Tax Planning Schemes

 
Let’s take a realistic view of what can happen to various tax planning schemes that people devise to avoid paying tax. Note that we mean legal avoidance of tax:

(1) They may work. Shopping in a duty-free shop at an airport is one example of a legal tax avoidance scheme that actually works.

(2) The Revenue stamps on the scheme straight away. The scheme user is left with a bill of some sort, and perhaps future costs involved in unravelling a scheme which is now pointless.

(3) The scheme requires active management. The scheme user gets lazy, and then the Revenue moves in to close it down. The scheme user is left with a bill of some sort, and perhaps future costs involved in unravelling a scheme which is now pointless.

(4) There is a new Finance Act every year. Anti-avoidance legislation is included in this Act, making the tax system more complicated for everybody else. The scheme user is left with a temporary benefit, and perhaps future costs involved in unravelling a scheme which is now pointless.

(5) The new Finance Act changes the tax system in some way which means that the scheme is now pointless, even though the Chancellor didn’t intend to do this.┬áThe scheme user is left with a temporary benefit, and perhaps future costs involved in unravelling a scheme which is now pointless.

Do not underestimate the risk in point (5), never mind the other risks. Do not underestimate the unravelling costs of pointless schemes. We accountants, including myself, would like to devise new schemes to save you tax, but we also have a duty to point out some of the risks.