Tax Avoidance v. Tax Evasion

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Posted in:Banking and Finance, Corporate and Commercial|September 25, 2014 | Join the mailing list

Since 2011 the UK government has been very vocal about its desire to increase the tax revenues that HMRC recovers. Since the 1970s there has been an increasing number of legal ways that UK citizens can manage their tax liabilities.
However, this has been called into question recently with this suggestion and that the super-rich and their advisors have taken things too far. Matters have therefore moved into a question of what amounts to a legal tax avoidance scheme and what is illegal
tax evasion? This is a regular and common question.

The simple answer is tax avoidance is the limiting the amount of tax you pay by careful planning but within the law. Tax evasion is having a liability for tax and not paying it.

In the UK tax advice may only be given by people that are authorised under the Financial Services and Markets Act 2000 to give such advice. This ranges from accountants, solicitors and barristers. Not all accountants, solicitors
or barristers can give tax advice, as they require specific authorisation to do so.

However, there is a large market in countries such as the UK, the US and various European countries where systems and schemes are set up with the express purpose of assisting people in mitigating their liability to tax. This
is the thin line that HMRC has drawn. On one side is legitimate tax avoidance and on the other side is tax evasion, which is illegal. The question as to which side a scheme lies is an issue that has often considered by the Courts, Tribunals, tax advisers and

The tax Tribunal has recently taken a sterner approach in its rulings when looking at whether a scheme is a legitimate tax avoidance scheme. The definition is known as the Ramsay principle. HMRC has been pushing the Tribunal
to find schemes to be illegal or not fully compliant and the Tribunals have been finding more and more in favour of HMRC, but not always.  See the recent Glasgow Rangers case.  See

this review of the case
on the BBC website.  However, we will be providing a more in-depth review of this case shortly.

Please continue to review this website as further articles regarding the ever changing face of

tax avoidance and tax liability
in the new world of the Finance Act 2014.

For more information about any of the above or for practical advice on this or any other aspect of banking and financial disputes, please contact
Geraldine Ford of the Berg Banking Litigation Team on 0161 829 2599 or email her at

(The information and opinions contained in this article are not intended to be comprehensive, nor to provide legal advice. No responsibility for its accuracy or correctness is assumed by Berg or any of its partners or employees. Professional legal advice should
be obtained before taking, or refraining from taking, any action as a result of this article.) 

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