Tax That – Buyer beware the Tax avoidance scheme

So today we’re all hearing that Gary Barlow and two of his friends from Take That may have to repay a great deal of tax.  We have also been served with a reminder that tax avoidance of the sort that they took part is not in itself illegal, but that tax evasion is the real crime.

Notice that I said “may have to repay this tax” in my wording, as the decision of the judge in this particular case can be appealed against and so the final situation is not yet clear.

We also heard that it is the fault of us “clever accountants” that these schemes exist, and that our wealthy clients are encouraged to take part in them.  This is not quite the truth, but I cannot deny that it is an important part of our job to ensure that our clients only pay the correct amount of tax and don’t voluntarily pay too much.

My own personal view is that these schemes only exist for the benefit of those that earn considerably large amounts of money, and that there was without a doubt an increase in interest in such schemes when the top rate of tax in this country rose from 40% to 50%.  Indeed, the economics of such schemes only make sense when people are paying tax at these higher rates.

It’s worth pointing out that income tax rates have of course been higher in the past, but I do feel that if rates of income tax were lower than their current levels there would be less of an appetite for people to attempt to avoid tax in this way.  There have been many arguments that suggest that if tax rates were lower the overall tax intake would in fact be higher.

In the meantime, the advice to anyone who seeks to reduce their overall tax bill by entering into schemes similar to the one that Gary Barlow invested in would be well advised to be aware that it is, of course, a risky business.  HM Revenue & Customs (HMRC) always look at such schemes, and if they see that there is any merit in challenging them, they will of course do so.

As in all things, caveat emptor – buyer beware.

Written by Partner, Mark Saunders

http://www.bbc.co.uk/news/uk-politics-27364089

 

Mark Saunders
Partner at Wilder Coe
Mark provides a comprehensive and committed service to his clients. His wide range of experience means he is equally able to advise and audit business start-ups, family-owned/managed businesses and multinational organisations from a range of industry backgrounds. Mark’s technical services include audit, preparation of financial statements, corporate taxation, business planning and advice.

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