2023 to 10 November 2023. Main phase recruitment took place between 20 November 2023 to 1 March 2024. An additional mail-merge invitation to participate, with the opt-out letter from HMRC attached, was sent to all those in the sample frame for which an email was available on 9 January 2024.  

1.3.3 Fieldwork 

Pilot phase interviews were carried out between 23 October 2023 to 10 November 2023, with main phase interviews taking place between 20 November 2023 to 1 March 2024. Each interview lasted approximately 60 minutes and was carried out via Microsoft Teams. Interviews were recorded with participants’ consent and transcribed. Each interview was moderated by an experienced member of the Walnut research team.  

Table 1 below presents how many interviews were conducted with individuals falling under each ownership type. During fieldwork it was noted that some individuals do not fall distinctly into one category but can be counted in several (for example, they are both a shareholder and a salaried director), and therefore the total in the interviews column exceeds 39. Table 2 presents how many interviews were conducted by business sector.

Table 1: Achieved sample by ownership type

Characteristic	Quota	Interviews
Sole Owner	13	14
Director	14	32
Shareholder	13	19

Table 2: Achieved sample by sector

Sector	Interviews
Information and communication for example, IT	8
Construction	4
Financial and insurance	4
Professional, scientific, and technical for example, legal	4
Real estate and property management	2
Water supply, sewerage, and waste management	2
Transportation and storage	2
Manufacturing	2
Arts, entertainment, sports, tourism, and recreation	2
Electricity, gas, steam, and air conditioning supply	1
Accommodation, hotels and food services	1
Wholesale and retail trade, including motor trade	1
Agriculture, forestry, and fishing	1
Human health and social work for example, childcare, care	1
Administrative and support services for example, leasing	1
TV, film, radio, and publishing	1
Education	1
Other	1

This research was qualitative (in the form of in-depth interviews). It was therefore not designed to quantify findings, but to offer detailed insights into the participating individuals, their businesses, and their tax activities. The interviews averaged 60 minutes. Fieldwork was carried out between October 2023 and March 2024, and all interviews were carried out by experienced moderators from within the project team. 

HMRC was identified as the research sponsor as part of the process of recruiting individuals. While we emphasised the confidential and anonymous nature of the research, it is probable that this reduced the likelihood of recruiting individuals who had committed serious breaches of tax rules, or who would be willing discuss breaches openly in the research.

1.3.4 Analysis 

A Framework Analysis approach was taken, whereby each interview was recorded in a detailed analysis grid, with key findings under each objective and research theme summarised for analysis.

2. Attitudes towards personal and business income and tax

This chapter explores participants’ backgrounds and experiences, how they approach their tax affairs, and how they see each of their income streams in relation to the other.  It starts with analysis of the demographic differences and types of business included in the sample, before discussing how participants approach their personal tax affairs.  

The following section describes how participants approached business taxes, highlighting how these differ across business types. Finally, we examine how participants perceive the links between their personal and business incomes. 

2.1. About the participants  

The research captured a broad spectrum of participants in terms of: 

• business sectors, including real estate and property, finance, construction, transportation and storage, manufacturing, information technology, hospitality, arts and entertainment, and professional services 

• business types and levels of involvement from sole owners to salaried and non-executive directors 

The geographical reach of the businesses the participants were involved in ranged from regional, national, and international. All companies fell into the mid-sized business definition, but there was large variety in the business model (for example the number of employees, having physical premises, the number of years of trading).  

In line with the wider mid-sized business landscape, some businesses had small numbers of employees, while others had much higher employee numbers. 

Almost all the participants were male, and the majority aged 45+. Most had families either with school age or adult children and felt a responsibility to provide for their children and grandchildren without making their lives ‘too comfortable’. 

There was no one typical background between the participants. While some had come from wealthy families and in some cases inherited a family business, others described themselves as self-made. However, all the participants appeared to share an entrepreneurial spirit. Few regarded themselves as wealthy, though acknowledged they were comfortable financially. 

2.2. Personal taxes 

2.2.1. Views on levels of personal taxation (and their attitudes towards tax compliance)

Participants felt that they paid significant amounts of personal tax. While they would not like to contribute any more tax, most recognised their responsibility as high earners to contribute more towards public services. Very few felt that personal tax rates were unfair, but they also felt personal tax rates were nearing the limit of fairness for wealthy, or middle class, individuals like them.  

“I’d rather [the current level of personal income tax] was lower, but I’m not feeling it’s there to punish [people], it’s at a reasonable level I think for the money I make. If it got much more then I might think, ‘Why am I bothering to work?’, but it’s not at that level for me at the moment, it’s worth me doing the work.” (Director and shareholder, Tech sector, Male, 55+ years)

There were some specific tax rules that were perceived as unreasonable. For example, extra tax rates for people earning just above £100,000, and Inheritance Tax were both spontaneously mentioned as unfair. Dissatisfaction with Inheritance Tax was a common theme throughout the research, perceived as double taxation, and was of particular concern for those approaching retirement age. 

“I think it’s generally OK, I would say the only thing that I think is bizarre is if you’re earning between £100,000 and £125,000, you get massively taxed… I think it’s taxed at 60%. So you’re penalising somebody who is earning good money but not earning crazy money, why is that?” (Owner and Director, Tech sector, 55+ years)

Other specific tax rules that were mentioned often related to a participant’s individual circumstances due to ways in which it had affected them personally, for example the removal of allowance for mortgage interest on rental properties.  

“The one that bothers me a lot is rental property. The way the tax regime now is, I could make a loss on a property and still have to pay tax, which is ridiculous.” (Director, IT and Communications, Male, 34 to 54 years)

There were also nuances of the tax system that were mentioned by a few that seemed unfair, as they felt they had been penalised through the tax system for personal life choices they had made; for example, complexities of getting married or having children affecting their assets and qualification for certain benefits. 

