HMRC have just issued a press release on tax avoidance. Let's offer praise where it is due, first of all. They are right to say these things about tax avoidance:
The 10 things a promoter won't always tell you:
- Most schemes don't work. You may be told that avoidance is legal, but if the scheme doesn't work you'll have made an incorrect tax return which is not in accordance with the law. You are legally obliged to pay tax that is due and you may be charged penalties if you try to avoid it.
- It could cost you more than you bargained for. Avoidance schemes are complex. They can give rise to unintended additional tax consequences, and the fees you pay the promoter do not count as tax paid. So you could end up paying much more than just the tax you're trying to avoid.
- You may have significant legal fees to pay. If the scheme is taken to litigation, you're likely to have hefty legal fees to pay. Your promoter may ask you to pay into a ‘fighting fund' up front.
- You could face criminal conviction. If you deliberately mislead or conceal information from HMRC you could be prosecuted and convicted.
- You could face publicity as a tax avoider. If you are named in court papers when the case is litigated, or in public registers, you could be reported in the media as a tax dodger.
- Your scheme is never HMRC approved. Getting an avoidance Scheme Reference Number from HMRC doesn't mean the department has cleared the scheme. HMRC issues these numbers when a scheme has signs of being designed to avoid tax.
- You could be marked out as a high-risk taxpayer. Use of a scheme could mark you out as a high-risk taxpayer, which means that all of your tax affairs will be closely scrutinised in future, not just your claim for relief.
- HMRC is likely to beat your scheme in court. HMRC wins eight out of ten cases where taxpayers and promoters take avoidance schemes to court.
- The risk is normally all your own. It's unlikely that a promoter will give you a guarantee that a scheme will work. And they probably won't be around to support you once HMRC starts investigating your tax affairs. Some promoters set up simply to sell the scheme, and then disband.
- You'll have to pay the tax up front anyway. You won't get a cash-flow advantage while HMRC investigates a scheme. New legislation means you'll have to pay the disputed tax up front.
I buy all of them. I do not buy this:
The government has taken unprecedented steps to clamp down on the selfish minority who practise tax avoidance, because we are firmly on the side of the vast majority of taxpayers who play by the rules. As a result, tax avoidance is now very high risk.
This is true, to a degree, with regard to high risk domestic tax avoidance schemes, but this is a government that has massively increased the scope for tax avoidance for major companies by creating a territorial tax system, removing most of the controlled foreign company rules meaning tax haven usage is much more advantageous now, creating the patent box that the EU thinks abusive, creating arrangements that offshore finance operations in tax havens owned by UK based multinationals and more.
This government's record on tax avoidance is poor, at best, and consistent with being a 'high risk promoter' in many cases. They have nothing whatsoever to shout about when it comes to their own record.
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“this is a government that has massively increased the scope for tax avoidance for major companies by creating a territorial tax system, removing most of the controlled foreign company rules meaning tax haven usage is much more advantageous now, creating the patent box that the EU thinks abusive, creating arrangements that offshore finance operations in tax havens owned by UK based multinationals and more.”
If these things were intended by Parliament, they cannot be tax avoidance.
They abuse other states, so yes they can be
So taxpayers can be doing exactly what Parliament intended, paying the right amount of tax, at the right amount of time, in the right place exactly as Parliament intended, and yet still be tax avoiding in your view.
Which makes your definition of tax avoidance ludicrous then. At the very least, you need to update the defintion.
Very clearly we are abusing internationally
And we accept international obligations but are not honouring them
“creating the patent box that the EU thinks abusive”
So what? Until the patent box is thrown out by the ECJ, what the EU thinks is of no consequence whatsoever. In the meantime we have Parliament to make our laws.
It seems you have arrived to make the usual neoliberal troll arguments
Richard
Using your definition, is there any country anywhere in the world that ISN’T engaged in ‘tax avoidance’?
Much of the EU is not
But not all of it
The Patent Box is an intereting one – It’s clearly a governenment sanctioned relief, in the same way an ISA is a government sanctioned relief, both are specifically written into the UK tax code. And to be slightly pedantic, the EU is looking at the whole concept of patent boxes, and is not just investigating the UK scheme, as there are a number of patent box regimes throughout Europe – some of which are more beneficial that the UK. What they are actually looking at isn’t getting rid of the concept but making sure there is some consistency about the way patent box regimes work and in particular looking at what level of profits shoudl be eligible for any patent box relief. So I am not sure it’s right to simply say they think the regime is abusive.
But I think what you are suggesting is that it’s a government sanctioned avoidance becasue it incentivises the shifting of profits into the UK, France, Netherlands etc which is detrimental to other states which don’t have a patent box. Am I understanding that right?
They are arguing with the basis of the UK patent box
They really do not like it – and nor do I – because it is not related to UK activity and others are
That is the real issue here – it is about tax shifting not R&D creation
Hello Richard
Will a company TUPEing its entire direct labour workers to third party suppliers receive a tax incentive against it operational costs and gross profits? Is this the reasoning behind companies transferring direct labour on TUPE?
Regards.
Graham
No tax incentive I can think of
Nor me. TUPE is there to protect the employees, Whether it works well I have no idea.
The only time I’ve used TUPE in a tax analysis is to explain the fact pattern when a busines is transferred as TUPE is a good indicator that a business as a whole has been transferred as opposed to just some assets being transferred – A subtle but occasionally important difference for tax purposes.
A very important one for tax, I’d say, if there are losses around especially
I once had to deal with an inspector who had a thing about trade transfers and capital allowances going across at pool value under what was then s.343 – it is ingrained in my memory.
I recall things like that
And old section numbers
ps – good luck with the Op tomorrow and a healthier future- My mother in law had it done earlier this year and is much better now!
Thanks