Monday, 27 September 2010

Tax avoidance and Tax evasion

These subjects have been made relevant, pertinent and current by a speech by Danny Alexander, the Chief Secretary to the Treasury at the Liberal Democrat Conference in Liverpool.

  • Avoidance and evasion are not the same

  • Tax avoidance is legal

  • Tax evasion is illegal


Tax Evasion - Definition
Unlawful attempt to minimise tax liability through fraudulent techniques to circumvent or frustrate tax laws, such as deliberate under-statement of taxable income or wilful non-payment of due taxes. Whereas tax evasion is an offense (punishable by both civil and criminal penalties), tax avoidance is not.

If you need advice or have a query please email me

Examples

  • Being resident in Spain (i.e. living in Spain for more than 183 days in a calendar year) but not registering with the tax authorities
  • Not declaring income from property letting
  • Spanish resident having an Individual Savings Account in the UK
  • Not declaring gross paid interest on offshore accounts


Tax Avoidance - Definition
Lawful minimisation of tax liability through sound financial planning techniques such as phasing the sale of assets over a period long enough to effect maximum exemption from capital gains tax. Whereas tax avoidance is legal, tax evasion is not.

I am quite happy to answer any queries you may have but I will refer you to an adviser for authorised and regulated advice, if you email me

Examples

  • Pension schemes are legitimate and avoid tax
  • UK residents having an Individual Savings Account
  • The legitimate use of ‘loopholes’ created by poorly drafted legislation or statutory instruments
  • QROPS for UK non-residents
  • QNUPS
  • The legitimate use of offshore trusts to hold assets


Notes to Mr Alexander

  • Tax avoidance schemes have to be registered with the tax authorities (HMRC) so you have chance to stop them
  • Ensure that legislation is correctly drafted to avoid loopholes
  • Please encourage pension savings
  • Stop confusing legal tax avoidance with illegal tax evasion
 Tax is high on the agenda in all counties as Governments struggle with huge deficits.

* * * * * * *


You can write to me with your personal experiences, ask me a question or to be put in touch with my recommended adviser by sending me an email