A bigger issue than the rate of tax was, for many, how tax was spent. Many participants expressed dissatisfaction and frustration at the way their taxes were invested. Examples included perceived poor maintenance of infrastructure, and perceptions of the effectiveness of services such as health and education. Many felt they had personally gained little from the tax they had paid, especially those with private healthcare or privately educated children. 

“I am perfectly happy with the amount of tax I pay; I would even be happy to pay more if you could see things improving. When you look at what has happened to the state, school funding. We pay into a foundation to top up the local primary school so they can bring music teachers in to teach the kids music, which we shouldn’t have to do.” (Salaried director, Construction, Male, 34 to 54 years)

“What would help is a better understanding of tax, if you felt like you were getting value for money from the tax you’re paying. Health services aren’t great at the moment, education isn’t great at the moment, the roads are a mess at the moment, all those things. It’s when people feel it’s unjust. There’s a feeling that there is something unjust about this at the moment and it’s unfair.” (Director, Entertainment sector, Male, 55+ years)

2.2.2. Approach to personal tax filing 

Participants were broadly split between those who managed and filed their own tax returns and those who used an agent. Those who filed personally considered their tax affairs to be sufficiently uncomplicated to avoid the use of an agent, though some occasionally sought advice on specific matters. Examples include when disposing of shares, advice on investments, declaring capital gains, and purchasing overseas property – this advice was sought usually from a friend or agent they had used in the past.  

Despite the process being seen as relatively straightforward, there were some low-level criticisms made about the online filing system and difficulties contacting HMRC to raise queries.  

Some liked the element of control they had in filing their own taxes, and often had the relevant training or experience to be able to do so. However, there was a perception that some non-experts would struggle to fill out and manage their own tax affairs. 

Participants who used agents did so because they felt their tax affairs were more complex, feared making errors, or simply wanted to avoid the perceived hassle of filing. 

Some participants used local firms while others used the big four accountancy firms. It was largely dependent on individual needs and circumstances. Some used the same agent or accountancy firm that was used to manage their businesses affairs. Relationships with individual accountants or firms were often longstanding.  

Individuals tended to start using tax agents for personal tax either when their affairs became more complicated, such as renting out properties, making investments, or their business structure changed which had an implication on their personal tax obligations.  

Some individuals mentioned that they started using an agent due to a change in their circumstances which made their financial situation more complex. Similarly, some mentioned that the tax system had become increasingly complex and felt it was too difficult for them to manage, so they decided to employ an agent. Participants also mentioned frequent changes to tax rules which they found difficult to follow, and therefore relied on an agent for specialist knowledge. 

While using an agent minimised risk and effort, some participants complained about the cost, blaming the complexity of the tax system for this additional expense. 

“I feel like there is no option but to have an agent, I’d almost have to become a trained accountant which I don’t want or have the time to do, but otherwise I would never have the knowledge. But I wouldn’t want to risk being investigated. I have one personal accountant and four business accountants, and I do that as it’s so complicated. But if it was all of a sudden simplified and I could do it myself, I would be better off to the tune of about £40,000 a year.” (Owner, Electricity, gas, steam and air conditioning supply, Male, 34 to 54 years)

2.3. Business taxes 

2.3.1. Perceptions of business taxes 

Participants generally viewed business tax rates as fair, but more complex and subject to more frequent change than personal taxes. For some, this greater complexity was a sign of unfairness, as it increased the risk of errors, but most acknowledged that as businesses were more complex than personal finances, increased tax complexity was inevitable.  

As with personal taxes, participants felt that business tax rates were at the top end of acceptability so if they were raised any higher they would be seen as unfair and could discourage entrepreneurship.  

Some specific examples given of business taxes being unfair included favourable tax relief being withdrawn making previous business decisions less justifiable. 

“When we started the company, there was a taper relief scheme that encouraged people to take a risk and start their own business whereby after a couple of years, your capital gains tax would go down to 10% I think. And a number of years after we started the company, that rule had changed. So I suppose it felt a little unfair to take a great risk based on favourable tax regimes, only for it to be removed.” (Shareholder and Director, IT Sector, Male, 55+ years)

All participants used professionals to file their business tax returns, with larger scale companies or those which had more complex operations also having their returns externally audited. All had used agents since the early stages of setting up their businesses, including those with accountancy qualifications.  

Using professional accountants (either internal, external, or both, depending on the size and complexity of the business) was seen as necessary to avoid non-compliance with tax rules which were seen as ‘too complex’ for participants.  

“It’s too complicated to be done by one person, so using agents is a necessity. Books are also signed off by various auditors, so they have to be accurate.” (Director, Real estate and property management, Male, 55+ years)

2.3.2. Involvement with business taxes 

Participants had a range of involvement in business taxes. For relatively smaller operations or where the participant was well versed in tax, they were more heavily involved. However, all felt they had, as a minimum, some top-level influence and responsibility for the tax affairs of the business they were involved with. 

Sole owners and joint owners tended to be more involved with business taxes, often due to the smaller scale of the business and their closeness to it. Those who felt that they had more of a personal sense of ownership and responsibility for the business tended to more heavily involved in managing their business finances. 

Salaried directors and shareholders tended to be less involved unless finance was part of their day job. Some, particularly directors, had relatively little involvement with the tax affairs, potentially just signing off the accounts at Board level. 

“I sit in on the audit meeting at the end, but it is not something I get involved in too much. When I was running the business, it was different. We didn’t have such a strong Financial Director at the time, and I was more involved then. Now I don’t because the FD is way cleverer than I am and knows what he’s doing.” (Shareholder and Salaried Director, Construction, Male, 55+ years)

Participants broadly felt that their business models were too simple to warrant tax planning or risk assessment, and typically had not spent time considering opportunities to help influence or reduce their business taxes. Though there was familiarity with the phrases ‘tax planning’ and ‘risk assessment’, participants did not particularly engage with the concepts or feel that their businesses did this.  

