Tax avoidance is the exploitation of tax loopholes to reduce the individual or business’ tax liability. In the UK, it is more commonly a term used to describe the operation of a policy, scheme or arrangement which seeks, directly or indirectly, to avoid payment of tax by way of a reduction in an individual or business’ tax liability, or alternatively the wholesale avoidance of this tax liability.
In the event tax avoidance is found, there are a number of penalties available to HMRC – for example standard penalties can be applied up to 100% of the unpaid tax liability (effectively doubling the amount due) plus interest (annualised at up to 8% per annum) and surcharges for certain types of tax.
Although the term “illegal” only applies to the civil liability, this can still lead to a large claim which can result in an individual or business’ insolvency of the taxes cannot be paid.
Where a deliberate or fraudulent avoidance of tax is found – for example deliberate under declarations of income, failing to register and pay taxes or deliberately seeking to avoid taxes without any justification, then this can lead to Code 9 investigations and, potentially, prosecution.
At Francis Wilks & Jones we have considerable experience of negotiations with HMRC, including accelerated payment notices, personal liability notices, VAT and PAYE security appeals to tax tribunals or insolvency claims by liquidators.