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Tax avoidance – The continuing culture shift

There was a time when we could explain to our clients, pretty simply, the difference between tax evasion (illegal) and tax avoidance (not what the taxman wants, but perfectly legal – and, if properly executed, perfectly safe).

In recent years we have seen a change in cultural attitudes towards tax avoidance, worldwide.  This is not just among government authorities.  It clearly extends to the press and public responses.  Crucially, the UK courts continue in a move towards interpreting legislation based on what was intended rather than by “the letter of the law”.  Gone are the days when clever barristers could, with certainty, rely on unusual combinations of structures, or simply a drafting error in the legislation, to frustrate the Treasury’s intentions!

Some years ago, a law was introduced requiring people to disclose to HM Revenue & Customs (HMRC) all tax avoidance schemes they are using (as defined for the purpose).  This is known as DOTAS (“doe-tass”) – disclosure of tax avoidance schemes.  There are swingeing penalties for failure to disclose.

In the latest move in this cat and mouse game, HMRC have started to write to every taxpayer who has made a DOTAS declaration in the previous quarter, starting with disclosures lodged in the period October to December 2013.  The letters are designed to publicise the possible adverse consequences of entering into tax avoidance arrangements.  Copies of the letters are also being sent to the individuals’ accountants or tax advisors.

HMRC say “We are keen to ensure that agents are informed about the engagement with their clients as we recognise the important role that they have to play in supporting them in making their decision as to whether or not to use an avoidance scheme.”

We will, indeed, continue to advise clients individually:

  • how they can plan, legitimately, to minimise their own tax burdens;
  • on every aspect of compliance with the tax system, insofar as it affects them.

 

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