“The businesses we have are service companies, so it’s not really sophisticated, you know [for example] there’s obviously revenue, expenditure, tax is paid in advance. I think in general as a rule across the board we’re in the service industry so we’re not claiming huge amounts of capital allowances, or investment reliefs, or that sort of thing. ” (Director, Finance, Male, 55+ years)

Motivations for tax planning tended to be relatively straightforward, examples included purchasing equipment or machinery for tax efficiencies. Participants often framed these as business-related (rather than tax-planning). 

“In a sense I control what we do, but we don’t as a business have any special things, other than these beneficial capital allowances if we buy equipment and machinery. So when it’s buying large equipment yes [I have control]. The other allowance we get is because we reinvest in research and development, so we get quite a large reduction for research and development. So I’ve been working with the managing director on filling in the relevant form because there’s been a tightening of what you can get for R&D allowances at the moment. But we don’t do that for tax reasons, we do that for the company, but with the benefit that we get the R&D tax allowance. ” (Director and Shareholder, Tech sector, Male, 55+ years)

Participants tended to learn about business taxes ‘on the job’ through growing their businesses from start-ups or small businesses through to their current size, or throughout their careers at other organisations. Some had professional qualifications in accountancy, though this was deemed insufficient to file business tax returns solely or personally, due to the perceived risks of error and complexity of the business tax system. 

2.4. Perceptions of income 

Most participants saw their personal and business incomes and taxes as separate. This was because they drew a salary from the business, making it feel separate from business income. Participants actively chose to see their personal and business incomes as separate to avoid confusion and reduce the complexity of needing to account for personal spending in their business accounts.  

“[I see them as] separate. The personal stuff is pretty easy because most of my payments are through PAYE, so I don’t really have to think. You get your tax code, adjust it now and again, and that’s about it. I think when you put it through a company you have the whole concern about is this allowed, what are the allowances here, so I don’t have that anymore which is quite good because that was quite complicated. For the corporate side that is done by the tax people, so I don’t really have to get involved in those.” (Owner and Director, IT sector, male, 55+ years)

The exception to this were smaller sole or jointly owned businesses where owners did not pay themselves a salary (or just minimum wage). Here, personal and business income were much more interlinked. In these cases, not taking a salary was partly driven by tax considerations, for instance, not wanting to pay tax on the salary and taking income as dividends instead, but also keeping money in the business if they did not personally need it (for example through having other sources of income). 

Such a close personal connection with the business also influenced this thinking. In some cases, their primary residence was used for business purposes, blurring the lines between personal and business matters. 

“[I see my personal and business incomes as] quite linked. It makes it more difficult to manage my taxes. In trying to determine which expenses are business versus personal expenses, trying to manage if it’s right to take a loan, or dividend or income, all decisions that I didn’t have to make before as I was working as an employee.” (Owner, Finance sector, Male, 55+ years)

Businesses that view personal and business incomes as the same were seen as having a ‘small business mindset’ by participants, and tended to associate such behaviours more with sole traders than mid-sized businesses. Some owners had made the conscious choice to pay themselves a salary to reduce any potential confusion over whether the income was personal or business.

3. Attitudes and behaviours around risk

This chapter explores how participants responded to the hypothetical scenarios used during in-depth interviews. By presenting examples of risky or illegal behaviour in various contexts we were able to draw out how participants felt about these and, by extension, their own attitudes towards risk.  

The section starts with an examination of the perceived seriousness of the different types of risky behaviours, and then explores the common motivations and barriers to taking risks in both personal and business taxes.   

3.1. Scenario responses 

In interviews we presented participants with up to four scenarios featuring fictional individuals engaging in a range of risky personal and or business tax behaviour, shown in rotated order to minimise order effects.  

These included abuse of IR35 rules and furlough payments, making cash payments to staff to reduce national insurance contributions, making personal purchases through the business, failing to declare rental income, Inheritance Tax infringements, and abuse of tax credits. The scenarios are found in appendix B.  

This approach was designed to achieve several goals: 

• introducing participants to a variety of risky behaviours in both personal and business tax, priming them with examples of risks that they may have taken, or heard of others doing 

• provide justifications for the behaviours which participants could potentially relate to and use to explain any risky behaviours they had undertaken 

• allow participants to comment on behaviours that were not explicitly their own, meaning they were more likely to speak candidly 

In questioning, we asked how common or prevalent participants considered the behaviours, what they would say to the fictional character, their thoughts on justifications and whether they could empathise with them. Where it felt appropriate, we also asked whether the participant had engaged in the behaviour, or knew anyone who had (if so, follow-up questions were asked about these activities).  

Overall participants responded from a moralistic position, pointing out the unlawful or risky actions of the scenario personas. Participants had typically never considered, and would never consider, replicating the behaviours described in the scenarios, though responses to the behaviours varied between participants.  

However, there were many instances where participants expressed that the fictional character was ‘not doing too much wrong’ or felt they could empathise with the behaviours. A few admitted to similar behaviour in their own business, though this was rare. 

A notable exception to this was with Inheritance Tax, which participants found deeply unfair and wanted to take steps to either avoid or, in some cases, evade. 

While participants almost uniformly denied they would replicate the evasive behaviours from the scenarios, most believed that these behaviours were not uncommon, citing actions of their friends, relatives or business associates. 

The behaviours viewed as most serious were abuse of furlough payments and persistent purchasing of personal items including holidays and a car for personal use through the business.  

