One Man's Tax Planning Is Another's Avoidance

Over recent years there has been a continued focus by Government and HMRC on combatting artificial tax avoidance and filling in the 'gap' in expected tax revenues. In 2004, legislation was introduced requiring promoters of tax avoidance schemes to notify HMRC of any new arrangements which has enabled HMRC to take early counter-action.

During this time the tax courts have found new ways to interpret the legislation in the way 'that Government intended' or rather would have intended if it had realised that taxpayers would exploit a loophole.

In addition, HMRC has started to work in a smarter manner by marshalling its human and technological resources to find funds hidden in foreign bank accounts, seek out traders evading tax on their business profits and to investigate the fine details of complex schemes designed to mitigate tax, such as film finance schemes.

There is a clear distinction between tax evasion, which is illegal, and planning so as to avoid paying more tax than is required. Old tax case law had established that taxpayers are entitled to take action to minimise their contributions to the state and, in an often quoted 1929 judgement, Lord Clyde said the taxpayer was "entitled to be astute to prevent, so far as he honestly can, the depletion of his means by the Inland Revenue".

Over recent months the morality of both contrived and standard planning has come under scrutiny in the media, with the inference that anyone who pays less than the potential maximum is failing...