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Pay less tax and feel good too

A recent survey from accountants RSM Tenon has produced some interesting statistics relating to tax avoidance.

Its Business Barometer found that 81% of business owners think HMRC should be investing more resources on combating tax evasion.

Over half of those surveyed, 53%, believed a simpler tax system would help reduce tax leakage but only 25% would like the introduction of a general anti-avoidance rule (GAAR) to catch successful tax planning.

Gary Ashford, head of tax risk, disputes & investigations at RSM Tenon, said: “It’s rare to see such support for tax policies, but entrepreneurs are clearly pleased that HMRC has made tackling this problem its top priority – British business owners do not like the idea of paying substantial amounts of tax while others are actively avoiding their obligations.”

I do not know how large the sample size of the survey and I do not want to comment on RSM Tenon’s findings but I do believe that anyone or any business should be able to rearrange their tax affairs in such a way as to reduce their own tax bill.

I quite agree with the Revenue diverting resources to stop the black economy as this is pure tax evasion. Being paid in cash, for example, and not declaring your income is fraud.

I also agree that our tax system is too complex and there are too many ‘tax avoidance’ deductions and reliefs.

You are probably avoiding tax at present. Some examples are:

• Making a pension contribution so that you pay a lower amount of income or corporation tax

• Paying money into an ISA so that you receive tax-free interest

• Owning an asset such as a bank deposit account or rental property in joint names with your spouse or civil partner in order to pay less tax

• Transferring an asset into the name of your spouse to use additional capital gains tax exemptions on the sale of an asset

• Providing your staff with a firm’s mobile phone as opposed to a pay rise

• Providing child care vouchers to staff

• Trading as a limited company as opposed to a sole trader to avoid national insurance and to avoid paying tax on retained profit

• Paying dividends as opposed to salary from your personal company

• Sharing dividend income with your spouse from your personal company

• Making a payment to a charity using gift aid

• Rewarding key staff members using Employee Benefit Trusts or Employer Financed Unapproved Retirement Benefit Schemes

It is very difficult to know where to draw the line. Is any tax planning more acceptable than any other? All of the planning achieves the same aim of you paying less in tax. Is that wrong?

My job is to give a client as many tax-planning options as possible. They can then decide on the moral position. I would be interested to know your views – please post a comment.

One Response to “Pay less tax and feel good too”

  1. Andrew Gray says:

    This reminded me of a case study in a book I recently read-
    Deepak Chopra’ Living Health: A businesses man was cured of a duodenal ulcer by paying his tax! He had suffered from stress caused by the fear of the consequences of “DIY tax planning” as we call it at K&H (tax evasion). After becoming aware of this causal link, he made big contribution to charity for the previous years’ underpaid tax and started to declare all his income, and the bleeding of the ulcer stopped.
    (There is a full review of this book at on my LinkinIn reading list if you are interested to find out more.)

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