These behaviours were deemed most serious for two main reasons, firstly they involved deliberate tax evasion: it was felt that these were not ‘grey areas’ and to evade tax through these means was a deliberate act. Secondly in the case of furlough payments, the behaviour ‘felt like stealing’ in a way that other behaviours did not: deliberately taking money from the government (rather than ‘failing to pay due taxes’). 

There were several behaviours commonly regarded as ‘medium level’ serious, which included, IR35 infringements. While some participants regarded the rules as extremely clear and judged this behaviour to be more serious as a result, for others it was a grey area which businesses could legitimately seek to exploit. 

Misuse of tax credits is another ‘medium level’ behaviour. In the case laid out in the scenario the individual had spent 80% of the funds legitimately, and the infringement was viewed as less serious as a result, presumed to relate to a relatively small amount of money. However, the deliberate nature of the evasion meant that this was still regarded as moderately serious. 

Similarly, failing to declare overseas rental income is another ‘medium level’ serious behaviour. As with the tax credits example, this was seen as a relatively small amount of money – particularly in relation to the income that the scenario presented. 

Some participants also had their own property portfolios (in the UK), and while they claimed to pay the right amount of tax on these, there was frustration about changes to tax in relation to rental properties that participants felt punitive and unfair (notably on mortgage interest) 

Finally in terms of ‘medium level’ serious behaviours making ‘naughty money’ from ‘off the books’ classic car sales (using language adopted in the scenario). Again, this was regarded as a small amount of money, reducing the perceived seriousness of the behaviour. Some also felt this was a grey area, depending on whether it was a hobby (felt to be permissible) or a genuine side-line business (less so). 

Two behaviours were deemed less serious, firstly, the use of ‘risky’ offshore financial arrangements. Framed in the scenarios as ‘risky’ rather than explicitly illegal, many participants felt that it was acceptable for businesses to make use of these arrangements if they were legal. However, participants claimed they would not look to benefit from such arrangements in their businesses, believing it would not be ‘worth the effort’. 

Secondly, minor personal purchases through the business, notably the purchase of extra alcohol for an office Christmas party or paying for meal through business accounts. While most acknowledged that this behaviour amounted to tax evasion, it was not viewed as particularly serious by most (though for some, any offence was deemed unacceptable). Some readily admitted to doing the same in their business 

The scenario describing Inheritance Tax evasion was viewed differently. While some participants took a moral standpoint, most strongly empathised with the behaviours of the individual in the scenario. Some participants said they would take similar steps (others went less far, stating that they would minimise their Inheritance Tax obligations through solely legal means). There was a degree of unawareness of some of the rules around Inheritance Tax, for example that paying for a wedding would count as a declarable gift. 

3.2. Motivations for taking risks 

Participants typically claimed not to have taken any tax risks. Views on motivations for tax evasion relied on their hypotheses around what may encourage people to take risks. However, several key themes emerged in relation to both business and personal taxes. 

3.2.1. Insignificant or inconsequential behaviour 

Many participants considered that the primary cause of tax evasion was the belief that the behaviour was insignificant. Examples included over-ordering alcohol for a Christmas party and putting minor personal expenses through the business. 

While participants broadly claimed to diligently keep and record all personal expenditure to be declared, some confessed to putting minor expenses such as meals and travel through the business, using the justification that it was insufficiently serious to matter. There was little comprehension or acknowledgement that, taken cumulatively, such behaviour would lead to undeclared revenue mounting up.  

“My child uses an old work iPad, it has no value for what they do now anyway. If it’s getting thrown away, is it a bad thing?” (Director, Real estate and property management, Male, 55+ years)

“I don’t think myself and the other Directors would do this kind of thing, we would optimise cash but within the law, we may buy a computer that our daughter uses but wouldn’t buy a car.” (Shareholder and Salaried director, Professional, scientific and technical, Male, 55+ years)

3.2.2. ‘Everyone’s doing it’ 

Again, this was used primarily to justify behaviours regarded as inconsequential such as over-claiming expenses. However, it was also used as the justification for the much more seriously regarded abuse of furlough payments.  

This behaviour was introduced part-way through fieldwork so was not commented on by all participants, but among those who saw it, there was a consensus that the behaviour was common, and that they knew of people or businesses that abused the furlough scheme.  

“I know a law firm that one of my staff used to work at that said anyone that didn’t work during the furlough period would be fired. It was just free money. I’m upset by it because we went so much by the book, and now I’m paying that back in my taxes, money that they have taken for free. It was easy to justify.” (Shareholder and Salaried Director, IT, Male, 34 to 54 years)

The ease with which participants could empathise with the view of ‘everyone’s doing it’ correlated with the perceived seriousness of the behaviour, which came down to how much money was involved. Where the amount seemed insignificant, such as putting meals on business accounts or small travel expenses it was seen as less serious and more acceptable.  

Behaviours involving inconsequential amounts were also the most common behaviours that participants themselves admitted to while using the ‘everyone’s doing it’ justification, suggesting that they experienced cognitive dissonance (believing themselves to be a moral person, while being confronted with their own undesirable behaviour), using the seemingly trivial sum as a reason why the behaviour was less serious. 

“Everyone who runs their own business will charge a few things to the business that shouldn’t be done, fact of life.” (Director, Food and Beverage, Male, 55+ years)

“The odd meal, the odd drink I would do, but not something significant like a company car. [My partners and I] have gone out and had a meal and discussed if we should expense it and we have but we don’t take the mick.” (Owner and Director, Professional Services, Male, 55+ years)

With larger amounts (particularly the furlough scheme), the justification was far weaker, implying that low level evasion was broadly accepted, or at least more accepted than instances where the sums were greater. 

3.2.3. Grey areas 

The third major justification for behaviours was that they were grey areas, which could be legitimately pursued by businesses willing to risk investigation or enforcement. 

