Recently published by The House of Commons Library the briefing paper provides commentary on the meaning of and distinction between ‘tax avoidance’, ‘tax evasion’ and ‘tax planning’ and covers the development of legislation to counter mass marketed tax avoidance schemes, including:
- the Disclosure of Tax Avoidance Schemes regime (DOTAS);
- the General Anti-Abuse Rule (GAAR);
- and the system of follower notices and accelerated payments(APNs)
Though a number of avoidance and related penalties provisions were removed from Finance Bill 2017, it is anticipated that they will be legislated for at the start of the new Parliament after June’s general election.
In recent years tax avoidance has been the subject of considerable public concern, largely fuelled by politicians and the media, although there is no statutory definition of what tax avoidance consists of. Tax avoidance can be distinguished from tax evasion, where someone acts against the law. By contrast tax avoidance is compliant with the law, though aggressive or abusive avoidance, as opposed to simple tax planning such as the use of legitimate reliefs such as Capitial Allowances or R&D tax credits, will seek to comply with the letter of the law, but to subvert its purpose. HMRC includes EBT, EFRB and other trust based schemes in this ‘aggressive and abusive’ avoidance category and the government has introduced retrospective legislation to curtail its use accordingly.
UK tax law is specifically targeted rather than purposive: in tackling the exploitation of loopholes in the law, governments have legislated against individual avoidance schemes as and when these have come to light. Often the response to this legislation has been the creation of new schemes to circumvent the law, which in turn has seen further legislation – an ‘arms race’ between the revenue authorities and Parliamentary counsel on one side, and on the other, taxpayers aided and abetted by the legal profession. In recent years concerns as to the scale of mass marketed tax avoidance schemes have led to three major initiatives to undermine this market, and encourage a sea change in attitudes, both in the accountancy industry and its customers with the introduction of DOTAS, GAAR and APNs.
We are seeing an increase use of APNs by HMRC and have worked with a number accountants to help their clients settle trust based planning arrangements which now fall foul of HMRC regulations.
If you’d like to read the published briefing note you’ll find it here or if you’d like to read how we settled some EBT planning for a client which actually resulted in HMRC paying the client money rather than the other way round take a read of this case study or give us a call.
