HomeFWJ TakeawayTax disputesDisguised remuneration and APNsWhat is tax avoidance and is it legal?

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.

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