An unhealthy obsession with not paying tax

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The FT published this enquiry from a reader over the weekend:

I own a share of a residential property that cannot be sold at present as it is subject to a lifetime occupancy agreement with the co-owner. It was bought decades ago so, when it is eventually sold, there will be a substantial capital gains tax (CGT) bill. But I want my children to receive all the proceeds from my share of the property. Can I therefore mitigate the eventual CGT liability by transferring some of my interest in the property each year into a trust for them? Will HM Revenue & Customs (HMRC) accept that the annual gift made under the deed of trust has in fact been carried out — that is, I will not be subject to CGT on the transfers?

A long, complicated, expensive and tortuous explanation of a mechanism using what seem to be wholly artificial trusts as a way to avoid this capital gains tax charge was provided by a chartered accountant — who in fairness concluded that even then “there could still be some CGT to pay on its ultimate sale”, as if this was a matter for apology.

One of my regular correspondents — who I am not sure will ant to be named, but can confess in the comments that follow this blog if thy so wish — mailed me to say:

Hi Richard

I always have to torture myself by reading the FT weekend Money supplement. This week a columnist was suggesting a complicated way of avoiding CGT on a share of a property bought many years ago. Now I don't blame in the least the one seeking advice. Most people do not consider tax a moral issue - why should they? But I do blame those who give this advice in national newspapers. Gains from property sales, where there is no owner occupation involved, are absolutely unearned. The advisers know this full well. Wouldn't it be good if  they could add a bit of moral education to their comments and point out that the avoider is actually forcing others less fortunate than themselves to pay the tax which they don't?

Glad to get that one off my chest.

Quite so. The tax profession has a duty to be ethical. That includes, I think, pointing out the need to pay tax and that the mechanisms to avoid doing so are very often absurd, unproductive and anti-social for society as a whole. But the profession does not, I regret, seem to appreciate this point, so no criticism attaches to the respondent in this particular case.

I just look forward to the more enlightened times my correspondent also clearly wishes for.

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