In some cases, the justifications overlapped with ‘insignificant behaviours’ and ‘everyone’s doing it’ – for example on certain expense claims (such as an extra night in a hotel away, staying in a more expensive hotel than one normally would when away for business, or unnecessarily upgrading to business or first-class travel). 

“I mean I did go to America before lockdown for work and then I took a week’s holiday in Florida. I thought whilst I’m in America I may as well have a few days holiday, so I did that. I paid for the hotel myself, but I didn’t pay for the flights there and back myself because I was going to do the flights anyway and it was exactly the same amount of money for the company. Some people may see as a free holiday because I didn’t have to pay for my flights to Florida, well no I didn’t, but on the other hand I would say I had to fly to America anyway.” (Shareholder, Professional, scientific and technical, Male, 55+ years)

“I’ve been in businesses working with individuals where their risk appetite was around expenses. Expenses are a place where you can play the system if you choose to play the system, and they absolutely chose to play the system right the way up. They tried to nudge the business in that direction, and they got caught, and they left.” (Salaried Director, Water supply, sewerage, waste management, Female, 55+ years) 

Infringements of rules around tax credits and IR35 rules also fell into the grey area category, with some citing cases which seemed to provide sufficient lack of clarity for businesses to try to exploit loopholes. 

“Well, we need more Simons [Simon is a fictional character from the scenarios] in the UK to create employment. I think the rules around employees versus freelancers are very vague and the high court just I believe ruled in favour of [company] as they’re self-employed, so there’s still a grey area.” (Shareholder, Professional, scientific and technical, Male, 55+ years)

“[On Simon’s abuse of tax credits] You can turn it the other way around and if it’s not quite right, then HMRC need to be a bit clearer about what’s allowed and what isn’t allowed, and if they see something going on that isn’t allowed, they should be a bit more active sorting it out really. [Simon]’s sort of doing stuff that’s within the rules, even though there might be a little bit of grey area.” (Owner and Director, IT sector, Male, 55+ years)

In some cases, there was clear empathy with the position of the fictional character (Simon), with participants seemingly unwilling to acknowledge IR35 rules. 

“The 5 to 10 contract staff is exactly the situation we have; I don’t have a problem with Simon employing contract staff if it’s reducing National Insurance Contributions. Don’t go after Simon, go after the contract staff. He’s just trying to get the staff in, they just happen to be contract staff. I find it frustrating [when] it becomes a business problem, not the individual’s issue.” (Salaried Director, Construction, Male, 55+ years)

3.2.5. Unfair taxes 

This justification predominately related to Inheritance Tax. There were strong motivations to avoid or evade the rules for this tax which was viewed almost universally as deeply unfair. 

“[On Inheritance Tax] We will begin to think about our tax planning soon. The last thing I want to do is give it to the tax man. I’ve worked all my life. Equally I don’t want to give my kids things to ruin them. I think that’s widespread. People say, ‘I’ve paid my taxes, now it’s up to me to do what I wish with my money’. The fiscal drag with the threshold has put people in that position when it’s less than the cost of a house.” (Salaried Director, Real estate and property management, Male, 55+ years)

3.2.5. Other justifications 

Aside from these main justifications above, which all attracted at least some level of empathy among participants, others were identified including: 

• where evasion would ‘save the business’ (for example, through taking or making payments in cash, abuse of furlough or other arrangements, IR35 infringements). While some participants raised this as a hypothetical justification with which they could empathise, most took the view that this was not an acceptable justification and not one which they would personally rely on 

“You end up with a lot of people we employed that had mortgages and families that dependent on their job. So, I guess when you are in a trough, and think you could lose all of it, that’s when you start to make bad decisions, and start looking at the tax system as a way of making money.” (Shareholder, IT sector, Male, 34 to 54 years)

• ignorance of the rules. A few participants claimed lack of knowledge of Inheritance Tax rules regarding gifts, seemingly wanting to ‘stay ignorant’ as a potential justification for evasion 

• ‘not my tax’ – raised spontaneously in relation to paying tradespeople in cash while being confident that the money would not be declared as income. The ‘one step removed’ nature of the evasion acted as an acceptable justification to avoid due diligence (for example, requiring an invoice or receipt) 

“This type of thing [speaking on paying staff in cash] is so ingrained in society that I don’t even think about it, and if a builder wants to be paid cash, I think that’s fine, it’s everywhere and it is part of the UK society and has been, other people can choose what to put through their business or not, that is their choice. I have paid people in cash in the past but it’s up to them to declare that.” (Owner, Electricity, gas, steam and air conditioning supply, Male, 34 to 54 years)

3.3. Barriers to taking risks 

While participants were able to identify potential justifications or reasons for evading business and personal tax, they were more likely to see barriers to infringements. 

3.3.1.  Moral standpoint 

A key barrier from participants, even among those who admitted to some form of risky behaviour, was their self-perception as law-abiding citizens.  

Almost all participants claimed to see the moral imperative of paying tax to fund vital services, recognising both their personal and business responsibilities in paying taxes. For most, it was simply ‘the right thing to do’. For some, their role as the business owner made it more important that they display compliant behaviours. 

“From my personal standpoint, I see all of these things as potential risks. I like to believe that I have a professional and moral compass that it is about trying to get those things right, so that we are not carrying any risks going forward, and so you don’t have any criticism or people saying you have done it wrong.” (Shareholder and Salaried director, Other, Male, 34 to 54 years)

3.3.2. Risk aversion 

Aside from the moral obligation, the most prevalent perceived barrier was fear of being investigated by HMRC. Many participants relayed stories in which either they or business associates had been investigated, noting the extra work and effort required to prove they had done nothing wrong.  

Some believed that once a business or individual had been investigated, they were more likely to be investigated again leading to a cycle of draining experiences, and damage to reputation. 

