Tax avoidance is the legitimate exploitation of tax loopholes to reduce the individual or business’ tax liability whereas tax evasion is the illegal evasion of taxes properly due. In the UK, both tax avoidance and tax evasion are illegal, although tax evasion is more likely to lead to criminal consequences.
However, it is not illegal to plan for your prospective tax liability it is important to distinguishes between tax planning and tax avoidance.
In the UK HMRC have adopted “anti-avoidance” measures designed to combat tax avoidance which, although appearing to comply strictly with the letter of the law, seeks to undermine the mischief which tax legislation was intended to prevent.
- HMRC have in recent years sought to introduce reactive legislation to combat such Tax Avoidance but, from 2013, more preventative steps were introduced via the General Anti-Abuse Rule to cover circumstances where it would objectively have considered any such tax scheme
- to have been adopted solely for the purpose of avoiding a tax liability.
- These tax disputes remain ongoing and some tax schemes can be legitimately argued to be part of a corporate or personal tax planning measure. However, where they exist solely or purposively for tax avoidance, the penalties for are severe with additional criminal penalties existing in circumstances where it is considered that there has been Tax Evasion.
At Francis Wilks & Jones we have considerable experience of negotiations with HMRC, accelerated payment notices, personal liability notices, VAT and PAYE security tax tribunals appeals and claims by liquidators.