Be Tax Efficient Without Being Tax Evasive

HM Revenue & Customs recently disclosed that they have won 22 of 26 tax avoidance cases taken to court between 2016 and 2017.

By opening nearly 4,000 inquiries last year, HMRC is demonstrating an inflexible standpoint regarding tax avoidance; which comes as no surprise considering the substantial amount of legitimate tax schemes brought by HMRC to assist businesses in staying tax efficient in an authorised manner.

So how does a business stay super tax efficient without being tax evasive?

Ignorance of the Law

The General Anti-Abuse Rule (GAAR) which was actioned in 2013, applies to tax payments and was designed to prevent ‘artificial and abusive’ tax avoidance schemes that do not meet a ‘reasonable’ criteria.

And after winning 86% of litigation decisions, losing only three by High Court ruling, it’s clear the law stands with HMRC on exercising this rule.

A Partner at international law firm Pinsent Masons has said that “Anyone seeking to implement a complex tax avoidance scheme would have to be a confirmed optimist to assume they would win if the case is ultimately litigated.”

However, the volume of tax disputes taken to court continues to highlight an ignorance of statute or, how certain some might be of the legitimacy or reasonability of their tax affairs due to grey areas in tax rules.

Nigar Hashimzade, a professor of economics and finance at Durham University has stated, “within existing tax systems, legislative efforts aspiring to cover every contingency in detail cause the law to become extremely complicated”.

However, though the verbiage surrounding tax remains somewhat vague, HMRC’s fervent approach to the matter is one that is one that is mirrored by the GAAR panel who voted unanimously in the favour of the taxman at their first ruling.

In light of this, it is important that an experienced and knowledgeable tax professional is involved in any decision undertaken by a company regarding reducing tax bills.

How To Be More Tax Efficient

Tax officials have warned that most tax avoidance schemes simply don’t work, adding that ‘those who engage in them can find they pay more than the tax they attempted to save’ therefore it’s of the utmost importance that taxpayers looking to save money should ensure they seek professional guidance to do so rather than engage with schemes.

Achieving maximum tax efficiency is possible without manipulating loopholes or circumventing legislation, many taxpayers are unwittingly eligible for tax relief or breaks which could save them significant sums of money.

To keep tax bills low businesses should be aware of all costs which can be applied, how to purchase assets effectively, VAT schemes, rates and refunds, employer’s allowances efficient cash extraction among many other things. Check out our hand guide on Research and Development Tax Relief to see if this applies to you.

Temptation Avoidance

You can avoid the temptation to lower your taxes via a quick fix tax avoidance scheme by ensuring your business is managed by a professional who should have your accounts looking so healthy that there is no need to turn to extremes.

Our partners and accountants are fully qualified and abreast of everything in place to keep the tax affairs businesses in all sectors efficient. Contact your nearest local office to find out more.

We have accountants in DaventryRugbyNorthampton, and London all on hand to assist you in growing your business in your local area and beyond.

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