“I think there’s real concern because of the impact on the technical concern, can have massive ramifications. We are very closely audited in the UK, we’ve had enough. There’s just too much complexity around the calculation.” Salaried Director, Information and Communication, Male, 34 to 54 years 

Alongside this was the perceived reputational risk of being caught breaking the rules.  

“I suspect people feel a discrepancy between personal tax and business tax and would be more worried about personal tax being a reflection on them rather than the business getting into trouble.” (Director, IT sector, Male, 34 to 54 years)

3.3.3. Lack of reward 

Risk aversion was closely linked with the perceived low rewards for tax evasion. Many participants responded with incredulity to the scenarios, questioning why a high earning businessperson would risk investigation over seemingly trivial sums.  

“I suspect [Sharon – a fictional character from the scenarios] gets paid pretty well so if she wants a bit more money to pay for her kid’s laptops, she should probably pay herself a bit more and pay income tax on it.” (Director, Finance sector, Male, 34 to 54 years)

Views varied on what constituted a trivial or unmotivating reward when balanced against the risk. However, the general perception was that a few hundred pounds per year would be insufficient to attract widespread condemnation. 

In the case of the fictional character Jeremy, who made ‘naughty money’ through the sale of classic cars and rented out a holiday home in France without declaring the income, acceptability in some cases came down to the scale of the operations; if a hobby or renting only to family and friends, this was deemed more acceptable than running either operation as a business. 

“If the France house is proper business, he is very silly. If it’s rented out to friends and family, then it’s not a big deal. If you buy and sell a car from profit, do you need to declare it? I probably wouldn’t. If you’re doing it on a big scale, then it’s completely different. It’s quite silly, it’s something that someone will pick up on one day.” (Shareholder and Director, Construction, Male, 55+ years)

3.3.4. Lack of opportunity 

Notwithstanding motivational issues, many participants felt there were limited opportunities to take risks with tax. This could relate to the complexity of their affairs, size or structure of their business, or the regulatory environment. 

• most participants felt they had relatively straightforward businesses which had few opportunities for risk taking. This included being located solely or mainly in the UK, not dealing with cash, and dealing with only simple R&D tax credit or grant schemes which were sufficiently unambiguous to limit opportunities for risk 

• those operating in a heavily regulated environment such as finance felt there was too much oversight and scrutiny of their affairs to allow for risky behaviours 

“I’m sure from an SME point of view, 99% of SMEs would just go, ‘oh that’s a business expense, just put it through the business’, whereas as financial services company, and as a director of a financial services company, you just go, ‘er no’ so you end up putting it on your personal account.” (Shareholder and Director, Financial services, Male, 34 to 54 years)

• businesses which had grown to require external auditing (or who chose to have their books audited without a legal requirement) felt this precluded risky behaviours. This also applied to businesses which had grown from small companies with significant owner control over tax affairs to businesses with internal finance teams which would scrutinise and question dubious transactions 

• personal taxes were felt to be difficult to evade through their relative simplicity and clarity – even for those who used an agent to file their returns 

For many, there were greater opportunities to push the boundaries for smaller (not mid-sized) businesses with lower scrutiny (both internal for example, through their finance department, or external through external auditing). They thought that small businesses with a single or joint ownership model and perceived reliance on less scrupulous accountants were seen as more likely to take risks. 

“When we were smaller it was much easier for us, I had a mate who became my business partner when we started the limited company, and quite early on we put the wives on the system. There’s a £12k tax free allowance you can pay your wives, yes they did do a bit of work for us but maybe not 12k’s worth. When we were going through the sale that was the kind of stuff we had to clean up as they are a much bigger company. The smaller you are the more flexible you can be around that stuff. You can put a few expenses through the business that might be “grey areas”. When you’re a small business it’s those small things that make the difference between staying alive and not staying alive. Maybe that’s why HMRC aren’t so bothered about the small, small businesses as the big businesses were small once upon a time. If you go after the little guys, you won’t get the big guys.” (Director and owner, IT and Comms, Male, 34 to 54 years)

4. Risk attitude towards personal and business tax

A key question in the research was to explore any links between how wealthy individuals perceive risk in relation to personal and business taxes. It is difficult for people to understand their true motivations and opinions objectively and explicitly, so the research took three approaches to this question: 

1. examining participants’ perceptions of risk in relation to their own personal and business taxes explicitly, comparing their appetite for risk in both cases 

2. exploring their responses to the scenarios, and the extent to which participants expressed empathy with examples of risky behaviours relating to personal and business taxes 

3. asking participants whether they believed there was a link between approaches to personal and business taxes more broadly, thinking about other people they knew 

Through a combination of these approaches the research provides clear evidence of a link between approaches and perceptions of risk in personal and business tax as outlined in this section.

4.1. Perceptions of risk in relation to personal and business tax 

Participants were typically risk averse in attitude to both their personal and business tax affairs. Broadly the same motivations and barriers applied to both personal and business taxes: wanting to ‘do the right thing’, fear of investigation, lack of perceived reward, and perceived limited opportunities.  

Few admitted to taking risks with either of their taxes, and there was little distinction between behaviours regarding personal or business tax. Instead, the differentiators were the motivations and barriers around risks with specific taxes. 

For personal tax, participants felt there was little opportunity to avoid most taxes, especially if an individual’s circumstances were straightforward (for example, with one source of PAYE income). For some, the risk of an investigation or enforcement also felt greater, therefore creating larger barriers to evasion.  

