Tax avoidance is the deliberate arrangement of one’s finances using legal methods to lower tax liability. Unlike tax evasion, tax avoidance, if done correctly, is technically legal. Many individuals and companies use strategic tax planning to navigate around certain tax requirements in order to pay the least amount of tax possible.
However, in the past few years, there has been a steady increase of tax avoidance schemes, which are devised to bend tax laws in such a way that changes the intention of the original legislators. In response to this, HMRC are cracking down on tax avoidance schemes and taking an increasingly strong stance on borderline tax evasion activities.
HMRC regularly review tax schemes suspected of being damaging and often close them down. It is important to be aware that any schemes you may take part in, including Employee Benefit Trusts (EBTs), Employer Finance Retirement Benefits Scheme (EFRBS), Stamp Duty Avoidance (among others – see below), are subject to continuous and rigorous challenging from HMRC. You should make the appropriate disclosures and decisions regarding your tax returns to ensure you mitigate any resulting additional taxes and penalties.