Remuneration Trusts, EBTs etc. – tax avoidance or tax evasion?

The tax avoidance market has changed quite prodigiously in more recent times.  Some of these schemes go back to the mid 1990’s and yet they may still be in dispute with HMRC.  All of these tax avoidance schemes set out to reward key employees with little (tax) cost often by way of loans.

And then came the Loan Charge designed to stop all that.

Why are they in the limelight again – because HMRC believe that some of these tax schemes “have crossed the line” between avoidance and evasion.

So which is it – avoidance or evasion?

Tax avoidance has always been and remains legal whereas tax evasion has always been illegal.  As Dennis Healey once said, “The difference between tax avoidance and tax evasion is the thickness of a prison wall.”  This suggests that there is (or rather was) a clear distinction between right and wrong.  Whichever way one might measure that difference, the difference is now very close and somewhat blurred.

Cases of tax avoidance are investigated by HMRC’s Counter Avoidance Directorate (CAD).  Cases of suspected tax fraud are investigated by HMRC’s Fraud investigation Service (FIS).  FIS are now getting involved.

Taxpayers are asking “Will it ever stop?”

Will HMRC stop investigating and go away empty handed?  No.

Will the cost of it all be too much?  Possibly.

The financial cost started with paying the scheme promoter.  A significant number of scheme promoters have since “gone away”.  There is therefore no redress against them.

Taxpayers are now having to pay for increasing support from their advisers.  However, this can sour relationships with their trusted accountant and tax adviser, often of many years standing who are left holding the baby (to quote Reuter’s telegram, published in The Pall Mall Gazette (London) of Tuesday 23rd June 1874).

The stress and strain is showing

Everyone went into these arrangements with their eyes open.  But how many understood how they worked – exactly what could be done and what couldn’t be done?

The emotional cost to some participants is still rising and in some respects has overtaken the financial costs.

Is there a way out?

Potentially and I don’t mean by using a scheme to get out of a scheme.

  • Have you thought of unwinding everything?
Help is at hand

If you would like to discuss this matter further, please contact me at paul@pmc.tax or on 07979 313 010.

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