“I really understand the attraction of paying for works in cash, and I would be tempted to do that myself, but the thing I always have in my mind is reputation, I see company directors having their reputation damaged by doing things like ‘well I got a speeding fine but I already had 3 points so my partner took it’ and suddenly it’s in court and that’s in the public domain and your reputation is damaged and your integrity. I have had conversations with my partner where they ask ‘do we need to pay the VAT on this housework’ and I said yes we do. For the sake of saving a few pounds here and there, I could lose my entire income.” (Director, Utilities, Female, 55+ years)

Inheritance Tax was an outlier in relation to personal tax. The motivation to avoid Inheritance Tax was high, not only from a monetary standpoint but also the perception that ‘everyone’s doing it’.  

Many also deemed it an unfair tax, often citing ‘double taxation’. Inheritance Tax was seen as relatively straightforward to avoid or evade through untraceable gifts or more complex arrangements such as trusts. 

“I am a little bit with [Elisha – a character from the fictional scenarios] on the Inheritance Tax front. We’ve been taxed once; I’m working with my financial advisor on Inheritance Tax to pay as little as possible. We won’t draw from our pension as that is transferable outside of Inheritance Tax.” (Shareholder and Salaried Director, Wholesale and retail trade, Male, 55+ years)

In relation to business tax, most felt that their business structures presented few opportunities, limited rewards and a high risk of investigation and enforcement. The outlier here was around small personal expenses, particularly for sole or joint owner businesses, those whose accounts were not audited, or did not have highly developed finance teams. 

Based on reported behaviour, then, there was a clear link between perceptions and appetite for risk with both personal and business taxes, with this risk appetite being based on the relative barriers and motivations to taking risks with individual taxes. 

4.2. Links between attitudes to risk in personal and business taxes 

With participants generally claiming to have low appetite for risk with both personal and business tax, it was useful to look at their responses to the types of behaviours discussed in the scenarios to better understand links between attitudes. While this does not necessarily indicate future behaviours (because there are more complex factors such as perceived opportunity for each individual) it does give us an indication of attitudinal differences.  

Though based on a qualitative sample, there appeared to be a link between empathising with risky behaviours in both the personal and business tax spheres. Sympathy was more greatly expressed on behaviours that they viewed as minor infringements such as minor expense claims or perceived grey areas such as IR35. 

“I mean the odd expenses and I suspect laptops do get charged to a business, but in the grand scheme of things, I would call it petty, if you asked me to rate the degree of badness that would be low on my scale.” (Director, Transportation and storage, Male, 55+ years)

Of those who empathised with the risky business tax behaviour, many of those who were shown scenarios featuring risky personal tax behaviours (not all participants saw all four scenarios) also empathised with the risky personal tax behaviour, suggesting a link between the two.  

A few participants empathised with risky personal tax behaviour but not any of the examples of risky business tax behaviour. However, this was almost always in relation to Inheritance Tax, which as we have seen in earlier in this report, was viewed as an unfair tax.  

It was more common for participants to show no empathy with the risky behaviour in any of the scenarios, whether that was personal or business tax. So, again, while based on a non-quantitative sample, there appeared to be a qualitative link between participants’ risk appetites in relation to personal and business taxes. 

Further supporting this link, when asked to speculate on whether there was a link between risk attitudes relating to personal and business taxes among the general population, most assumed that there was a clear link, with the issue coming down to personality and individual risk attitudes. As such, they assumed that if a person took risks with tax, it would be in relation to both personal and business taxes. 

“I think so [taking risks with both] because I think it’s a personality trait. So, if you’re doing it on one side, you’re probably doing it on both. So yeah, from HMRC’s side I certainly think on the business or personal side, it would probably be a good strategy to look at both things they’re involved in.” (Owner, Manufacturing, Male, 34 to 54 years)

To counter the above, some suggested that since personal taxes were generally higher than business taxes, there would be more motivation to take risks with personal taxes. However, in practice this would probably involve manipulating business expenses, taking a reduced salary to minimise tax, or putting personal expenses through a business account as there were fewer perceived ways to avoid personal taxes.  

Very few admitted that they would personally take these actions, even if some had when their businesses were smaller. 

“With business taxes being quite low, and personal taxes being very high, if a person had the opportunity, then they would be more likely to take a low salary and try to push more through the business. Are you likely to behave differently with the two? I think if you’re fundamentally playing games with taxes, you’re going to play games with both of them. And if you’re the kind of person who doesn’t play games then you play them both straight up the line. On the other hand, because business taxes are low and personal taxes are so onerous, I think there’s a greater chance of the system being abused by moving money through the company.” (Director, Utilities, Female, 55+ years)

There was a prevalent view among participants that it would be difficult for the medium size businesses they operate to take significant risks with business taxes. Though business taxes as a whole were seen as complex, most considered their own business taxes to be straightforward, or had professional internal or external accountants to oversee accounts. The oversight of external auditors also contributed to a sense that risky behaviour would not be possible, with the view that even minor infringements would be noticed. 

4.3. Factors affecting risk taking behaviours 

The research indicated a link between perceptions of risk relating to personal and business tax; wealthy individuals seem to see risk in relation to their personal and business taxes in broadly the same way.  

Whether this translated into actual behaviours, however, depended on contextual factors. One of these was the balance between perceived motivations and barriers discussed above, for instance, participants were more likely to consider risky behaviour in either the personal or business tax area when they saw a favourable balance between motivations, barriers and opportunities. 

A further factor, considered only in brief detail in the research, was that of external influences such as the advice of accountants, or other third parties encouraging (or dissuading) individuals and businesses from taking risk.  

One participant mentioned being encouraged to take risks with R&D tax credits by numerous third parties and believed that competitors would be influenced by this. Others mentioned the influence of others around them, for example agents, financial advisers, business partners, friends and family.  

In conclusion, the research indicated a connection between perceptions of risk associated with personal and business taxes, suggesting that wealthy individuals tend to view these risks in a comparable manner.

