Is Tax Planning legal?
Planning your affairs to accommodate the liability for tax is perfectly legal provided it is not designed to disguise the income received as something else, solely for the purpose of avoiding a tax liability that should be chargeable.
Please click here for an explanation of the difference between tax planning and Tax Avoidance.
One of the most popular examples of legitimate Tax Planning, as opposed to Tax Avoidance, exists within small to medium-sized owner managed companies where the Directors are also the shareholders. In such circumstances it is common for the Directors (or “Owner-Managers”) to pay themselves a nominal salary (up to their income tax-free allowance) and then pay the remainder by way of dividends (which bear a lower level of tax when compared to the tax charge on a PAYE salary of the same sum).
Please see our website here which goes into more detail on this subject.
Of course, receiving income as dividends is a riskier form of receiving income, as it is not guaranteed, depends on the company remaining solvent and is more complicated as a result of the necessary legal requirements before a dividend can be declared and paid.
However, as opposed to such Tax Planning, illegal Tax Avoidance Schemes usually carry no such risks and are promoted solely for the purpose of the tax saving likely to be achieved (and thus the tax likely to be unpaid) by participating in the Tax Avoidance Scheme, although there is also likely to be a healthy fee paid to the scheme promoter.
At Francis Wilks & Jones we have considerable experience of negotiations with HMRC, including Accelerated Payment Notices, Personal Liability Notices, VAT security or any other claim by HMRC, including appeals to Tax Tribunals or insolvency claims.
Please call any member of our Tax Disputes team for your consultation now on 020 7841 0390. Alternatively email us with your enquiry at firstname.lastname@example.org and we will call you back at a time convenient to you.