Evasion or avoidance?

Recent reports indicate that the Coalition Government is to spend £900 million more to cut down on the level of tax evasion and tax avoidance.

Whilst I fully support all measures to ensure that everyone pays the tax they should pay I think there has been some lax use of language. As someone who studied tax law, admittedly several years ago, I have always understood there was a big difference between tax evasion (illegal) and tax avoidance (legal). The difference is one that has exercised the Courts over the years and as I understand it essentially the difference is that any taxpayer is legally entitled to arrange their affairs so as to minimise the amount of tax payable – in other words to reduce or avoid the tax that would otherwise be payable. On the other hand tax evasion is where the taxpayer deliberately misleads the HM Revenue and Customs by not revealing the true extent of their income or the true nature of a particular transaction or series of transactions.

In simple terms everyone who has taken out an ISA (Individual Savings Account) is ‘guilty’ of tax avoidance as they have arranged their affairs in such a way as to reduce the amount of tax they have to pay.

Published by David Nuttall

Business and Political Consultant

17 thoughts on “Evasion or avoidance?

  1. I dont know why ISA is repeatedly used as an example of clever tax avoidance

    Its is not in same league as what clever accountants do for businesses

    ISA gives you chicken feed interest, seriously i could just about feed a chicken with the interest. Its not clever , not smart and is not going to make anyone rich

    Clever shark accountants on the other hand are making a killing for businesses — the loopholds out there are cheating uk of legetimate revenue.

  2. Yes it is undoubtedly the case that the Labour Government is in great part responsible for the need for cuts in Child Benefit.

    However it is the Conservative Government together with it’s coalition partner that is responsible for this entirely unfair decision

    It is the Government that you support that has decided that some families earning £44,000 per year will lose Child Benefit whilst some others earning £82,000 a year will NOT lose it.

    That appalling decision is NOT Labour’s fault.

    It is the Conservative Government’s fault.

  3. David,

    I notice that you had time last evening to reply to Paul, but not to comment on your Chancellor’s attack on Child Benefits.

    In case you missed it, a married couple where one spouse earns £42,500 will lose Child Benefit. Everyone else will keep it. (Including those where both spouses earn £40,000.)

    To paraphrase a former Labour leader in a very famous speech.

    We have a Conservative Government, a CONSERVATIVE Government mind, attacking traditional families. Of course, after 5 years of Cameron as leader, this should no longer come as a surprise to anyone at all.

    As my MP perhaps you could advise me. Should we get divorced? Then my wife can keep the Child Benefit.

    Of course, she could work full time instead and our children could go into state sponsored child care where they could be taught to be Politically Correct.

    Then of course though if she was working, someone else wouldn’t be and that might well be a family with no other income at all.

    So then they will be claiming benefits, and it will be an awful lot more than the cost of Child Benefit.

    But of course the Government is going to limit that to £26,000 a year, isn’t it?

    Well actually, it’s not is it. Because it’s £26,000 Net, in other words around £35,000 Gross.

    But it doesn’t stop there either does it? Free school dinners (worth £555 (before tax) per year to someone earning £42,500, PER CHILD) will not be included in the £35K. There’s a whole host of other benefits too which will still be available to the unemployed, bringing the Gross Equivalent to , well not far away from £42,500. The rate at which someone working is too rich to receive Child Benefit.

    So, perhaps we should get divorced. My wife can move next door and start claiming benefits.

    And you call yourselves Conservatives????

    PS Just had another idea. I could transfer part of my salary to my wife. That way, not only will we keep our Child Benefit, but we will pay less tax too. I’m sure my boss won’t mind.

    1. Hi James,

      Thanks for your views. No, of course you should not get divorced!

      Let us not forget it is the economic mismanagement of the last Labour Government that has resulted in these cuts being necessary. I do not expect they will be welcomed but they are essential if we are to start to balance the nations books.


      1. Hi David,

        The brevity of your last reply to James on the Child Benefit issue was interesting.

        I am not affected by it as my Children are fighting their own battles now and I think my Grandson’s Mum would be relatively content if she or her Husband were Higher Rate Taxpayers!

        On the face of it the Chancellor’s announcement appears not to have been thought thro’ in respect of the points raised by James as to one earner families losing out and two earners not.

        If I were a betting man I would seriously consider a good punt that this disparity will be resolved, and that the Chancellor knew what the reaction would be and the solution has been circulating in the Treasury ever since his announcement was first formulated. Actually I’m surprised it hasn’t been leaked!!

        This is pure politics. Say something horrendous, knowing you can fix it if you need to.

        The Chancellor knows he has to fix this. The political capital he will accrue from removing this dastardly attack on some middle class families is too big to ignore. Simples!!

        I’m sure you will know all this David, hence your non-commital reply.

  4. What kind of Member of Parliament actively promotes tax avoidance?
    Granted, it is legal but avoiding tax when your Coalition Government needs every pound because of the deficit run up by the rich bankers, condoning tax avoidance is a disgraceful act and you have let down your constituents, who the vast majority live on a mere wage working in the public sector, greatly.

    1. Hi Paul,

      There is a difference between tax avoidance and tax evasion. It is open for every person to pay the correct amount of tax. This is not avoiding tax it is simply not voluntarily paying more tax than you have to.

      If some one chooses to pay more tax than so be it.

      1. I know I’m coming to this late but I’ve only just managed to contain my amusement at some of the self righteous claptrap from some of your correspondents re. tax evasion/avoidance.

        I don’t think it’s any worse to make sure HMRC only get what they are due than it is to be a member of a militant trade union that holds us all to ransom from time to time on the pretext of acting in the best interests of their members!!

        David, can I make a suggestion that you should only accept comments from those who are prepared to give their full name. I realise that there is no guarantee that a full name is accurate but it would be a start towards a genuine debate.

  5. Basically, your saying that those better off in society should be able to cunningly avoid tax while those who are less well off struggle to contribute to the deficit reducation plan that was not caused by them.

    Once again, a typical Tory looking after there own kind!

    1. Hi Ste,

      There is nothing cunning about someone paying the right amount of tax. Tax breaks such as ISA’s are there to encourage people to save. Incentives like this help those who have little in the way of savings and it makes sense for them to save in an ISA to avoid paying income tax on the interest on their savings.

  6. Hi David, Thx for your clarification, I’ve always understood the same. One (just one) of the problems is that many HMRC staff have no such knowledge and are not prepared to countenance it either. Anyone who so arranges their tax affairs is often dealt with as being too clever by half and comes under the “what else are they upto” banner. HMRC is not fit for purpose and hasn’t been for many years!! Best regards. Brian Darlington.

  7. Its Conservative boilerplate that those gaming the benefits system are workshy spongers, while those gaming the tax system are wealth creating entrepreneur heros. To conflate an ISA, that saves the average tax payer a few tens of pounds in tax annually with the multimillion pound avoidances of the super rich, who use clever accountants and lawyers to avoid paying a fair share of their income to the society that enables them to accrue their wealth is to miss the point.

    Most people, I am sure, do not need to be reminded of the difference between avoidance and evasion. They do need to know the the Inland Revenue is going to work as hard on closing the loopholes exploited by avoiders, as the DSS is going to work on forcing people off the benefits they currently claim.

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