Appendix A. Achieved sample

Achieved sample details

Table 3: Final achieved sample

Gender	Target	Interviews
Male	Not applicable	37
Female	Not applicable	2

Age	Target	Interviews
18 to 34	Not applicable	0
35 to 54	Not applicable	13
55+	Not applicable	26

Agent for personal tax	Target	Interviews
Yes	30	22
No	10	17

Ownership model	Target	Interviews
Sole Owner	13	14
Director	14	30
Shareholder	13	17

Appendix B. Scenarios

Scenarios were shown to participants in rotation to avoid order effects and ensure thorough coverage of all scenarios across the research. Scenarios were amended at points throughout the research to incorporate different behaviours.

Scenario 1

Introducing Simon

• Simon lives in Leeds with his family. 

• 10 years ago, Simon set up a video game design business, designing products for global companies (now turning over £50m a year with 75 staff). He still owns the business though has sold shares for 25% of it to employees making him the majority shareholder. 

• Getting to this point in the business has been hard – with long hours and many sleepless nights worrying about the finances and his ability to pay his staff wages. He’s had to learn on the job, taking the tough decisions to make the business profitable and successful. 

Tax behaviours 

• Simon employees around 5 to 10 contract staff in the UK, who have worked for the business full time for almost a year. They effectively work for the company, but he employees them as freelancers to help reduce National Insurance Contributions. 

• He applied for creative industry tax credit two years ago and 80% of it was valid expenditure but the rest included out-of-scope office upgrades, asking for the receipts to be combined for tax purposes.

Simon’s view 

“The tax system is a game, some people just play it better than others. All the big corporates do the same thing – they are actually breaking the law, so why aren’t HMRC going after them?  At the end of the day I’m just doing the best I can to run my business.”

Scenario 2 

Introducing Sandra 

• Sandra was born in France and educated privately in the UK. She and her family spend time in several countries, but she would like them all to move to the UK permanently at some point. 

• Sandra’s parents have set up several companies under a group. Sandra runs one of these businesses in the health and beauty sector and has been successful in expanding the business overseas. She has sacrificed time away from her husband and children, which she feels guilty about. 

• Sandra currently holds 25% shares in the family business, which hires 150 employees in the UK and has a global turnover of £75m a year. The business has accountants in all countries it operates in, and Sandra also asks them for personal financial advice. 

Tax behaviours 

• Sandra set up an offshore account five years ago to reduce tax burden in the UK. She estimates that this has saved £250,000 to date, for out-goings of £30,000. Her accountant flagged it as risky at the time,. 

• Sandra often uses her business card and accounts for personal purchases. Last year she bought a company car but mainly uses it for personal trips. She puts meals and holiday travel through as business expenses. 

• She also bought her children laptops through the company to get a discount and made sure there was an excess amount of alcohol ordered for the office Christmas party so she could use the leftovers for her own personal party. 

Sandra’s view 

“My family and I work very hard in our family run and owned business. It’s my business therefore my money, and it’s only fair to use a little of it for personal gain, given my business and personal life overlap so heavily (travelling for work and family for example). I wouldn’t do anything too risky that might attract attention, but a few treats here and there are payback for all the jobs I create in the UK and the tax I already pay.”

Scenario 3 

Introducing Jeremy 

• Jeremy lives with his wife in Kent. He’s starting to think about retirement, but he’s worried about being financially responsible for his parents and children – he is a member of the sandwich generation. 

• He earns between £150k to £250k per year in the haulage industry (through his own small company), and has about £2m in assets. 

• He has a healthy sideline hobby buying and selling classic cars. 

• He has an accountant and an IFA, but most of his income comes from work. 

Tax behaviours 

• Jeremy pays an accountant to make sure he pays as little tax as possible on his personal declared income and is prepared to take risks, however he wants to make sure the tax position of his haulage company is completely compliant. 

• He pays some of his warehouse staff in cash off the books. 

• And he makes what he refers to as ‘naughty money’ off the books from his classic car sales. 

• During the covid-19 pandemic, Jeremy’s business looked like it would fold through a sudden drop in orders. So he put all of his staff on the furlough scheme, but still required some of them to come into the office to work and inflated the hours of others.  As the business started to pick back up, staff were required to work but not taken off furlough in time. 

Jeremy’s view 

“I want to live in a fair and just society, and paying tax is part of that. But I pay a lot in, and I don’t get much out. My children went to private school and the whole family has private health care – I’m actually saving the state money on health and education. And, if I hadn’t used furlough money to keep the business afloat, I’d be costing the state an awful lot more money in the long run. Middle class people like me are getting squeezed for more and more tax, so I don’t mind saving a bit here and there when I can. I pay so much tax anyway that they would never look at me.”

Scenario 4 

Introducing Elisha 

• Elisha works in finance in the city, and has recently married her husband, Mark.  

• They are already starting to think about how they can set their young children up for life, so they do not need to be as stressed about finances as Mark was growing up. 

Tax behaviours 

• Elisha and Mark have been taking £10,000 a year from Elisha’s ailing father for many years, both to make the most of potentially exempt transfers if he survived more than 7 years after them but also anticipating not declaring ones within 7 years for inheritance tax purposes. 

• Last year, Elisha’s father paid for their wedding and honeymoon: £60k in total, before sadly passing away. The estate did not declare the gift, because Elisha’s father was always careful to avoid looking like he was giving lots of money away. 

Elisha’s view 

“I feel obliged to respect my father’s wishes not to pay extra IHT, although I did have to pay £20k in IHT anyway, so I also feel I’ve paid my fair share. I think I will also do the same for my twins, IHT is the most unfair of taxes because you’ve already been taxed on it once, so why should they be taxed again? Aside from this I feel I’m a hardworking member of society and I know how important paying tax is when you’re privileged, and I pay in full through PAYE at the company I work for.”